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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 7/10/23 First Trust ETF IV N-CSRS 4/30/23 3:2.3M Fitzgerald Marke… LLC/FA → First Trust EIP Carbon Impact ETF ⇒ ECLN → First Trust Enhanced Short Maturity ETF ⇒ FTSM → First Trust High Income Strategic Focus ETF ⇒ HISF → First Trust Long Duration Opportunities ETF ⇒ LGOV → First Trust Low Duration Opportunities ETF ⇒ LMBS → First Trust Ltd. Duration Investment Grade Corporate ETF ⇒ FSIG → First Trust North American Energy Infrastructure Fund ⇒ EMLP → First Trust Senior Loan Fund ⇒ FTSL → First Trust SSI Strategic Convertible Securities ETF ⇒ FCVT → First Trust Tactical High Yield ETF ⇒ HYLS → FT Energy Income Partners Strategy ETF ⇒ EIPX → FT Vest DJIA Dogs 10 Target Income ETF ⇒ DOGG → FT Vest Rising Dividend Achievers Target Income ETF ⇒ RDVI → FT Vest S&P 500 Dividend Aristocrats Target Income ETF ⇒ KNG |
Document/Exhibit Description Pages Size 1: N-CSRS Semi-Annual Report to Shareholders HTML 2.26M 3: EX-99.906 CERT Section 906 Certifications HTML 7K 2: EX-99.CERT Section 302 Certifications HTML 19K
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, 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, 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.
| (a) | 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 -------------------------------------------------------------------------------- First Trust North American Energy Infrastructure Fund (EMLP) First Trust EIP Carbon Impact ETF (ECLN) FT Energy Income Partners Strategy ETF (EIPX) Semi-Annual Report For the Period Ended April 30, 2023 Energy Income Partners, LLC ---------------------------
-------------------------------------------------------------------------------- TABLE OF CONTENTS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV SEMI-ANNUAL REPORT APRIL 30, 2023 Shareholder Letter........................................................... 1 Fund Performance Overview First Trust North American Energy Infrastructure Fund (EMLP).............. 2 First Trust EIP Carbon Impact ETF (ECLN).................................. 4 FT Energy Income Partners Strategy ETF (EIPX)............................. 6 Notes to Fund Performance Overview........................................... 8 Portfolio Management......................................................... 9 Understanding Your Fund Expenses............................................. 10 Portfolio of Investments First Trust North American Energy Infrastructure Fund (EMLP).............. 11 First Trust EIP Carbon Impact ETF (ECLN).................................. 13 FT Energy Income Partners Strategy ETF (EIPX)............................. 15 Statements of Assets and Liabilities......................................... 17 Statements of Operations..................................................... 18 Statements of Changes in Net Assets.......................................... 19 Financial Highlights......................................................... 21 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/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 certain 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.
-------------------------------------------------------------------------------- SHAREHOLDER LETTER -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO APRIL 30, 2023 Dear Shareholders: First Trust is pleased to provide you with the semi-annual report for certain series of the First Trust Exchange-Traded Fund IV (the "Funds"), which contains detailed information about the Funds for the six months ended April 30, 2023. Please note that the FT Energy Income Partners Strategy ETF was incepted on November 2, 2022, and so the information in this letter and the semi-annual report prior to that date does not apply to this Fund. It pleases me to write that on May 5, 2023, the World Health Organization officially declared that the coronavirus ("COVID-19") pandemic no longer qualified as a global health emergency. While the virus officially no longer poses an immediate threat, its full impact on the world economy remains to be seen, in my opinion. Recall, if you will, those early days of the pandemic; companies sent workers home, consumers were afraid or unwilling to leave their homes, supply chains dried up, and grocery shelves were left bare. Hoping to provide relief to their constituents and to bolster economic activity, governments across the globe funneled trillions of dollars in stimulus directly into the hands of their citizens. Unfortunately, economist Milton Friedman's age-old economic adage "there's no such thing as a free lunch" still holds. As a result of the U.S. government stimulus, gross domestic product rebounded quickly, but so did inflation. As many investors are aware, the Federal Reserve (the "Fed") has been locked in a battle with stubbornly high inflation for several years now. Inflation, as measured by the trailing 12-month rate of change in the Consumer Price Index ("CPI"), surged from 1.4% on December 31, 2020, to 9.1% as of June 30, 2022. Since then, the trailing rate on the CPI has come down, but remains elevated. On April 30, 2023, the CPI stood at 4.9%, well above the Fed's goal of 2.0%. Surging prices have not been restricted to the U.S. Headline inflation rates in each of the countries that make up the so-called Group of Ten (G-10) stand above the targets set by their central banks, according to data from Bloomberg. From the Fed's perspective, monetary policy is the most efficient means to combat rising prices. From December 31, 2020 through May 3, 2023, the Fed increased the Federal Funds target rate (upper bound) a total of ten times, raising the rate from 0.25% to 5.25%. As mentioned, tighter monetary policy resulted in a decrease in the CPI, but there have been casualties in the Fed's battle with rising prices. The most recent banking turmoil is one example. Another is the spike in mortgage rates. According to Bankrate, the national average for a 30-year mortgage stood at just 2.87% on December 31, 2020. As of May 1, 2023, the average 30-year mortgage rate had surged to 6.88%. Not all the news is negative, however. Driven by a strong U.S. labor market, consumer spending remained robust in April 2023. Notably, American corporations added 253,000 jobs during the month, and the unemployment rate stood at a 53-year low. Bob Carey, Chief Market Strategist at First Trust, recently summed up the current situation, noting that "we're not out of the woods yet." That said, even the most difficult situations don't last forever. In my opinion, like the COVID-19 pandemic, inflation, and the tighter monetary policy it ushered in, will pass with time. 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
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) -------------------------------------------------------------------------------- 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. These companies principally include U.S. and Canadian natural gas and electric utilities, corporations operating energy infrastructure assets such as pipelines or renewable energy production, utilities, publicly-traded master limited partnerships or limited liability companies taxed as partnerships ("MLPs"), MLP affiliates, and other companies that derive the majority of their revenues from operating or providing services in support of infrastructure assets such as pipelines, power transmission and petroleum and natural gas storage in the petroleum, natural gas and power generation industries (collectively, "energy infrastructure companies"). The Fund will invest principally in energy infrastructure companies. Under normal market conditions, the Fund will invest at least 80% of its net assets (including investment borrowings) in equity securities of companies headquartered or incorporated in the United States and Canada. <TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 6 Months 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended Ended (6/20/12) Ended Ended (6/20/12) 4/30/23 4/30/23 4/30/23 4/30/23 to 4/30/23 4/30/23 4/30/23 to 4/30/23 <S> <C> <C> <C> <C> <C> <C> <C> <C> FUND PERFORMANCE NAV 3.44% 5.36% 7.83% 5.06% 6.73% 45.78% 63.86% 102.86% Market Price 3.25% 5.25% 7.79% 5.06% 6.72% 45.54% 63.78% 102.76% INDEX PERFORMANCE Blended Benchmark(1) 3.53% 8.36% 9.97% 5.97% 7.46% 60.84% 78.54% 118.55% S&P 500(R) Index 8.63% 2.66% 11.45% 12.20% 13.07% 71.93% 216.22% 279.75% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> (See Notes to Fund Performance Overview on page 8.) ----------------------------- (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 27 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
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP) (CONTINUED) ----------------------------------------------------------- % OF TOTAL LONG-TERM INDUSTRY CLASSIFICATION INVESTMENTS ----------------------------------------------------------- Electric Power & Transmission 29.8% Natural Gas Transmission 24.4 Petroleum Product Transmission 16.4 Crude Oil Transmission 13.7 Nat. Gas Gathering & Processing 10.5 Oil & Gas Production 1.4 Marine 0.2 Propane 0.1 Other 3.5 ------- Total 100.0% ======= ----------------------------------------------------------- % OF TOTAL LONG-TERM TOP TEN HOLDINGS INVESTMENTS ----------------------------------------------------------- Enterprise Products Partners, L.P. 7.6% Magellan Midstream Partners, L.P. 6.6 Energy Transfer, L.P. 6.3 Plains GP Holdings, L.P., Class A 5.9 Sempra Energy 5.0 Kinder Morgan, Inc. 4.2 Quanta Services, Inc. 3.9 DT Midstream, Inc. 3.8 Public Service Enterprise Group, Inc. 2.9 NextEra Energy Partners, L.P. 2.8 ------- Total 49.0% ======= <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT OCTOBER 31, 2012 - APRIL 30, 2023 First Trust North American Blended S&P 500(R) Energy Infrastructure Fund Benchmark Index <S> <C> <C> <C> 10/31/12 $10,000 $10,000 $10,000 4/30/13 11,580 11,568 11,442 10/31/13 11,354 11,400 12,718 4/30/14 12,479 12,645 13,781 10/31/14 13,900 13,592 14,914 4/30/15 14,035 13,044 15,570 10/31/15 11,966 11,378 15,690 4/30/16 12,163 11,842 15,757 10/31/16 13,404 12,368 16,397 4/30/17 13,933 13,350 18,581 10/31/17 13,813 13,134 20,272 4/30/18 13,015 12,840 21,046 10/31/18 13,256 13,365 21,762 4/30/19 14,845 14,404 23,885 10/31/19 15,143 14,447 24,879 4/30/20 12,713 11,825 24,093 10/31/20 12,616 11,806 27,293 4/30/21 15,693 15,964 35,167 10/31/21 16,649 17,190 39,006 4/30/22 18,010 19,059 35,244 10/31/22 18,345 19,947 33,308 4/30/23 18,976 20,651 36,182 </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
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- 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. The Sub-Advisor defines positive carbon impact companies 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. <TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL CUMULATIVE TOTAL RETURNS TOTAL RETURNS 6 Months Ended 1 Year Ended Inception (8/19/19) Inception (8/19/19) 4/30/23 4/30/23 to 4/30/23 to 4/30/23 <S> <C> <C> <C> <C> FUND PERFORMANCE NAV 2.02% 2.84% 8.56% 35.51% Market Price 2.22% 3.20% 8.60% 35.66% INDEX PERFORMANCE PHLX Utility Sector Index 4.56% -0.79% 6.70% 27.10% S&P 500(R) Index 8.63% 2.66% 11.92% 51.61% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> (See Notes to Fund Performance Overview on page 8.) Page 4
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EIP CARBON IMPACT ETF (ECLN) (CONTINUED) ----------------------------------------------------------- % OF TOTAL LONG-TERM INDUSTRY CLASSIFICATION INVESTMENTS ----------------------------------------------------------- Electric Power & Transmission 59.2% Natural Gas Transmission 27.0 Nat. Gas Gathering & Processing 5.0 Petroleum Product Transmission 2.7 Gas Production 1.1 Propane 0.1 Marine 0.0* Other 4.9 ------- Total 100.0% ======= * Amount is less than 0.1%. ----------------------------------------------------------- % OF TOTAL LONG-TERM TOP TEN HOLDINGS INVESTMENTS ----------------------------------------------------------- DT Midstream, Inc. 5.1% Atmos Energy Corp. 4.3 Sempra Energy 4.2 Quanta Services, Inc. 4.1 American Electric Power Co., Inc. 3.9 Southern (The) Co. 3.6 Xcel Energy, Inc. 3.4 Clearway Energy, Inc., Class A 3.2 Cheniere Energy, Inc. 3.2 Cheniere Energy Partners, L.P. 3.2 ------- Total 38.2% ======= <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT AUGUST 19, 2019 - APRIL 30, 2023 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 10,891 10,772 11,436 4/31/21 12,156 11,678 14,736 10/31/21 12,578 11,968 16,343 4/30/22 13,178 12,811 14,766 10/31/22 13,283 12,155 13,956 4/30/23 13,551 12,710 15,161 </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
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FT ENERGY INCOME PARTNERS STRATEGY ETF (EIPX) The FT Energy Income Partners Strategy ETF's (the "Fund") investment objective is to seek risk-adjusted total return. Under normal market conditions, the Fund will seek to achieve its investment objective by investing at least 80% of its net assets (plus any borrowing for investment purposes) in a portfolio of equity securities in the broader energy market ("Energy Companies"). Energy Companies include companies in the Global Industry Classification Standard ("GICS") energy sector, companies in the GICS utility sector (excluding water utilities), or companies in any other GICS sectors that derive at least 50% of their revenues or profits from exploration, development, production, gathering, transportation, processing, storing, refining, distribution, mining or marketing, of natural gas, natural gas liquids (including propane), crude oil, refined petroleum products, petrochemicals, electricity, coal, uranium, hydrogen or other energy sources, renewable energy production, renewable energy equipment, energy storage, carbon, carbon dioxide, carbon dioxide and fugitive methane mitigation and management, as well as electric transmission, distribution, storage and system reliability support. Energy Companies also include companies providing engineering, consulting and construction services that derive at least 50% of their revenues or profits from the above, all of which are selected by Energy Income Partners, LLC, the Fund's investment sub-advisor ("EIP" or the "Sub-Advisor"). These companies may include publicly traded master limited partnerships or limited liability companies taxed as partnerships ("MLPs") and MLP affiliates. <TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ CUMULATIVE TOTAL RETURNS Inception (11/2/22) to 4/30/23 <S> <C> FUND PERFORMANCE NAV 4.73% Market Price 4.83% INDEX PERFORMANCE S&P Global 1200 Energy Index 1.72% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> (See Notes to Fund Performance Overview on page 8.) Page 6
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FT ENERGY INCOME PARTNERS STRATEGY ETF (EIPX) (CONTINUED) ----------------------------------------------------------- % OF TOTAL LONG-TERM INDUSTRY CLASSIFICATION INVESTMENTS ----------------------------------------------------------- Oil & Gas Production 25.9% Natural Gas Transmission 17.7 Petroleum Product Transmission 16.3 Electric Power & Transmission 13.9 Crude Oil Transmission 9.7 Nat. Gas Gathering & Processing 7.9 Coal 0.9 Marine 0.3 Other 7.4 ------- Total 100.0% ======= * Amount is less than 0.1%. ----------------------------------------------------------- % OF TOTAL LONG-TERM TOP TEN HOLDINGS INVESTMENTS ----------------------------------------------------------- Shell PLC, ADR 7.3% Enterprise Products Partners, L.P. 7.1 BP PLC, ADR 6.2 TotalEnergies SE, ADR 6.0 Energy Transfer, L.P. 5.2 Magellan Midstream Partners, L.P. 4.1 Plains GP Holdings, L.P., Class A 3.6 MPLX, L.P. 3.5 Kinder Morgan, Inc. 3.0 Cheniere Energy Partners, L.P. 2.9 ------- Total 48.9% ======= <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT NOVEMBER 2, 2022 - APRIL 30, 2023 FT Income Partners S&P Global 1200 Strategy ETF Energy Index <S> <C> <C> 11/2/22 $10,000 $10,000 4/30/23 10,473 10,172 </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 7
-------------------------------------------------------------------------------- NOTES TO FUND PERFORMANCE OVERVIEW (UNAUDITED) -------------------------------------------------------------------------------- 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 is calculated. Since shares of each Fund did not trade in the secondary market until after the Fund's inception, for the period from inception to the first day of secondary market trading in shares of the Fund, the NAV of each Fund is used as a proxy for the secondary market trading price to calculate market returns. NAV and market returns assume that all distributions have been reinvested in each Fund at NAV and Market Price, respectively. An index is a statistical composite that tracks a specified financial market or sector. Unlike each Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by each Fund. These expenses negatively impact the performance of each Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The total returns presented reflect the reinvestment of dividends on securities in the indices. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of each Fund will vary with changes in market conditions. Shares of each Fund may be worth more or less than their original cost when they are redeemed or sold in the market. Each Fund's past performance is no guarantee of future performance. Page 8
-------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV SEMI-ANNUAL REPORT APRIL 30, 2023 (UNAUDITED) ADVISOR First Trust Advisors L.P. ("First Trust") is the investment advisor to the First Trust North American Energy Infrastructure Fund ("EMLP"), the First Trust EIP Carbon Impact ETF ("ECLN") and the FT Energy Income Partners Strategy ETF ("EIPX") (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 includes 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 $5.2 billion of assets as of April 30, 2023. 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 and a sleeve of a series of a 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 9
FIRST TRUST EXCHANGE-TRADED FUND IV UNDERSTANDING YOUR FUND EXPENSES APRIL 30, 2023 (UNAUDITED) As a shareholder of First Trust North American Energy Infrastructure Fund, First Trust EIP Carbon Impact ETF or FT Energy Income Partners Strategy 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 (or since inception) and held through the six-month period (or shorter) ended April 30, 2023. ACTUAL EXPENSES The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Period" to estimate the expenses you paid on your account during this six-month period (or shorter). 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, 2022 APRIL 30, 2023 PERIOD PERIOD (a) ------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP) Actual $1,000.00 $1,034.40 0.95% $4.79 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 $1,020.20 0.95% $4.76 Hypothetical (5% return before expenses) $1,000.00 $1,020.08 0.95% $4.76 </TABLE> <TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------ ANNUALIZED EXPENSES PAID EXPENSE RATIO DURING THE PERIOD BEGINNING ENDING BASED ON THE NOVEMBER 2, 2022 (b) ACCOUNT VALUE ACCOUNT VALUE NUMBER OF DAYS TO NOVEMBER 2, 2022 (b) APRIL 30, 2023 IN THE PERIOD APRIL 30, 2023 (c) ------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> FT ENERGY INCOME PARTNERS STRATEGY ETF (EIPX) Actual $1,000.00 $1,047.30 0.95% $4.80 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, 2022 through April 30, 2023), multiplied by 181/365 (to reflect the six-month period). (b) Inception date. (c) Actual expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (November 2, 2022 through April 30, 2023), multiplied by 180/365. Hypothetical expenses are assumed for the most recent six-month period. Page 10
FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP) PORTFOLIO OF INVESTMENTS APRIL 30, 2023 (UNAUDITED) SHARES DESCRIPTION VALUE ------------------------------------------------------------ COMMON STOCKS -- 59.7% CONSTRUCTION & ENGINEERING -- 3.6% 532,475 Quanta Services, Inc. $ 90,329,059 -------------- ELECTRIC UTILITIES -- 15.3% 603,593 Alliant Energy Corp. 33,282,118 672,917 American Electric Power Co., Inc. 62,190,989 80,453 Constellation Energy Corp. 6,227,062 69,991 Duke Energy Corp. 6,920,710 40,895 Emera, Inc. (CAD) 1,740,117 4,670,248 Enel S.p.A., ADR 31,617,579 200,655 Evergy, Inc. 12,462,682 305,239 Eversource Energy 23,689,599 74,669 Exelon Corp. 3,168,952 48,822 Fortis, Inc. (CAD) 2,143,721 532,259 Iberdrola S.A., ADR 27,672,145 145,691 IDACORP, Inc. 16,189,184 328,020 NextEra Energy, Inc. 25,136,173 88,418 Orsted A/S, ADR 2,639,277 1,825,541 PPL Corp. 52,429,538 772,650 Southern (The) Co. 56,828,408 246,196 Xcel Energy, Inc. 17,211,562 -------------- 381,549,816 -------------- ENERGY EQUIPMENT & SERVICES -- 0.2% 519,025 Archrock, Inc. 5,340,767 -------------- GAS UTILITIES -- 6.0% 771,616 AltaGas Ltd. (CAD) 13,497,656 330,331 Atmos Energy Corp. 37,703,980 11,703 Chesapeake Utilities Corp. 1,445,321 1,102,335 National Fuel Gas Co. 61,620,527 123,476 New Jersey Resources Corp. 6,376,301 321,654 ONE Gas, Inc. 24,751,275 95,596 UGI Corp. 3,238,792 -------------- 148,633,852 -------------- INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 1.9% 1,561,623 AES (The) Corp. 36,948,000 228,753 Clearway Energy, Inc., Class A 6,629,262 102,188 Northland Power, Inc. (CAD) 2,508,597 -------------- 46,085,859 -------------- MULTI-UTILITIES -- 11.5% 1,142,593 ATCO Ltd., Class I (CAD) 37,756,127 78,130 Canadian Utilities Ltd., Class A (CAD) 2,258,812 116,082 CenterPoint Energy, Inc. 3,537,019 288,715 CMS Energy Corp. 17,975,396 224,248 DTE Energy Co. 25,207,718 1,067,354 Public Service Enterprise Group, Inc. 67,456,773 747,815 Sempra Energy 116,277,754 SHARES/ UNITS DESCRIPTION VALUE ------------------------------------------------------------ MULTI-UTILITIES (CONTINUED) 170,394 WEC Energy Group, Inc. $ 16,386,791 -------------- 286,856,390 -------------- OIL, GAS & CONSUMABLE FUELS -- 21.0% 429,863 Cheniere Energy, Inc. 65,769,039 1,805,332 DT Midstream, Inc. 88,948,708 863,581 Enbridge, Inc. 34,335,981 2,214,809 Keyera Corp. (CAD) 52,115,076 5,692,142 Kinder Morgan, Inc. 97,620,235 931,072 ONEOK, Inc. 60,901,419 691,616 Targa Resources Corp. 52,237,756 497,688 TC Energy Corp. 20,673,960 1,599,198 Williams (The) Cos., Inc. 48,391,731 -------------- 520,993,905 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.1% 14,279 Enphase Energy, Inc. (a) 2,344,612 -------------- WATER UTILITIES -- 0.1% 15,951 American Water Works Co., Inc. 2,364,736 -------------- TOTAL COMMON STOCKS -- 59.7% 1,484,498,996 (Cost $1,233,878,515) -------------- MASTER LIMITED PARTNERSHIPS -- 33.9% CHEMICALS -- 0.3% 379,329 Westlake Chemical Partners, L.P. 8,512,143 -------------- ENERGY EQUIPMENT & SERVICES -- 0.1% 149,320 USA Compression Partners, L.P. 3,120,788 -------------- INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 2.7% 1,146,924 NextEra Energy Partners, L.P. (b) 65,959,599 -------------- OIL, GAS & CONSUMABLE FUELS -- 30.8% 676,930 Cheniere Energy Partners, L.P. 30,874,777 11,463,529 Energy Transfer, L.P. 147,650,254 242,848 EnLink Midstream LLC (b) 2,382,339 6,733,649 Enterprise Products Partners, L.P. 177,162,305 1,032,966 Hess Midstream, L.P., Class A (b) 30,307,223 1,670,208 Holly Energy Partners, L.P. 27,825,665 2,772,339 Magellan Midstream Partners, L.P. 154,696,516 1,525,156 MPLX, L.P. 53,365,208 10,185,825 Plains GP Holdings, L.P., Class A (b) 136,490,055 See Notes to Financial Statements Page 11
FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) UNITS DESCRIPTION VALUE ------------------------------------------------------------ MASTER LIMITED PARTNERSHIPS (CONTINUED) OIL, GAS & CONSUMABLE FUELS (CONTINUED) 231,768 Western Midstream Partners, L.P. $ 6,134,899 -------------- 766,889,241 -------------- TOTAL MASTER LIMITED PARTNERSHIPS -- 33.9% 844,481,771 (Cost $618,412,003) -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------ MONEY MARKET FUNDS -- 6.0% 148,230,843 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class 4.71% (c) $ 148,230,843 (Cost $148,230,843) -------------- TOTAL INVESTMENTS -- 99.6% 2,477,211,610 (Cost $2,000,521,361) NET OTHER ASSETS AND LIABILITIES -- 0.4% 8,975,527 -------------- NET ASSETS -- 100.0% $2,486,187,137 ============== (a) Non-income producing security. (b) This security is taxed as a "C" corporation for federal income tax purposes. (c) Rate shown reflects yield as of April 30, 2023. 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, 2023 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 4/30/2023 PRICES INPUTS INPUTS ----------------------------------------------------------------------- <S> <C> <C> <C> <C> Common Stocks*.................................. $ 1,484,498,996 $ 1,484,498,996 $ -- $ -- Master Limited Partnerships*.................... 844,481,771 844,481,771 -- -- Money Market Funds.............................. 148,230,843 148,230,843 -- -- ----------------------------------------------------------------------- Total Investments............................... $ 2,477,211,610 $ 2,477,211,610 $ -- $ -- ======================================================================= </TABLE> * See Portfolio of Investments for industry breakout. Page 12 See Notes to Financial Statements
FIRST TRUST EIP CARBON IMPACT ETF (ECLN) PORTFOLIO OF INVESTMENTS APRIL 30, 2023 (UNAUDITED) SHARES DESCRIPTION VALUE ------------------------------------------------------------ COMMON STOCKS -- 85.6% CONSTRUCTION & ENGINEERING -- 3.8% 7,944 Quanta Services, Inc. $ 1,347,620 -------------- ELECTRIC UTILITIES -- 32.8% 16,934 Alliant Energy Corp. 933,741 13,899 American Electric Power Co., Inc. 1,284,546 2,153 Constellation Energy Corp. 166,642 2,473 Duke Energy Corp. 244,530 884 Edison International 65,062 8,175 Emera, Inc. (CAD) 347,853 141,128 Enel S.p.A., ADR 955,436 8,417 Evergy, Inc. 522,780 9,398 Eversource Energy 729,379 4,005 Fortis, Inc. (CAD) 175,855 19,479 Hydro One Ltd. (CAD) (a) (b) 570,489 17,216 Iberdrola S.A., ADR 895,060 6,967 IDACORP, Inc. 774,173 7,161 NextEra Energy, Inc. 548,747 6,327 OGE Energy Corp. 237,516 456 Orsted A/S (DKK) (a) (b) (c) 40,926 30,943 PPL Corp. 888,683 16,214 Southern (The) Co. 1,192,540 16,268 Xcel Energy, Inc. 1,137,296 -------------- 11,711,254 -------------- GAS UTILITIES -- 8.5% 8,757 AltaGas Ltd. (CAD) 153,184 12,532 Atmos Energy Corp. 1,430,403 1,521 Chesapeake Utilities Corp. 187,844 12,299 National Fuel Gas Co. 687,514 1,574 New Jersey Resources Corp. 81,281 6,532 ONE Gas, Inc. 502,637 -------------- 3,042,863 -------------- INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 8.2% 22,587 AES (The) Corp. 534,408 4,503 Brookfield Renewable Corp., Class A (CAD) 150,460 37,090 Clearway Energy, Inc., Class A 1,074,868 32,527 EDP Renovaveis S.A. (EUR) (c) 723,003 7,683 Encavis AG (EUR) (c) 132,857 13,185 Northland Power, Inc. (CAD) 323,677 -------------- 2,939,273 -------------- MORTGAGE REAL ESTATE INVESTMENT TRUSTS -- 2.0% 24,702 Hannon Armstrong Sustainable Infrastructure Capital, Inc. 701,043 -------------- MULTI-UTILITIES -- 15.0% 20,935 ATCO Ltd., Class I (CAD) 691,781 1,528 CenterPoint Energy, Inc. 46,558 11,787 CMS Energy Corp. 733,859 6,296 DTE Energy Co. 707,733 SHARES/ UNITS DESCRIPTION VALUE ------------------------------------------------------------ MULTI-UTILITIES (CONTINUED) 14,672 Public Service Enterprise Group, Inc. $ 927,271 9,023 Sempra Energy 1,402,986 8,859 WEC Energy Group, Inc. 851,970 -------------- 5,362,158 -------------- OIL, GAS & CONSUMABLE FUELS -- 14.0% 7,025 Cheniere Energy, Inc. 1,074,825 34,325 DT Midstream, Inc. 1,691,193 10,250 ONEOK, Inc. 670,452 11,706 Targa Resources Corp. 884,154 22,984 Williams (The) Cos., Inc. 695,496 -------------- 5,016,120 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.8% 1,668 Enphase Energy, Inc. (d) 273,886 -------------- WATER UTILITIES -- 0.5% 1,085 American Water Works Co., Inc. 160,851 -------------- TOTAL COMMON STOCKS -- 85.6% 30,555,068 (Cost $29,031,621) -------------- MASTER LIMITED PARTNERSHIPS -- 7.5% INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 4.6% 24,892 Brookfield Renewable Partners, L.P. (CAD) 768,155 15,054 NextEra Energy Partners, L.P. (e) 865,755 -------------- 1,633,910 -------------- OIL, GAS & CONSUMABLE FUELS -- 2.9% 23,111 Cheniere Energy Partners, L.P. 1,054,093 -------------- TOTAL MASTER LIMITED PARTNERSHIPS -- 7.5% 2,688,003 (Cost $2,827,000) -------------- MONEY MARKET FUNDS -- 6.9% 2,462,646 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class 4.71% (f) 2,462,646 (Cost $2,462,646) -------------- TOTAL INVESTMENTS -- 100.0% 35,705,717 (Cost $34,321,267) NET OTHER ASSETS AND LIABILITIES -- 0.0% 14,680 -------------- NET ASSETS -- 100.0% $ 35,720,397 ============== See Notes to Financial Statements Page 13
FIRST TRUST EIP CARBON IMPACT ETF (ECLN) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) (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) This security is fair valued by the Advisor's Pricing Committee in accordance with procedures approved by the Trust's Board of Trustees, and in accordance with provisions of the Investment Company Act of 1940 and rules thereunder, as amended. At April 30, 2023, securities noted as such are valued at $896,786 or 2.5% of net assets. Certain of these securities are fair valued using a factor provided by a third-party pricing service due to the change in value between the foreign markets' close and the New York Stock Exchange close exceeding a certain threshold. On days when this threshold is not exceeded, these securities are typically valued at the last sale price on the exchange on which they are principally traded. (d) Non-income producing security. (e) This security is taxed as a "C" corporation for federal income tax purposes. (f) Rate shown reflects yield as of April 30, 2023. 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, 2023 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 4/30/2023 PRICES INPUTS INPUTS ----------------------------------------------------------------------- <S> <C> <C> <C> <C> Common Stocks: Electric Utilities........................... $ 11,711,254 $ 11,670,328 $ 40,926 $ -- Independent Power and Renewable Electricity Producers................................. 2,939,273 2,083,413 855,860 -- Other Industry Categories*................... 15,904,541 15,904,541 -- -- Master Limited Partnerships*.................... 2,688,003 2,688,003 -- -- Money Market Funds.............................. 2,462,646 2,462,646 -- -- ----------------------------------------------------------------------- Total Investments............................... $ 35,705,717 $ 34,808,931 $ 896,786 $ -- ======================================================================= </TABLE> * See Portfolio of Investments for industry breakout. Page 14 See Notes to Financial Statements
FT ENERGY INCOME PARTNERS STRATEGY ETF (EIPX) PORTFOLIO OF INVESTMENTS APRIL 30, 2023 (UNAUDITED) SHARES DESCRIPTION VALUE ------------------------------------------------------------ COMMON STOCKS -- 67.2% CONSTRUCTION & ENGINEERING -- 1.9% 14,012 Quanta Services, Inc. $ 2,376,996 -------------- ELECTRIC UTILITIES -- 6.8% 5,884 Alliant Energy Corp. 324,444 9,318 American Electric Power Co., Inc. 861,170 3,530 Constellation Energy Corp. 273,222 268,471 Enel S.p.A., ADR 1,817,549 5,348 Entergy Corp. 575,338 9,632 Evergy, Inc. 598,243 3,968 Eversource Energy 307,956 2,980 Exelon Corp. 126,471 29,268 Iberdrola S.A., ADR 1,521,643 4,071 NextEra Energy, Inc. 311,961 22,366 PPL Corp. 642,352 12,818 Southern (The) Co. 942,764 -------------- 8,303,113 -------------- ENERGY EQUIPMENT & SERVICES -- 4.6% 156,724 Archrock, Inc. 1,612,690 11,537 Cactus, Inc., Class A 467,018 32,601 Halliburton Co. 1,067,683 3,325 Nabors Industries Ltd. (a) 331,635 26,412 NOV, Inc. 442,401 22,961 Schlumberger N.V. 1,133,125 18,677 Tenaris S.A., ADR 536,217 -------------- 5,590,769 -------------- GAS UTILITIES -- 3.8% 8,955 AltaGas Ltd. (CAD) 156,647 7,587 Atmos Energy Corp. 865,980 52,848 National Fuel Gas Co. 2,954,203 7,811 ONE Gas, Inc. 601,057 -------------- 4,577,887 -------------- INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 1.1% 10,933 AES (The) Corp. 258,675 36,528 Clearway Energy, Inc., Class A 1,058,581 -------------- 1,317,256 -------------- MULTI-UTILITIES -- 6.6% 76,779 ATCO Ltd., Class I (CAD) 2,537,104 5,154 CMS Energy Corp. 320,888 933 DTE Energy Co. 104,879 30,340 Public Service Enterprise Group, Inc. 1,917,488 19,905 Sempra Energy 3,095,028 -------------- 7,975,387 -------------- OIL, GAS & CONSUMABLE FUELS -- 42.3% 179,937 BP PLC, ADR 7,247,862 14,620 Canadian Natural Resources Ltd. (CAD) 890,894 SHARES/ UNITS DESCRIPTION VALUE ------------------------------------------------------------ OIL, GAS & CONSUMABLE FUELS (CONTINUED) 28,656 Cenovus Energy, Inc. (CAD) $ 480,966 7,934 Cheniere Energy, Inc. 1,213,902 287 Chevron Corp. 48,382 28,911 Coterra Energy, Inc. 740,122 6,344 Diamondback Energy, Inc. 902,117 50,948 DT Midstream, Inc. 2,510,208 30,459 Enbridge, Inc. 1,211,050 6,419 EOG Resources, Inc. 766,878 10,496 Exxon Mobil Corp. 1,242,097 46,521 Imperial Oil Ltd. (CAD) 2,371,289 119,165 Keyera Corp. (CAD) 2,803,986 204,691 Kinder Morgan, Inc. 3,510,451 2,420 Marathon Petroleum Corp. 295,240 19,748 ONEOK, Inc. 1,291,717 4,039 PDC Energy, Inc. 262,737 2,975 Phillips 66 294,525 3,999 Pioneer Natural Resources Co. 869,982 31,530 Range Resources Corp. 833,968 139,442 Shell PLC, ADR 8,642,615 6,419 SM Energy Co. 180,245 131,376 Southwestern Energy Co. (a) 681,841 16,563 Targa Resources Corp. 1,251,003 27,126 TC Energy Corp. 1,126,814 110,143 TotalEnergies SE, ADR 7,041,442 19,706 Tourmaline Oil Corp. (CAD) 885,341 2,309 Valero Energy Corp. 264,773 8,918 Vital Energy, Inc. (a) 414,955 35,576 Williams (The) Cos., Inc. 1,076,530 -------------- 51,353,932 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.1% 826 Enphase Energy, Inc. (a) 135,629 -------------- TOTAL COMMON STOCKS -- 67.2% 81,630,969 (Cost $80,380,368) -------------- MASTER LIMITED PARTNERSHIPS -- 29.7% ENERGY EQUIPMENT & SERVICES -- 0.6% 32,839 USA Compression Partners, L.P. 686,335 -------------- INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 0.7% 15,702 NextEra Energy Partners, L.P. (b) 903,022 -------------- OIL, GAS & CONSUMABLE FUELS -- 28.4% 35,814 Alliance Resource Partners, L.P. 748,154 75,895 Cheniere Energy Partners, L.P. 3,461,571 477,592 Energy Transfer, L.P. 6,151,385 See Notes to Financial Statements Page 15
FT ENERGY INCOME PARTNERS STRATEGY ETF (EIPX) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) UNITS DESCRIPTION VALUE ------------------------------------------------------------ MASTER LIMITED PARTNERSHIPS (CONTINUED) OIL, GAS & CONSUMABLE FUELS (CONTINUED) 319,394 Enterprise Products Partners, L.P. $ 8,403,256 31,578 Hess Midstream, L.P., Class A (b) 926,499 38,864 Kimbell Royalty Partners, L.P. (b) 623,379 86,592 Magellan Midstream Partners, L.P. 4,831,834 116,352 MPLX, L.P. 4,071,157 6,895 Natural Resource Partners, L.P. 358,954 317,156 Plains GP Holdings, L.P., Class A (b) 4,249,890 29,009 TXO Energy Partners, L.P. (a) 646,030 -------------- 34,472,109 -------------- TOTAL MASTER LIMITED PARTNERSHIPS -- 29.7% 36,061,466 (Cost $34,965,244) -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------ MONEY MARKET FUNDS -- 2.9% 3,475,215 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class 4.71% (c) $ 3,475,215 (Cost $3,475,215) -------------- TOTAL INVESTMENTS -- 99.8% 121,167,650 (Cost $118,820,827) NET OTHER ASSETS AND LIABILITIES -- 0.2% 269,247 -------------- NET ASSETS -- 100.0% $ 121,436,897 ============== (a) Non-income producing security. (b) This security is taxed as a "C" corporation for federal income tax purposes. (c) Rate shown reflects yield as of April 30, 2023. 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, 2023 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 4/30/2023 PRICES INPUTS INPUTS ----------------------------------------------------------------------- <S> <C> <C> <C> <C> Common Stocks*.................................. $ 81,630,969 $ 81,630,969 $ -- $ -- Master Limited Partnerships*.................... 36,061,466 36,061,466 -- -- Money Market Funds.............................. 3,475,215 3,475,215 -- -- ----------------------------------------------------------------------- Total Investments............................... $ 121,167,650 $ 121,167,650 $ -- $ -- ======================================================================= </TABLE> * See Portfolio of Investments for industry breakout. Page 16 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND IV STATEMENTS OF ASSETS AND LIABILITIES APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> FIRST TRUST NORTH FIRST TRUST FT ENERGY AMERICAN ENERGY EIP CARBON INCOME PARTNERS INFRASTRUCTURE FUND IMPACT ETF STRATEGY ETF (EMLP) (ECLN) (EIPX) ------------------- ------------------- ------------------- ASSETS: <S> <C> <C> <C> Investments, at value....................................... $ 2,477,211,610 $ 35,705,717 $ 121,167,650 Foreign currency, at value.................................. 215 -- -- Receivables: Dividends................................................ 7,550,536 40,231 200,816 Investment securities sold............................... 3,299,488 -- 156,503 Reclaims................................................. 62,132 1,822 5,501 ----------------- ----------------- ----------------- Total Assets.......................................... 2,488,123,981 35,747,770 121,530,470 ----------------- ----------------- ----------------- LIABILITIES: Due to custodian foreign currency........................... -- 2 -- Investment advisory fees payable............................ 1,936,844 27,371 93,573 ----------------- ----------------- ----------------- Total Liabilities..................................... 1,936,844 27,373 93,573 ----------------- ----------------- ----------------- NET ASSETS.................................................. $ 2,486,187,137 $ 35,720,397 $ 121,436,897 ================= ================= ================= NET ASSETS CONSIST OF: Paid-in capital............................................. $ 2,309,400,431 $ 34,234,264 $ 119,243,803 Par value................................................... 916,550 14,000 59,500 Accumulated distributable earnings (loss)................... 175,870,156 1,472,133 2,133,594 ----------------- ----------------- ----------------- NET ASSETS.................................................. $ 2,486,187,137 $ 35,720,397 $ 121,436,897 ================= ================= ================= NET ASSET VALUE, per share.................................. $ 27.13 $ 25.51 $ 20.41 ================= ================= ================= Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share)................... 91,655,000 1,400,002 5,950,002 ================= ================= ================= Investments, at cost........................................ $ 2,000,521,361 $ 34,321,267 $ 118,820,827 ================= ================= ================= Foreign currency, at cost (proceeds)........................ $ 211 $ (2) $ -- ================= ================= ================= </TABLE> See Notes to Financial Statements Page 17
FIRST TRUST EXCHANGE-TRADED FUND IV STATEMENTS OF OPERATIONS FOR THE PERIOD ENDED APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> FIRST TRUST NORTH FIRST TRUST FT ENERGY AMERICAN ENERGY EIP CARBON INCOME PARTNERS INFRASTRUCTURE FUND IMPACT ETF STRATEGY ETF (EMLP) (ECLN) (EIPX) (a) ------------------- ------------------- ------------------- INVESTMENT INCOME: <S> <C> <C> <C> Dividends................................................... $ 40,364,078 $ 551,895 $ 1,609,632 Foreign withholding tax..................................... (1,017,622) (18,047) (131,886) ----------------- ----------------- ----------------- Total investment income.................................. 39,346,456 533,848 1,477,746 ----------------- ----------------- ----------------- EXPENSES: Investment advisory fees.................................... 12,044,553 160,870 454,565 ----------------- ----------------- ----------------- Total expenses........................................... 12,044,553 160,870 454,565 ----------------- ----------------- ----------------- NET INVESTMENT INCOME (LOSS)................................ 27,301,903 372,978 1,023,181 ----------------- ----------------- ----------------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments.............................................. 60,025,605 (162,120) (681,899) In-kind redemptions...................................... 53,025,020 295,700 738,842 Foreign currency transactions............................ (122,779) (15,112) 1,203 ----------------- ----------------- ----------------- Net realized gain (loss).................................... 112,927,846 118,468 58,146 ----------------- ----------------- ----------------- Net change in unrealized appreciation (depreciation) on: Investments.............................................. (54,234,040) 138,075 2,346,823 Foreign currency translation............................. (214) 31 -- ----------------- ----------------- ----------------- Net change in unrealized appreciation (depreciation)........ (54,234,254) 138,106 2,346,823 ----------------- ----------------- ----------------- NET REALIZED AND UNREALIZED GAIN (LOSS)..................... 58,693,592 256,574 2,404,969 ----------------- ----------------- ----------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................ $ 85,995,495 $ 629,552 $ 3,428,150 ================= ================= ================= </TABLE> (a) Inception date is November 2, 2022, which is consistent with the commencement of investment operations and is the date the initial creation units were established. Page 18 See Notes to Financial Statements
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 4/30/2023 ENDED 4/30/2023 ENDED (UNAUDITED) 10/31/2022 (UNAUDITED) 10/31/2022 --------------- --------------- --------------- --------------- <S> <C> <C> <C> <C> OPERATIONS: Net investment income (loss)............................ $ 27,301,903 $ 25,780,173 $ 372,978 $ 273,761 Net realized gain (loss)................................ 112,927,846 110,578,584 118,468 696,748 Net change in unrealized appreciation (depreciation).... (54,234,254) 77,549,288 138,106 (283,507) --------------- --------------- --------------- --------------- Net increase (decrease) in net assets resulting from operations...................................... 85,995,495 213,908,045 629,552 687,002 --------------- --------------- --------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations................................... (45,097,551) (33,630,677) (404,460) (331,016) Return of capital....................................... -- (41,859,413) -- -- --------------- --------------- --------------- --------------- Total distributions to shareholders..................... (45,097,551) (75,490,090) (404,460) (331,016) --------------- --------------- --------------- --------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold............................... 37,586,636 398,965,547 5,151,085 13,026,378 Cost of shares redeemed................................. (162,602,443) (96,213,496) (1,283,648) (2,436,473) --------------- --------------- --------------- --------------- Net increase (decrease) in net assets resulting......... from shareholder transactions........................ (125,015,807) 302,752,051 3,867,437 10,589,905 --------------- --------------- --------------- --------------- Total increase (decrease) in net assets................. (84,117,863) 441,170,006 4,092,529 10,945,891 NET ASSETS: Beginning of period..................................... 2,570,305,000 2,129,134,994 31,627,868 20,681,977 --------------- --------------- --------------- --------------- End of period........................................... $ 2,486,187,137 $ 2,570,305,000 $ 35,720,397 $ 31,627,868 =============== =============== =============== =============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period................. 96,255,000 85,105,000 1,250,002 850,002 Shares sold............................................. 1,400,000 14,900,000 200,000 500,000 Shares redeemed......................................... (6,000,000) (3,750,000) (50,000) (100,000) --------------- --------------- --------------- --------------- Shares outstanding, end of period....................... 91,655,000 96,255,000 1,400,002 1,250,002 =============== =============== =============== =============== </TABLE> See Notes to Financial Statements Page 19
FIRST TRUST EXCHANGE-TRADED FUND IV STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) <TABLE> <CAPTION> FT ENERGY INCOME PARTNERS STRATEGY ETF (EIPX) --------------- PERIOD ENDED 4/30/2023 (UNAUDITED) (a) --------------- <S> <C> OPERATIONS: Net investment income (loss)............................ $ 1,023,181 Net realized gain (loss)................................ 58,146 Net change in unrealized appreciation (depreciation).... 2,346,823 --------------- Net increase (decrease) in net assets resulting from operations...................................... 3,428,150 --------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations................................... (1,294,556) Return of capital....................................... -- --------------- Total distributions to shareholders..................... (1,294,556) --------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold............................... 132,384,461 Cost of shares redeemed................................. (13,081,158) --------------- Net increase (decrease) in net assets resulting from shareholder transactions........................ 119,303,303 --------------- Total increase (decrease) in net assets................. 121,436,897 NET ASSETS: Beginning of period..................................... -- --------------- End of period........................................... $ 121,436,897 =============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period................. -- Shares sold............................................. 6,600,002 Shares redeemed......................................... (650,000) --------------- Shares outstanding, end of period....................... 5,950,002 =============== </TABLE> (a) Inception date is November 2, 2022, which is consistent with the commencement of investment operations and is the date the initial creation units were established. Page 20 See Notes to Financial Statements
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, 4/30/2023 -------------------------------------------------------------- (UNAUDITED) 2022 2021 2020 2019 2018 ----------- ---------- ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> <C> <C> Net asset value, beginning of period $ 26.70 $ 25.02 $ 19.68 $ 24.83 $ 22.64 $ 24.55 ----------- ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.28 0.37 0.19 0.20 0.36 0.35 Net realized and unrealized gain (loss) 0.63 2.14 6.01 (4.33) 2.81 (1.33) ----------- ---------- ---------- ---------- ---------- ---------- Total from investment operations 0.91 2.51 6.20 (4.13) 3.17 (0.98) ----------- ---------- ---------- ---------- ---------- ---------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.48) (0.37) (0.86) (0.70) (0.29) (0.45) Return of capital -- (0.46) -- (0.32) (0.69) (0.48) ----------- ---------- ---------- ---------- ---------- ---------- Total distributions (0.48) (0.83) (0.86) (1.02) (0.98) (0.93) ----------- ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 27.13 $ 26.70 $ 25.02 $ 19.68 $ 24.83 $ 22.64 =========== ========== ========== ========== ========== ========== TOTAL RETURN (a) 3.44% 10.19% 31.97% (16.69)% 14.22% (4.03)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 2,486,187 $2,570,305 $2,129,135 $1,687,897 $2,565,360 $2,117,805 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 2.15% (b) 1.08% 0.71% 1.13% 1.52% 1.40% Portfolio turnover rate (c) 18% 32% 52% 46% 33% 35% </TABLE> <TABLE> <CAPTION> FIRST TRUST EIP CARBON IMPACT ETF (ECLN) SIX MONTHS ENDED YEAR ENDED OCTOBER 31, PERIOD 4/30/2023 ------------------------------------ ENDED (UNAUDITED) 2022 2021 2020 10/31/2019 (d) ----------- ---------- ---------- ---------- -------------- <S> <C> <C> <C> <C> <C> Net asset value, beginning of period $ 25.30 $ 24.33 $ 21.40 $ 20.70 $ 20.09 ----------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.27 0.31 0.31 0.30 0.05 Net realized and unrealized gain (loss) 0.24 1.05 2.98 0.85 0.56 ----------- ---------- ---------- ---------- ---------- Total from investment operations 0.51 1.36 3.29 1.15 0.61 ----------- ---------- ---------- ---------- ---------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.27) (0.29) (0.36) (0.33) -- Net realized gain (0.03) (0.10) -- -- -- Return of capital -- -- -- (0.12) -- ----------- ---------- ---------- ---------- ---------- Total distributions (0.30) (0.39) (0.36) (0.45) -- ----------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 25.51 $ 25.30 $ 24.33 $ 21.40 $ 20.70 =========== ========== ========== ========== ========== TOTAL RETURN (a) 2.02% 5.62% 15.49% 5.69% 3.04% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 35,720 $ 31,628 $ 20,682 $ 2,140 $ 2,070 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.95% (b) 0.95% 0.95% 0.95% 0.95% (b) Ratio of net investment income (loss) to average net assets 2.20% (b) 1.29% 1.24% 1.45% 1.18% (b) Portfolio turnover rate (c) 30% 22% 56% 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. See Notes to Financial Statements Page 21
FIRST TRUST EXCHANGE-TRADED FUND IV FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD FT ENERGY INCOME PARTNERS STRATEGY ETF (EIPX) <TABLE> <CAPTION> PERIOD ENDED 4/30/2023 (a) (UNAUDITED) ----------- <S> <C> Net asset value, beginning of period $ 19.72 ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.19 Net realized and unrealized gain (loss) 0.74 ----------- Total from investment operations 0.93 ----------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.24) ----------- Total distributions (0.24) ----------- Net asset value, end of period $ 20.41 =========== TOTAL RETURN (b) 4.73% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 121,437 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.95% (c) Ratio of net investment income (loss) to average net assets 2.14% (c) Portfolio turnover rate (d) 11% </TABLE> (a) Inception date is November 2, 2022, 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 return presented does 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 22 See Notes to Financial Statements
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV APRIL 30, 2023 (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 fourteen funds that are offering shares. This report covers the three 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") FT Energy Income Partners Strategy ETF - (ticker "EIPX")(1) (1) Commenced investment operations on November 2, 2022. 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 U.S. and Canadian natural gas and electric utilities, corporations operating energy infrastructure assets such as pipelines or renewable energy production, utilities, publicly-traded master limited partnerships or limited liability companies taxed as partnerships ("MLPs"), MLP affiliates, 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 the equity securities of companies identified by EIP as having or seeking to have a positive carbon impact. The Sub-Advisor defines positive carbon impact companies 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. EIPX's investment objective is to seek risk-adjusted total return. EIPX will invest, under normal market conditions, at least 80% of its net assets (plus any borrowing for investment purposes) in a portfolio of equity securities in the broader energy market ("Energy Companies"), which principally include companies in the Global Industry Classification Standard ("GICS") energy sector, companies in the GICS utility sector (excluding water utilities), or companies in any other GICS sectors that derive at least 50% of their revenues or profits from exploration, development, production, gathering, transportation, processing, storing, refining, distribution, mining or marketing, of natural gas, natural gas liquids (including propane), crude oil, refined petroleum products, petrochemicals, electricity, coal, uranium, hydrogen or other energy sources, renewable energy production, renewable energy equipment, energy storage, carbon, carbon dioxide, carbon dioxide and fugitive methane mitigation and management, as well as electric transmission, distribution, storage and system reliability support. Energy Companies also include companies providing engineering, consulting and construction services that derive at least 50% of their revenues or profits from the above, all of which are selected by EIP. These companies may include MLPs and MLP affiliates. 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. Page 23
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV APRIL 30, 2023 (UNAUDITED) 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 readily available market quotations such as last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Pricing Committee of the Funds' investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"), in accordance with valuation procedures approved by the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act and rules thereunder. Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. Each Fund's investments are valued as follows: 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 primary exchange for such securities. Securities trading on foreign exchanges or over-the-counter markets that close prior to the NYSE close may be valued using a systematic fair valuation model provided by a third-party pricing service. If these foreign securities meet certain criteria in relation to the valuation model, their valuation is systematically adjusted to reflect the impact of movement in the U.S. market after the close of the foreign markets. Shares of open-end funds are valued based on NAV per share. Securities traded in an over-the-counter market are valued at the mean of their most recent bid and asked price, if available, and otherwise at their last trade price. Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Advisor's Pricing Committee at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of a Fund's NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security's fair value. As a general principle, the current fair value of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities, including, but not limited to, the following: 1) the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price; 2) the type of security; 3) the size of the holding; 4) the initial cost of the security; 5) transactions in comparable securities; 6) price quotes from dealers and/or third-party pricing services; 7) relationships among various securities; 8) information obtained by contacting the issuer, analysts, or the appropriate stock exchange; 9) an analysis of the issuer's financial statements; 10) the existence of merger proposals or tender offers that might affect the value of the security; and 11) other relevant factors. Page 24
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV APRIL 30, 2023 (UNAUDITED) 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; 8) whether the effects of the event are isolated or whether they affect entire markets, countries or regions; and 9) other relevant factors. Because foreign markets may be open on different days than the days during which investors may transact in the shares of a Fund, the value of the Fund's securities may change on the days when investors are not able to transact in the shares of the Fund. The value of 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 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, 2023, 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. Distributions received from a Fund's investments in Real Estate Investment Trusts ("REITs") may be comprised of return of capital, capital gains, and income. The actual character of the amounts received during the year are not known until after the REITs' fiscal year end. A Fund records the character of distributions received from the REITs during the year based on estimates available. The characterization of distributions received by a Fund may be subsequently revised based on information received from the REITs after their tax reporting periods conclude. C. FOREIGN CURRENCY The books and records of the Funds are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at the exchange rates prevailing at the end of the period. Purchases and sales of investments and items of income and expense are translated on the respective dates of such transactions. Unrealized gains and Page 25
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV APRIL 30, 2023 (UNAUDITED) 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. A Fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes. Distributions from net investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on 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. The tax character of distributions paid by each Fund during the fiscal year ended October 31, 2022 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 $ 33,630,677 $ -- $ 41,548,643 First Trust EIP Carbon Impact ETF 331,016 -- -- </TABLE> As of October 31, 2022, 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 $ -- $(358,055,801) $ 493,028,013 First Trust EIP Carbon Impact ETF 23,595 39,587 1,183,859 </TABLE> E. INCOME TAXES Each Fund intends to qualify or continue to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, which includes distributing substantially all of its net investment income and net realized gains to shareholders. Accordingly, no provision has been made for federal and state income taxes. However, due to the timing and amount of distributions, each Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of each Fund's taxable income exceeds the distributions from such taxable income for the calendar year. Each Fund intends to utilize provisions of the federal income tax laws, which allow it to carry a realized capital loss forward indefinitely following the year of the loss and offset such loss against any future realized capital gains. Each Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. At October 31, 2022, EMLP and ECLN had non-expiring capital loss carryforwards available for federal income tax purposes of $358,055,801 and $0, respectively. Page 26
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV APRIL 30, 2023 (UNAUDITED) 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 and ECLN, the taxable years ended 2019, 2020, 2021, and 2022 remain open to federal and state audit. As of April 30, 2023, 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. During the taxable year ended October 31, 2022, EMLP and ECLN utilized non-expiring capital loss carryforwards in the following amounts: <TABLE> <CAPTION> Capital Loss Carryforward Utilized --------------- <S> <C> First Trust North American Energy Infrastructure Fund $ 84,449,607 First Trust EIP Carbon Impact ETF 4,660 </TABLE> 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, 2022, EMLP and ECLN had no net late year ordinary or capital losses. As of April 30, 2023, the aggregate cost, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation/(depreciation) on investments (including short positions and derivatives, if any) for federal income tax purposes were as follows: <TABLE> <CAPTION> Gross Gross Net Unrealized Unrealized Unrealized Appreciation Tax Cost Appreciation (Depreciation) (Depreciation) --------------- --------------- --------------- --------------- <S> <C> <C> <C> <C> First Trust North American Energy Infrastructure Fund $ 2,000,521,361 $ 491,309,918 $ (14,619,669) $ 476,690,249 First Trust EIP Carbon Impact ETF 34,321,267 2,446,373 (1,061,923) 1,384,450 FT Energy Income Partners Strategy ETF 118,820,827 3,757,233 (1,410,410) 2,346,823 </TABLE> 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 service fees payable pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses. Effective November 1, 2022, for EMLP and ECLN, and for EIPX from its date of inception, November 2, 2022, the annual unitary management fee payable by each Fund to First Trust for these services will be reduced at certain levels of each Fund's net assets ("breakpoints") and calculated pursuant to the schedule below: <TABLE> <CAPTION> Breakpoints ------------------------------------------------------------------------- <S> <C> 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% </TABLE> Page 27
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV APRIL 30, 2023 (UNAUDITED) Prior to November 1, 2022, EMLP and ECLN each paid 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 and EIPX from First Trust equal to 50% of the monthly investment management fee paid to First Trust less one-half of the Fund's expenses, for which EIP is responsible. During any period in which the Advisor's management fee is reduced in accordance with the breakpoints described above, the investment sub-advisory fee (which is based on the Advisor's management fee) paid to EIP will be reduced to reflect the reduction in the Advisor's management fee. 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 target outcome fund or an index fund. Additionally, the Lead Independent Trustee and the Chairs 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 Chairs 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 period ended April 30, 2023, 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 $ 415,960,799 $ 506,836,738 First Trust EIP Carbon Impact ETF 11,455,504 9,073,649 FT Energy Income Partners Strategy ETF 11,704,821 12,300,875 </TABLE> For the period ended April 30, 2023, 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 $ 32,670,118 $ 142,806,136 First Trust EIP Carbon Impact ETF 4,285,024 1,255,866 FT Energy Income Partners Strategy ETF 129,556,892 12,973,480 </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 Page 28
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV APRIL 30, 2023 (UNAUDITED) 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 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, 2024 for EMLP and ECLN and October 28, 2024 for EIPX. 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 was the following subsequent event: On May 23, 2023, the Advisor's Pricing Committee approved changes to the Advisor's Valuation Procedures for the First Trust Funds, including clarifications to certain pricing methodologies. These changes will be reflected in future reports' Notes to Financial Statements. Page 29
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV APRIL 30, 2023 (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 significant 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 more broadly diversified. 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. DEFINED OUTCOME FUNDS RISK. To the extent a fund's investment strategy is designed to deliver returns tied to the price performance of an underlying ETF, an investor may not realize the returns the fund seeks to achieve if that investor does not hold shares for the entire target outcome period. In the event an investor purchases shares after the first day of the target outcome period or sells shares prior to the end of the target outcome period, the buffer that the fund seeks to provide against a decline in the value of the underlying ETF may not be available, the enhanced returns that the fund seeks to provide (if any) may not be available and the investor may not participate in a gain in the value of the underlying ETF up to the cap for the investor's investment period. Additionally, the fund will not participate in gains of the underlying ETF above the cap and a shareholder may lose their entire investment. If the fund seeks enhanced returns, there are certain time periods when the value of the fund may fall faster than the value of the underlying ETF, and it is very unlikely that, on any given day during which the underlying ETF share price increases in value, the fund's share price will increase at the same rate as the enhanced returns sought by the fund, which is designed for an entire target outcome period. Trading flexible exchange options involves risks different from, or possibly greater than, the risks associated with investing directly in securities, such as less liquidity and correlation and valuation risks. A fund may experience substantial downside from specific flexible exchange option positions and certain positions may expire worthless. Page 30
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV APRIL 30, 2023 (UNAUDITED) 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 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 OR MODEL CONSTITUENT RISK. Certain funds may be a constituent of one or more indices or ETF models. 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 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. In addition, index rebalances may potentially result in increased trading activity in a fund's shares. 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 has ceased making LIBOR available as a reference rate over a phase-out period that began December 31, 2021. Page 31
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV APRIL 30, 2023 (UNAUDITED) There is no assurance that any alternative reference rate, including the Secured Overnight Financing Rate ("SOFR") will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the same volume or liquidity. 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. Market risk is the risk that a particular security, or shares of a fund in general, may fall in value. 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. In February 2022, Russia invaded Ukraine which has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain fund investments as well as fund performance. The COVID-19 global pandemic and the ensuing policies enacted by governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets. While the U.S. has resumed "reasonably" normal business activity, many countries continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective against emerging variants of the disease. These events also adversely affect the prices and liquidity of a fund's portfolio securities or other instruments and could result in disruptions in the trading markets. Any of such circumstances could have a materially negative impact on the value of a fund's shares and result in increased market volatility. During any such events, a fund's shares may trade at increased premiums or discounts to their net asset value and the bid/ask spread on a fund's shares may widen. 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; capital controls; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; the imposition of sanctions by foreign governments; 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. Each fund relies on third-parties for a range of services, including custody. Any delay or failure relating to engaging or maintaining such service providers may affect a fund's ability to meet its investment objective. Although the funds and the funds' investment 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. PREFERRED SECURITIES RISK. Preferred securities combine some of the characteristics of both common stocks and bonds. Preferred securities are typically subordinated to bonds and other debt securities in a company's capital structure in terms of priority to corporate income, subjecting them to greater credit risk than those debt securities. Generally, holders of preferred securities have no voting rights with respect to the issuing company unless preferred dividends have been in arrears for a specified number of periods, at which time the preferred security holders may obtain limited rights. In certain circumstances, an issuer of preferred securities may defer payment on the securities and, in some cases, redeem the securities prior to a specified date. Preferred securities may also be substantially less liquid than other securities, including common stock. Page 32
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV APRIL 30, 2023 (UNAUDITED) VALUATION RISK. The valuation of certain securities may carry more risk than that of common stock. Uncertainties in the conditions of the financial markets, unreliable reference data, lack of transparency and inconsistency of valuation models and processes may lead to inaccurate asset pricing. A fund may hold investments in sizes smaller than institutionally sized round lot positions (sometimes referred to as odd lots). However, third-party pricing services generally provide evaluations on the basis of institutionally-sized round lots. If a fund sells certain of its investments in an odd lot transaction, the sale price may be less than the value at which such securities have been held by the fund. Odd lots often trade at lower prices than institutional round lots. There is no assurance that the fund will be able to sell a portfolio security at the price established by the pricing service, which could result in a loss to the fund. 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 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 17, 2023 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 17, 2022 through the Liquidity Committee's annual meeting held on March 23, 2023 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 Funds primarily hold assets that are highly liquid investments, the Funds have not adopted any highly liquid investment minimums. As stated in the written report, during the review period, two funds breached the 15% limitation on illiquid investments for one day each, as a result of an unscheduled week-long closure of the stock exchange in Istanbul following devastating earthquakes in February, causing all Turkish equities to be re-classified as "illiquid" for one day. Each fund filed a Form N-RN on the day after the breach occurred, and one day later after the breach was cured. No fund with a highly liquid investment minimum breached that minimum during the reporting period. 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. ADVISORY AND SUB-ADVISORY AGREEMENTS BOARD CONSIDERATIONS REGARDING APPROVAL OF INVESTMENT MANAGEMENT AND 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 Energy Income Partners Strategy 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 Energy Income Partners, LLC (the "Sub-Advisor"), for an initial two-year term at a meeting held on September 19, 2022. 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 business judgment. Page 33
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV APRIL 30, 2023 (UNAUDITED) 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 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 indirect benefits to the Advisor and its affiliates, First Trust Portfolios L.P. ("FTP") and First Trust Capital Partners, LLC ("FTCP"), and the Sub-Advisor; and information on the Advisor's and the Sub-Advisor's compliance programs. The 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. 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 who will be responsible for such services. The Board considered that the Fund will be an actively-managed ETF and 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 written materials provided by the Sub-Advisor, at the September 19, 2022 meeting, the Board also received a presentation from representatives of the Sub-Advisor, who discussed 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 noted the background and experience of the Sub-Advisor's portfolio management team and the Sub-Advisor's investment style. Because the Fund had yet to commence investment operations, the Board could not consider the historical investment performance of the Fund. In light of the information presented and the considerations made, the Board concluded that the nature, extent and quality of the services to be provided to the Fund by the Advisor 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 0.95% 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 0.475% of the Fund's average daily net assets less one-half of the Fund's expenses. The Board noted that the Advisor and the Sub-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 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 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 Page 34
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV APRIL 30, 2023 (UNAUDITED) noted that the unitary fee rate for the Fund was above the median total (net) expense ratio of the peer funds in the Expense Group. With respect to the Expense Group, the Board discussed with 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 the Fund will be most comparable to another actively-managed ETF in the First Trust Fund Complex that is sub-advised by the Sub-Advisor, which pays a unitary fee equal to an annual rate of 0.95% of its average daily net assets. 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 build infrastructure and add new staff 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 and the Advisor's estimate of the profitability of the Advisory Agreement if the 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 indirect benefits described by the Advisor that may be realized from its relationship with the Fund. The Board noted that FTCP has an ownership interest in the Sub-Advisor and considered potential indirect benefits to the Advisor from such ownership interest. The Board also considered that the Advisor had identified as an indirect benefit to the Advisor and FTP their exposure to investors and brokers who, absent their exposure to the Fund, may have had no dealings with the Advisor or FTP. The Board considered indirect benefits described by the Sub-Advisor that may be realized from its relationship with the Fund, including soft-dollar arrangements, and considered a summary of such arrangements. The Board also considered the potential indirect benefits to the Sub-Advisor from the ownership interest of FTCP in the Sub-Advisor. The Board concluded that the character and amount of potential indirect benefits to the 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. BOARD CONSIDERATIONS REGARDING APPROVAL OF AMENDMENTS TO THE INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS The Board of Trustees of First Trust Exchange-Traded Fund IV (the "Trust"), including the Independent Trustees, unanimously approved the amendment (the "Advisory Agreement Amendment") of the Investment Management Agreement (the "Advisory Agreement") with First Trust Advisors L.P. (the "Advisor") and the amendment (the "Sub-Advisory Agreement Amendment" and together with the Advisory Agreement Amendment, the "Amendments") of the Investment Sub-Advisory Agreement (the "Sub-Advisory Agreement" and together with the Advisory Agreement, the "Agreements") among the Trust, the Advisor and Energy Income Partners, LLC (the "Sub-Advisor") on behalf of the FT Energy Income Partners Strategy ETF (the "Fund"). The Board approved the Amendments at a meeting held on October 24, 2022. As part of the review process, the Board reviewed information and had preliminary discussions with the Advisor regarding the proposed Amendments at a meeting held on September 18-19, 2022. Following those preliminary discussions, the Board requested and received information from the Advisor regarding the proposed Amendments, and that information was considered at an executive session of the Independent Trustees and their counsel held prior to the October 24, 2022 meeting, as well as at the October meeting. In reviewing the Advisory Agreement Amendment, the Board considered that the purpose of the Advisory Agreement Amendment is to modify the unitary fee rate for the Fund under the Advisory Agreement by introducing a breakpoint schedule pursuant to which the unitary fee rate paid by the Fund to the Advisor will be reduced as assets of the Fund meet certain thresholds. In reviewing the Sub-Advisory Agreement Amendment, the Board considered that the purpose of the Sub-Advisory Agreement Amendment is to modify the sub-advisory fee rate for the Fund under the Sub-Advisory Agreement to reflect the modification of the unitary fee rate schedule under the Advisory Agreement Amendment. The Board noted the Advisor's representations that the quality and quantity of the services Page 35
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV APRIL 30, 2023 (UNAUDITED) provided to the Fund by the Advisor under the Advisory Agreement and by the Sub-Advisor under the Sub-Advisory Agreement will not be reduced or modified as a result of the Advisory Agreement Amendment and the Sub-Advisory Agreement Amendment, and that the obligations of the Advisor under the Advisory Agreement and the obligations of the Sub-Advisor under the Sub-Advisory Agreement will remain the same in all respects. The Board noted that it, including the Independent Trustees, approved the Agreements for an initial two-year period ending October 28, 2024 at a meeting held on September 19, 2022. The Board noted that in connection with such approval it had determined, based upon the information provided, that the terms of the Agreements were fair and reasonable and that the approval of the Agreements was 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 business judgment. Based on all of the information considered, the Board, including the Independent Trustees, unanimously determined that the terms of the Amendments are fair and reasonable and that the Amendments are in the best interests of the Fund. Page 36
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 South Wacker Drive Chicago, IL 60606 LEGAL COUNSEL Chapman and Cutler LLP 320 South Canal Street Chicago, IL 60606
[BLANK BACK COVER]
FIRST TRUST First Trust Exchange-Traded Fund IV -------------------------------------------------------------------------------- First Trust Senior Loan Fund (FTSL) Semi-Annual Report For the Six Months Ended April 30, 2023
-------------------------------------------------------------------------------- TABLE OF CONTENTS -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) SEMI-ANNUAL REPORT APRIL 30, 2023 Shareholder Letter........................................................... 1 Fund Performance Overview.................................................... 2 Portfolio Management......................................................... 5 Understanding Your Fund Expenses............................................. 6 Portfolio of Investments..................................................... 7 Statement of Assets and Liabilities.......................................... 18 Statement of Operations...................................................... 19 Statements of Changes in Net Assets.......................................... 20 Financial Highlights......................................................... 21 Notes to Financial Statements................................................ 22 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 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.
-------------------------------------------------------------------------------- SHAREHOLDER LETTER -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO APRIL 30, 2023 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, 2023. It pleases me to write that on May 5, 2023, the World Health Organization officially declared that the coronavirus ("COVID-19") pandemic no longer qualified as a global health emergency. While the virus officially no longer poses an immediate threat, its full impact on the world economy remains to be seen, in my opinion. Recall, if you will, those early days of the pandemic; companies sent workers home, consumers were afraid or unwilling to leave their homes, supply chains dried up, and grocery shelves were left bare. Hoping to provide relief to their constituents and to bolster economic activity, governments across the globe funneled trillions of dollars in stimulus directly into the hands of their citizens. Unfortunately, economist Milton Friedman's age-old economic adage "there's no such thing as a free lunch" still holds. As a result of the U.S. government stimulus, gross domestic product rebounded quickly, but so did inflation. As many investors are aware, the Federal Reserve (the "Fed") has been locked in a battle with stubbornly high inflation for several years now. Inflation, as measured by the trailing 12-month rate of change in the Consumer Price Index ("CPI"), surged from 1.4% on December 31, 2020, to 9.1% as of June 30, 2022. Since then, the trailing rate on the CPI has come down, but remains elevated. On April 30, 2023, the CPI stood at 4.9%, well above the Fed's goal of 2.0%. Surging prices have not been restricted to the U.S. Headline inflation rates in each of the countries that make up the so-called Group of Ten (G-10) stand above the targets set by their central banks, according to data from Bloomberg. From the Fed's perspective, monetary policy is the most efficient means to combat rising prices. From December 31, 2020 through May 3, 2023, the Fed increased the Federal Funds target rate (upper bound) a total of ten times, raising the rate from 0.25% to 5.25%. As mentioned, tighter monetary policy resulted in a decrease in the CPI, but there have been casualties in the Fed's battle with rising prices. The most recent banking turmoil is one example. Another is the spike in mortgage rates. According to Bankrate, the national average for a 30-year mortgage stood at just 2.87% on December 31, 2020. As of May 1, 2023, the average 30-year mortgage rate had surged to 6.88%. Not all the news is negative, however. Driven by a strong U.S. labor market, consumer spending remained robust in April 2023. Notably, American corporations added 253,000 jobs during the month, and the unemployment rate stood at a 53-year low. Bob Carey, Chief Market Strategist at First Trust, recently summed up the current situation, noting that "we're not out of the woods yet." That said, even the most difficult situations don't last forever. In my opinion, like the COVID-19 pandemic, inflation, and the tighter monetary policy it ushered in, will pass with time. 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
-------------------------------------------------------------------------------- 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 invests at least 80% of its net assets (including investment borrowings) in first lien senior floating rate bank loans ("Senior Loans"). 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, such as the London Interbank Offered Rate ("LIBOR"), the Secured Overnight Financing Rate ("SOFR"), a similar reference rate, or the prime rate offered by one or more major U.S. banks. 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 S&P Global Ratings, 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 or SOFR 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 TOTAL RETURNS CUMULATIVE TOTAL RETURNS 6 Months Ended 1 Year Ended 5 Years Ended Inception (5/1/13) 5 Years Ended Inception (5/1/13) 4/30/23 4/30/23 4/30/23 to 4/30/23 4/30/23 to 4/30/23 <S> <C> <C> <C> <C> <C> <C> FUND PERFORMANCE NAV(1) 4.78% 2.48% 3.10% 3.05% 16.46% 35.01% Market Price 4.45% 1.74% 2.99% 3.00% 15.85% 34.40% INDEX PERFORMANCE Morningstar(R) LSTA(R) US Leveraged Loan Index(2) 5.94% 3.35% 3.75% 3.80% 20.23% 45.25% ------------------------------------------------------------------------------------------------------------------------------------ </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 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) On January 3, 2023, the fair value methodology used to value the senior loan investments held by the Fund was changed. Prior to that date, the senior loans were valued using the bid side price provided by a pricing service. After such date, the senior loans were valued using the midpoint between the bid and ask price provided by a pricing service. The change in the Fund's fair value methodology on January 3, 2023, resulted in a one-time increase in the Fund's net asset value of approximately $0.159 per share on that date, which represented a positive impact on the Fund's performance of 0.35%. Without the change to the pricing methodology, the performance of the Fund on a NAV basis would have been 4.38%, 2.11%, 3.02%, 3.01%, 16.04%, and 34.52%, in the six-months, one-year, five-years average annual, since inception average annual, five-years cumulative, and since inception cumulative periods ended April 30, 2023, respectively. (2) Formerly, S&P/LSTA Leveraged Loan Index. Page 2
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) ------------------------------------------------------- % OF SENIOR LOANS AND OTHER INDUSTRY CLASSIFICATION SECURITIES(1) ------------------------------------------------------- Software 20.5% Insurance 12.6 Health Care Technology 11.7 Media 10.5 Hotels, Restaurants & Leisure 6.4 Health Care Providers & Services 5.3 Containers & Packaging 4.9 Pharmaceuticals 4.3 Electric Utilities 3.2 Professional Services 2.9 Wireless Telecommunication Services 2.4 Commercial Services & Supplies 2.2 Diversified Telecommunication Services 2.0 Capital Markets 1.9 Health Care Equipment & Supplies 1.9 Trading Companies & Distributors 0.9 Specialty Retail 0.8 Diversified Consumer Services 0.8 Diversified Financial Services 0.7 Machinery 0.7 Auto Components 0.6 Electronic Equipment, Instruments & Components 0.5 IT Services 0.5 Food Products 0.5 Beverages 0.4 Food & Staples Retailing 0.3 Life Sciences Tools & Services 0.3 Communications Equipment 0.1 Building Products 0.1 Aerospace & Defense 0.1 Household Durables 0.0* Entertainment 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 89.8% Corporate Bonds and Notes 9.2 Foreign Corporate Bonds and Notes 1.0 Common Stocks 0.0* Warrants 0.0* Rights 0.0* ------- Total 100.0% ======= ------------------------------------------------------- % OF SENIOR LOANS AND OTHER CREDIT QUALITY (S&P RATINGS)(2) DEBT SECURITIES(1) ------------------------------------------------------- BBB 0.0%* BBB- 14.9 BB+ 7.6 BB 1.9 BB- 8.7 B+ 16.6 B 29.2 B- 13.3 CCC+ 5.9 CCC 0.4 NR 1.5 ------- Total 100.0% ======= ------------------------------------------------------- % OF SENIOR LOANS AND OTHER TOP 10 ISSUERS SECURITIES(1) ------------------------------------------------------- HUB International Ltd. 4.4% Charter Communications Operating LLC 4.4 SS&C Technologies Holdings, Inc. 4.3 Verscend Technologies, Inc. (Cotiviti) 4.2 AssuredPartners, Inc. 3.6 IQVIA, Inc. (Quintiles) 3.6 PG&E Corp. 3.2 Zelis Payments Buyer, Inc. 3.0 Open Text Corp. (GXS) 2.6 1011778 B.C. Unlimited Liability Co. (Restaurant Brands) (aka Burger King/Tim Horton's) 2.4 ------- Total 35.7% ======= * Amount is less than 0.1%. (1) Percentages are based on long-term positions. Money market funds are excluded. (2) The ratings are by S&P Global Ratings. 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
-------------------------------------------------------------------------------- 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, 2023 First Trust Senior Morningstar(R) LSTA(R) Loan Fund US Leveraged Loan Index <S> <C> <C> 5/1/13 $10,000 $10,000 10/31/13 10,092 10,150 4/30/14 10,275 10,382 10/31/14 10,385 10,492 4/30/15 10,637 10,730 10/31/15 10,567 10,540 4/30/16 10,763 10,707 10/31/16 11,034 11,230 4/30/17 11,247 11,568 10/31/17 11,414 11,799 4/30/18 11,592 12,080 10/31/18 11,760 12,334 4/30/19 12,044 12,592 10/31/19 12,156 12,663 4/30/20 11,619 11,759 10/31/20 12,266 12,880 4/30/21 12,978 13,653 10/31/21 13,198 13,969 4/30/22 13,175 14,053 10/31/22 12,889 13,723 4/30/23 13,501 14,525 </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
-------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) SEMI-ANNUAL REPORT APRIL 30, 2023 (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, 2023, the First Trust Leveraged Finance Team managed or supervised approximately $5.7 billion in senior secured bank loans and high-yield bonds. These assets are managed across various strategies, including two closed-end funds, an open-end fund, and four exchange-traded funds 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 The portfolio managers are primarily and jointly responsible for the day-to-day management of the Fund. Mr. Housey has served as a part of the portfolio management team of the Fund since 2013, while Mr. Scott has served as part of the portfolio management team of the Fund since 2020. Page 5
FIRST TRUST SENIOR LOAN FUND (FTSL) UNDERSTANDING YOUR FUND EXPENSES APRIL 30, 2023 (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, 2023. 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, 2022 APRIL 30, 2023 PERIOD (a) PERIOD (a) (b) ------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> FIRST TRUST SENIOR LOAN FUND (FTSL) Actual $1,000.00 $1,047.80 0.85% $4.32 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, 2022 through April 30, 2023), multiplied by 181/365 (to reflect the six-month period). Page 6
FIRST TRUST SENIOR LOAN FUND (FTSL) PORTFOLIO OF INVESTMENTS APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED VALUE DESCRIPTION RATE (a) MATURITY (b) VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> SENIOR FLOATING-RATE LOAN INTERESTS -- 84.3% APPLICATION SOFTWARE -- 12.5% $ 2,664,671 Applied Systems, Inc., 2026 Term Loan, 3 Mo. SOFR + 4.50%, 0.50% Floor.................................................. 9.40% 09/19/26 $ 2,673,211 828,556 CCC Intelligent Solutions, Inc., Term Loan B, 1 Mo. LIBOR + 2.25%, 0.50% Floor........................................... 7.27% 09/21/28 826,174 8,290,582 ConnectWise LLC, Term Loan B, 1 Mo. LIBOR + 3.50%, 0.50% Floor.................................................. 8.52% 09/30/28 8,067,814 14,125,209 Epicor Software Corp., Term Loan C (First Lien), 1 Mo. LIBOR + 3.25%, 0.75% Floor......................................... 8.27% 07/30/27 13,969,691 1,029,842 Flexera Software LLC, 2020 Term Loan B, 1 Mo. LIBOR + 3.75%, 0.75% Floor........................................... 8.77% 01/26/28 1,019,651 30,804,482 Gainwell Acquisition Corp. (fka Milano), Term Loan B, 3 Mo. SOFR + 4.00%, 0.75% Floor.................................... 9.00% 10/01/27 29,764,985 17,063,295 Greeneden U.S. Holdings II LLC (Genesys Telecommunications aboratories, Inc.), Initial Dollar Term Loan, 1 Mo. LIBOR + 4.00%, 0.75% Floor........................................... 9.02% 12/01/27 16,877,660 8,635,580 Hyland Software, Inc., Term Loan (Second Lien), 1 Mo. LIBOR + 6.25%, 0.75% Floor......................................... 11.27% 07/10/25 8,319,432 2,858,192 Informatica Corp., Term Loan B, 1 Mo. LIBOR + 2.75%, 0.00% Floor........................................................ 7.81% 10/29/28 2,855,334 13,478,485 Internet Brands, Inc. (WebMD/MH Sub I LLC), 2020 June New Term Loan, 1 Mo. LIBOR + 3.75%, 1.00% Floor.................. 8.77% 09/15/24 13,434,680 26,130,609 Internet Brands, Inc. (WebMD/MH Sub I LLC), Initial Term Loan, 1 Mo. LIBOR + 3.75%, 0.00% Floor....................... 8.77% 09/13/24 26,059,795 11,578,646 Internet Brands, Inc. (WebMD/MH Sub I LLC), Term Loan (Second Lien), 1 Mo. SOFR + 6.25%, 0.00% Floor............... 11.23% 02/23/29 10,787,419 1,453,358 ION Trading Technologies Ltd., Term Loan B, 3 Mo. LIBOR + 4.75%, 0.00% Floor........................................... 9.91% 04/01/28 1,406,640 30,680,940 LogMeIn, Inc. (GoTo Group, Inc.), Term Loan B, 1 Mo. LIBOR + 4.75%, 0.00% Floor......................................... 9.77% 08/31/27 18,983,832 21,812,099 McAfee Corp. (Condor Merger Sub, Inc.), Tranche B-1 Term Loan, 1 Mo. SOFR + 3.75%, 0.50% Floor........................ 8.65% 02/28/29 20,620,286 17,488,471 Open Text Corp. (GXS), New Term Loan B, 1 Mo. SOFR + 3.50%, 0.50% Floor........................................... 8.58% 01/31/30 17,499,401 27,231,659 Open Text Corp. (GXS), Term Loan B, 1 Mo. LIBOR + 1.75%, 0.00% Floor.................................................. 6.77% 05/30/25 27,265,698 14,335,603 RealPage, Inc., Term Loan (Second Lien), 1 Mo. LIBOR + 6.50%, 0.75% Floor........................................... 11.52% 04/22/29 13,479,983 19,696,612 RealPage, Inc., Term Loan B, 1 Mo. LIBOR + 3.00%, 0.50% Floor........................................................ 8.02% 04/24/28 19,161,160 25,751,931 SolarWinds Holdings, Inc., Extended Term Loan B, 1 Mo. SOFR + 4.00%, 0.00% Floor.................................... 8.98% 02/17/27 25,760,043 317,943 Solera Holdings, Inc. (Polaris Newco), Term Loan B, 3 Mo. LIBOR + 4.00%, 0.50% Floor................................... 9.16% 06/04/28 295,511 371,698 Tenable, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%, 0.50% Floor........................................................ 7.77% 07/07/28 367,981 3,678,295 Ultimate Kronos Group (UKG Inc.), Term Loan B, 3 Mo. SOFR + 3.25%, 0.50% Floor......................................... 8.27% 05/03/26 3,587,588 3,000,000 Ultimate Kronos Group (UKG Inc.), Term Loan B, 3 Mo. SOFR + 3.75%, 0.00% Floor......................................... 8.90% 05/03/26 2,956,020 3,933,041 Veeam Software Holdings Ltd. (VS Buyer LLC), Term Loan B, 1 Mo. SOFR + 3.00%, 0.00% Floor.............................. 7.90% 02/28/27 3,888,795 --------------- 289,928,784 --------------- </TABLE> See Notes to Financial Statements Page 7
FIRST TRUST SENIOR LOAN FUND (FTSL) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED VALUE DESCRIPTION RATE (a) MATURITY (b) VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED) ASSET MANAGEMENT & CUSTODY BANKS -- 1.6% $ 15,451,614 Edelman Financial Engines Center LLC, Term Loan (Second Lien), 1 Mo. LIBOR + 6.75%, 0.00% Floor...................... 11.77% 07/20/26 $ 14,509,993 22,574,048 Edelman Financial Engines Center LLC, Term Loan B, 1 Mo. LIBOR + 3.75%, 0.75% Floor................................... 8.77% 04/07/28 21,878,542 --------------- 36,388,535 --------------- AUTO PARTS & EQUIPMENT -- 0.6% 13,186,973 Clarios Global L.P. (Power Solutions), Term Loan B, 1 Mo. LIBOR + 3.25%, 0.00% Floor................................... 8.27% 04/30/26 13,177,347 --------------- BROADCASTING -- 2.7% 959,387 E.W. Scripps Co., Tranche B-3 Term Loan, 1 Mo. SOFR + 2.75%, 0.75% Floor........................................... 7.85% 01/07/28 922,076 7,369,088 Gray Television, Inc., Term Loan E, 1 Mo. SOFR + 2.50%, 0.00% Floor.................................................. 7.42% 01/02/26 7,305,383 24,939,453 iHeartCommunications, Inc., Second Amendment Incremental Term Loan B, 1 Mo. LIBOR + 3.25%, 0.50% Floor................ 8.27% 05/01/26 21,697,324 6,502,712 iHeartCommunications, Inc., Term Loan B, 1 Mo. LIBOR + 3.00%, 0.00% Floor........................................... 8.02% 05/01/26 5,635,868 17,030,209 Nexstar Broadcasting, Inc., Incremental Term Loan B-4, 1 Mo. LIBOR + 2.50%, 0.00% Floor................................... 7.52% 09/19/26 17,017,862 9,352,389 Univision Communications, Inc., 2021 Replacement New Term Loan (First Lien), 1 Mo. LIBOR + 3.25%, 0.75% Floor.......... 8.27% 03/15/26 9,305,627 --------------- 61,884,140 --------------- BUILDING PRODUCTS -- 0.1% 2,116,773 Hunter Douglas, Inc. (Solis), Term Loan B, 3 Mo. SOFR + 3.50%, 0.50% Floor........................................... 8.37% 02/28/29 1,926,263 369,928 Quikrete Holdings, Inc., Term Loan B-1, 1 Mo. LIBOR + 3.00%, 0.00% Floor.................................................. 8.02% 03/18/29 368,919 --------------- 2,295,182 --------------- CABLE & SATELLITE -- 2.4% 15,959,786 Cablevision (aka CSC Holdings LLC), March 2017 Term Loan B-1, 1 Mo. LIBOR + 2.25%, 0.00% Floor........................ 7.20% 07/17/25 15,271,520 106,421 Charter Communications Operating LLC, Term Loan B1, 1 Mo. SOFR + 1.75%, 0.00% Floor.................................... 6.73% 04/30/25 106,392 40,592,677 Charter Communications Operating LLC, Term Loan B1, 3 Mo. SOFR + 1.75%, 0.00% Floor.................................... 6.80% 04/30/25 40,581,514 --------------- 55,959,426 --------------- CASINOS & GAMING -- 1.1% 24,745,766 Golden Nugget, Inc. (Fertitta Entertainment LLC), Initial Term Loan B, 1 Mo. SOFR + 4.00%, 0.50% Floor...................... 8.98% 01/27/29 24,127,246 496,250 Light & Wonder (FKA Scientific Games International, Inc.), Term Loan B, 1 Mo. SOFR + 3.00%, 0.50% Floor................. 7.98% 04/07/29 495,716 1,691,181 Scientific Games Holdings L.P. (Scientific Games Lottery), Initial Dollar Term Loan, 3 Mo. SOFR + 3.50%, 0.50% Floor.... 8.42% 04/04/29 1,668,984 --------------- 26,291,946 --------------- COMMERCIAL PRINTING -- 0.6% 13,092,845 Multi-Color Corp. (LABL, Inc.), Initial Dollar Term Loan, 1 Mo. SOFR + 5.00%, 0.50% Floor.................................... 10.08% 10/29/28 12,929,905 --------------- </TABLE> Page 8 See Notes to Financial Statements
FIRST TRUST SENIOR LOAN FUND (FTSL) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED VALUE DESCRIPTION RATE (a) MATURITY (b) VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED) COMMUNICATIONS EQUIPMENT -- 0.1% $ 2,584,295 Commscope, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%, 0.00% Floor........................................................ 8.27% 04/06/26 $ 2,400,810 --------------- EDUCATION SERVICES -- 0.3% 5,852,894 Ascensus Holdings, Inc. (Mercury), Term Loan (First Lien), 1 Mo. LIBOR + 3.50%, 0.50% Floor............................. 8.56% 08/02/28 5,739,494 --------------- ELECTRIC UTILITIES -- 3.0% 70,175,064 PG&E Corp., Term Loan B, 1 Mo. LIBOR + 3.00%, 0.50% Floor........................................................ 8.06% 06/23/25 70,225,239 --------------- ELECTRONIC EQUIPMENT & INSTRUMENTS -- 0.5% 723,923 Chamberlain Group, Inc. (Chariot), Term Loan B, 1 Mo. LIBOR + 3.25%, 0.50% Floor......................................... 8.27% 11/03/28 703,846 12,850,299 Verifone Systems, Inc., Term Loan B, 3 Mo. LIBOR + 4.00%, 0.00% Floor.................................................. 8.96% 08/20/25 11,143,201 --------------- 11,847,047 --------------- ENVIRONMENTAL & FACILITIES SERVICES -- 0.5% 10,747,137 GFL Environmental, Inc., Extended Term Loan B, 3 Mo. SOFR + 3.00%, 0.50% Floor......................................... 8.05% 05/31/27 10,768,792 --------------- FOOD DISTRIBUTORS -- 0.3% 7,554,346 US Foods, Inc., 2019 Incremental Term Loan B, 1 Mo. LIBOR + 2.00%, 0.00% Floor........................................... 7.02% 08/31/26 7,546,112 --------------- HEALTH CARE EQUIPMENT -- 0.0% 908,735 Embecta Corp., Initial Term Loan, 6 Mo. SOFR + 3.00%, 0.50% Floor........................................................ 7.79% 03/31/29 897,294 --------------- HEALTH CARE FACILITIES -- 0.9% 16,637,590 Ardent Health Services, Inc. (AHP Health Partners, Inc.), Term Loan B, 1 Mo. LIBOR + 3.50%, 0.50% Floor..................... 8.52% 08/24/28 16,627,191 3,231,000 Select Medical Corp., Term Loan B, 1 Mo. LIBOR + 2.50%, 0.00% Floor.................................................. 7.53% 03/06/25 3,227,462 --------------- 19,854,653 --------------- HEALTH CARE SERVICES -- 2.5% 6,500,000 ADMI Corp. (Aspen Dental), 2020 Incremental Term Loan B2, 1 Mo. LIBOR + 3.38%, 0.50% Floor............................. 8.40% 12/23/27 6,144,548 2,207,999 ADMI Corp. (Aspen Dental), 2021 Incremental Term Loan B3, 1 Mo. LIBOR + 3.75%, 0.50% Floor............................. 8.77% 12/23/27 2,093,923 7,822,844 Aveanna Healthcare LLC, 2021 Term Loan B, 3 Mo. LIBOR + 3.75%, 0.50% Floor........................................... 8.70% 07/15/28 6,780,215 16,108,878 CHG Healthcare Services, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%, 0.50% Floor........................................... 8.27% 09/30/28 16,034,375 19,578,404 DaVita, Inc., Term Loan B, 1 Mo. SOFR + 1.75%, 0.00% Floor........................................................ 6.85% 08/12/26 19,428,433 347,229 ExamWorks Group, Inc. (Electron Bidco), Term Loan B, 1 Mo. SOFR + 3.00%, 0.50% Floor.................................... 8.10% 10/29/28 344,272 10,440,500 Global Medical Response, Inc. (fka Air Medical), 2018 New Term Loan, 3 Mo. LIBOR + 4.25%, 1.00% Floor.................. 9.20% 03/14/25 6,490,076 1,349,876 Global Medical Response, Inc. (fka Air Medical), 2021 Refinancing Term Loan, 3 Mo. LIBOR + 4.25%, 1.00% Floor........................................................ 9.24% 10/02/25 842,734 --------------- 58,158,576 --------------- </TABLE> See Notes to Financial Statements Page 9
FIRST TRUST SENIOR LOAN FUND (FTSL) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (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 SUPPLIES -- 1.7% $ 40,553,391 Medline Borrower L.P. (Mozart), Initial Dollar Term Loan, 1 Mo. LIBOR + 3.25%, 0.50% Floor................................... 8.27% 10/21/28 $ 39,418,504 --------------- HEALTH CARE TECHNOLOGY -- 11.0% 37,262,971 athenahealth, Inc. (Minerva Merger Sub, Inc.), Term Loan B, 1 Mo. SOFR + 3.50%, 0.50% Floor.............................. 8.46% 02/15/29 35,040,421 10,616,162 Ciox Health (Healthport/CT Technologies Intermediate Holdings, Inc.), New Term Loan B, 1 Mo. LIBOR + 4.25%, 0.75% Floor........................................................ 9.27% 12/16/25 10,103,613 7,595,808 Ensemble RCM LLC (Ensemble Health), Term Loan B, 3 Mo. SOFR + 3.75%, 0.00% Floor.................................... 8.90% 08/01/26 7,598,505 25,793,912 Mediware (Wellsky/Project Ruby Ultimate Parent Corp.), Term Loan B, 1 Mo. SOFR + 3.25%, 0.75% Floor...................... 8.35% 03/10/28 25,044,212 20,705,060 Navicure, Inc. (Waystar Technologies, Inc.), Term Loan B, 1 Mo. LIBOR + 4.00%, 0.00% Floor................................... 9.02% 10/23/26 20,688,910 90,792,867 Verscend Technologies, Inc. (Cotiviti), New Term Loan B-1, 1 Mo. LIBOR + 4.00%, 0.00% Floor............................. 9.02% 08/27/25 90,821,466 66,470,223 Zelis Payments Buyer, Inc., New Term Loan B-1, 1 Mo. LIBOR + 3.50%, 0.00% Floor......................................... 8.52% 09/30/26 66,248,545 --------------- 255,545,672 --------------- HOTELS, RESORTS & CRUISE LINES -- 0.9% 1,761,293 Alterra Mountain Co., Term Loan B-2, 1 Mo. LIBOR + 3.50%, 0.50% Floor.................................................. 8.52% 08/17/28 1,760,553 840,481 Four Seasons Holdings, Inc., New Term Loan B, 1 Mo. SOFR + 3.25%, 0.50% Floor........................................... 8.23% 11/30/29 843,855 17,486,347 Hilton Worldwide Finance LLC, Refinancing Series B-2 Term Loan, 1 Mo. SOFR + 1.75%, 0.00% Floor........................ 6.82% 06/21/26 17,479,003 --------------- 20,083,411 --------------- HOUSEHOLD APPLIANCES -- 0.0% 1,055,858 Weber-Stephen Products LLC, Term Loan B, 1 Mo. LIBOR + 3.25%, 0.75% Floor........................................... 8.27% 10/31/27 947,236 --------------- HUMAN RESOURCE & EMPLOYMENT SERVICES -- 0.0% 892,848 Alight, Inc. (fka Tempo Acq.), Extended Term Loan 2022, 1 Mo. SOFR + 3.00%, 0.50% Floor.................................... 7.98% 08/31/28 893,500 --------------- INDUSTRIAL MACHINERY -- 0.6% 9,744,466 Filtration Group Corp., 2021 Incremental Term Loan B, 1 Mo. LIBOR + 3.50%, 0.50% Floor................................... 8.52% 10/21/28 9,663,538 4,752,588 Filtration Group Corp., Initial Term Loan, 1 Mo. LIBOR + 3.00%, 0.00% Floor........................................... 8.02% 03/29/25 4,752,588 58,116 Gates Global LLC, Term Loan B-3, 1 Mo. SOFR + 2.50%, 0.75% Floor.................................................. 7.58% 03/31/27 57,995 516,023 TK Elevator Newco GMBH (Vertical U.S. Newco, Inc.), New Term Loan B1 (USD), 6 Mo. LIBOR + 3.50%, 0.50% Floor......... 8.60% 07/31/27 504,521 --------------- 14,978,642 --------------- INSURANCE BROKERS -- 10.5% 11,553,437 Alliant Holdings I LLC, Term Loan B-4, 1 Mo. LIBOR + 3.50%, 0.50% Floor.................................................. 8.51% 11/06/27 11,470,656 29,244,510 Alliant Holdings I LLC, Term Loan B-5, 1 Mo. SOFR + 3.50%, 0.50% Floor.................................................. 8.38% 11/06/27 29,043,454 5,002,531 AmWINS Group, Inc., Feb. 2023 Incremental Term Loan, 1 Mo. SOFR + 2.75%, 0.75% Floor.................................... 7.83% 02/19/28 4,990,025 </TABLE> Page 10 See Notes to Financial Statements
FIRST TRUST SENIOR LOAN FUND (FTSL) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (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 (CONTINUED) $ 10,404,784 AmWINS Group, Inc., Term Loan B, 1 Mo. LIBOR + 2.25%, 0.75% Floor.................................................. 7.27% 02/28/28 $ 10,311,401 12,790,487 AssuredPartners, Inc., 2021 Term Loan B, 1 Mo. LIBOR + 3.50%, 0.50% Floor........................................... 8.52% 02/13/27 12,614,618 887,369 AssuredPartners, Inc., 2022 Incremental Term Loan B4, 1 Mo. SOFR + 4.25%, 0.50% Floor.................................... 9.23% 02/13/27 886,814 13,064,441 AssuredPartners, Inc., Incremental Term Loan 2022, 1 Mo. SOFR + 3.50%, 0.50% Floor......................................... 8.48% 02/13/27 12,857,630 43,505,264 AssuredPartners, Inc., Term Loan B, 1 Mo. LIBOR + 3.50%, 0.00% Floor.................................................. 8.52% 02/12/27 42,834,631 8,935,151 BroadStreet Partners, Inc., Term Loan B, 1 Mo. LIBOR + 3.00%, 0.00% Floor.................................................. 8.02% 01/27/27 8,879,306 7,055,095 BroadStreet Partners, Inc., Term Loan B-3, 1 Mo. SOFR + 4.00%, 0.00% Floor........................................... 9.02% 01/26/29 7,006,592 34,233,917 HUB International Ltd., Initial Term Loan B, 1 Mo. LIBOR + 3.00%, 0.00% Floor........................................... 8.02% 04/25/25 34,208,241 90,089 HUB International Ltd., Initial Term Loan B, 2 Mo. LIBOR + 3.00%, 0.00% Floor........................................... 8.16% 04/25/25 90,022 110,869 HUB International Ltd., New Term Loan B-3, 2 Mo. LIBOR + 3.25%, 0.75% Floor........................................... 8.41% 04/25/25 110,819 43,238,942 HUB International Ltd., New Term Loan B-3, 3 Mo. LIBOR + 3.25%, 0.75% Floor........................................... 8.51% 04/25/25 43,219,268 1,841,538 HUB International Ltd., Term Loan B4, 3 Mo. SOFR + 4.00%, 0.75% Floor.................................................. 8.73% 11/10/29 1,840,185 9,793,803 USI, Inc. (fka Compass Investors, Inc.), 2021 New Term Loans, 3 Mo. LIBOR + 3.25%, 0.00% Floor............................. 8.41% 12/02/26 9,797,917 14,417,430 USI, Inc. (fka Compass Investors, Inc.), 2022 New Term Loan, 3 Mo. SOFR + 3.75%, 0.50% Floor.............................. 8.65% 11/30/29 14,404,382 --------------- 244,565,961 --------------- INTEGRATED TELECOMMUNICATION SERVICES -- 1.8% 8,520,818 Numericable (Altice France S.A. or SFR), Term Loan B-11, 1 Mo. LIBOR + 2.75%, 0.00% Floor............................. 8.02% 07/31/25 8,334,467 1,928,839 Numericable (Altice France S.A. or SFR), Term Loan B-12, 3 Mo. LIBOR + 3.69%, 0.00% Floor............................. 8.95% 01/31/26 1,863,741 12,646,010 Numericable (Altice France S.A. or SFR), Term Loan B-13, 3 Mo. LIBOR + 4.00%, 0.00% Floor............................. 8.86% 08/14/26 12,302,228 6,636,589 Zayo Group Holdings, Inc., Incremental Term Loan B-2, 1 Mo. SOFR + 4.25%, 0.50% Floor.................................... 9.23% 03/09/27 5,531,730 17,001,608 Zayo Group Holdings, Inc., Initial Dollar Term Loan, 1 Mo. LIBOR + 3.00%, 0.00% Floor................................... 8.02% 03/09/27 13,875,097 --------------- 41,907,263 --------------- INTERNET SERVICES & INFRASTRUCTURE -- 0.1% 1,994,872 Go Daddy Operating Co. LLC, Term Loan B4, 1 Mo. LIBOR + 2.00%, 0.00% Floor........................................... 7.02% 08/10/27 1,994,593 --------------- INVESTMENT BANKING & BROKERAGE -- 0.2% 4,987,113 LPL Holdings, Inc., Term Loan B, 1 Mo. SOFR + 1.75%, 0.00% Floor........................................................ 6.65% 11/12/26 4,985,044 --------------- MANAGED HEALTH CARE -- 0.5% 13,258,743 Multiplan, Inc. (MPH), Term Loan B, 3 Mo. LIBOR + 4.25%, 0.50% Floor.................................................. 9.20% 08/31/28 11,424,661 --------------- </TABLE> See Notes to Financial Statements Page 11
FIRST TRUST SENIOR LOAN FUND (FTSL) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED VALUE DESCRIPTION RATE (a) MATURITY (b) VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED) METAL & GLASS CONTAINERS -- 2.0% $ 46,189,341 Berry Global, Inc., Term Loan Z, 1 Mo. LIBOR + 1.75%, 0.00% Floor........................................................ 6.64% 07/01/26 $ 46,140,842 --------------- OFFICE SERVICES & SUPPLIES -- 0.9% 20,727,385 Dun & Bradstreet Corp., Refinancing Term Loan, 1 Mo. LIBOR + 3.25%, 0.00% Floor......................................... 8.27% 02/08/26 20,724,172 --------------- OTHER DIVERSIFIED FINANCIAL SERVICES -- 0.0% 951,570 AlixPartners, LLP, Term Loan B, 1 Mo. LIBOR + 2.75%, 0.50% Floor........................................................ 7.77% 02/04/28 951,242 --------------- PACKAGED FOODS & MEATS -- 0.4% 9,988,378 Hostess Brands LLC (HB Holdings), Term Loan B, 3 Mo. LIBOR + 2.25%, 0.75% Floor................................... 7.52% 08/03/25 9,995,419 --------------- PAPER PACKAGING -- 2.5% 26,893,153 Graham Packaging Co., L.P., Term Loan B, 1 Mo. LIBOR + 3.00%, 0.75% Floor........................................... 8.02% 08/04/27 26,784,639 14,818,357 Pactiv LLC/Evergreen Packaging LLC (fka Reynolds Group Holdings), Term Loan B-2, 1 Mo. SOFR + 3.25%, 0.00% Floor........................................................ 8.35% 02/05/26 14,798,945 1,792,418 Pactiv LLC/Evergreen Packaging LLC (fka Reynolds Group Holdings), Tranche B-3 U.S. Term Loan, 1 Mo. SOFR + 3.25%, 0.50% Floor.................................................. 8.35% 09/20/28 1,777,075 13,829,734 Reynolds Consumer Products LLC, Initial Term Loan, 1 Mo. SOFR + 1.75%, 0.00% Floor.................................... 6.83% 02/04/27 13,707,894 --------------- 57,068,553 --------------- PHARMACEUTICALS -- 4.0% 1,374,907 ICON Clinical Investments LLC (PRA Health Sciences, Inc.), Lux Term Loan B, 3 Mo. SOFR + 2.25%, 0.50% Floor............. 7.41% 07/01/28 1,376,041 342,559 ICON Clinical Investments LLC (PRA Health Sciences, Inc.), US Term Loan B, 3 Mo. SOFR + 2.25%, 0.50% Floor.............. 7.41% 07/01/28 342,842 31,147,393 IQVIA, Inc. (Quintiles), Term Loan B2, 1 Mo. LIBOR + 1.75%, 0.00% Floor.................................................. 6.77% 01/18/25 31,157,204 47,694,976 IQVIA, Inc. (Quintiles), Term Loan B3, 1 Mo. LIBOR + 1.75%, 0.00% Floor.................................................. 6.77% 06/11/25 47,673,752 12,474,724 Parexel International Corp. (Phoenix Newco), Term Loan (First Lien), 1 Mo. LIBOR + 3.25%, 0.50% Floor...................... 8.27% 11/15/28 12,279,058 --------------- 92,828,897 --------------- PROPERTY & CASUALTY INSURANCE -- 0.1% 1,719,461 Sedgwick Claims Management Services, Inc., Term Loan B, 1 Mo. SOFR + 3.75%, 0.00% Floor.............................. 8.73% 02/24/28 1,703,221 --------------- RESEARCH & CONSULTING SERVICES -- 2.6% 44,429,325 Clarivate Analytics PLC (Camelot), Amendment No. 2 Incremental Term Loan, 1 Mo. LIBOR + 3.00%, 1.00% Floor........................................................ 8.02% 10/31/26 44,422,438 3,855,302 Corelogic, Inc., Term Loan B, 1 Mo. LIBOR + 3.50%, 0.50% Floor........................................................ 8.56% 06/02/28 3,469,425 9,247,541 J.D. Power (Project Boost Purchaser LLC), 2021 Incremental Term Loan B, 1 Mo. LIBOR + 3.50%, 0.50% Floor................ 8.52% 05/26/26 9,178,185 3,701,434 Trans Union LLC, Term Loan B5, 1 Mo. LIBOR + 1.75%, 0.00% Floor........................................................ 6.77% 11/13/26 3,692,199 </TABLE> Page 12 See Notes to Financial Statements
FIRST TRUST SENIOR LOAN FUND (FTSL) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (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) $ 436,375 Veritext Corp. (VT TopCo, Inc.), Non-Fungible Term Loan (First Lien), 1 Mo. LIBOR + 3.75%, 0.75% Floor...................... 8.77% 08/10/25 $ 433,445 --------------- 61,195,692 --------------- RESTAURANTS -- 3.9% 51,992,118 1011778 B.C. Unlimited Liability Co. (Restaurant Brands) (aka Burger King/Tim Horton's), Term Loan B-4, 1 Mo. LIBOR + 1.75%, 0.00% Floor........................................... 6.77% 11/14/26 51,573,842 39,163,517 IRB Holding Corp. (Arby's/Inspire Brands), 2022 Replacement Term B Loan 2022, 1 Mo. SOFR + 3.00%, 0.75% Floor............ 8.08% 12/15/27 38,590,947 --------------- 90,164,789 --------------- SECURITY & ALARM SERVICES -- 0.1% 2,629,846 Garda World Security Corp., Term Loan B-2, 1 Mo. SOFR + 4.25%, 0.00% Floor........................................... 9.30% 10/30/26 2,628,755 --------------- SOFT DRINKS -- 0.3% 8,942,326 Tropicana (Naked Juice LLC/Bengal Debt Merger Sub LLC), Term Loan (First Lien), 3 Mo. SOFR + 3.25%, 0.50% Floor...... 8.25% 01/24/29 8,000,296 --------------- SPECIALIZED CONSUMER SERVICES -- 0.5% 4,388,805 Asurion LLC, New B-8 Term Loan, 1 Mo. LIBOR + 3.25%, 0.00% Floor.................................................. 8.27% 12/23/26 4,111,762 8,795,978 Asurion LLC, Term Loan B-3 (Second Lien), 1 Mo. LIBOR + 5.25%, 0.00% Floor........................................... 10.27% 01/31/28 7,392,316 309,217 Driven Holdings LLC, 2021 Term Loan B, 1 Mo. LIBOR + 3.00%, 0.50% Floor........................................... 7.95% 11/30/28 303,806 --------------- 11,807,884 --------------- SPECIALIZED FINANCE -- 0.6% 5,598,497 Radiate Holdco LLC (Astound), Amendment No. 6 Term Loan, 1 Mo. LIBOR + 3.25%, 0.75% Floor............................. 8.27% 09/25/26 4,650,279 8,716,655 WCG Purchaser Corp. (WIRB-Copernicus Group), Term Loan B, 3 Mo. LIBOR + 4.00%, 1.00% Floor............................. 8.95% 01/08/27 8,348,900 --------------- 12,999,179 --------------- SPECIALTY CHEMICALS -- 0.2% 5,436,152 Avantor, Inc., Term Loan B5, 1 Mo. SOFR + 2.25%, 0.50% Floor........................................................ 7.33% 11/06/27 5,437,837 --------------- SPECIALTY STORES -- 0.8% 8,420,363 Petco Health and Wellness Co., Inc., Initial Term Loan B, 3 Mo. SOFR + 3.25%, 0.75% Floor.................................... 8.41% 03/03/28 8,314,604 9,487,629 Petsmart, Inc., Initial Term Loan B, 1 Mo. SOFR + 3.75%, 0.75% Floor.................................................. 8.83% 02/12/28 9,457,980 --------------- 17,772,584 --------------- SYSTEMS SOFTWARE -- 5.4% 14,381,926 BMC Software Finance, Inc. (Boxer Parent), 2021 Replacement Dollar Term Loan, 1 Mo. LIBOR + 3.75%, 0.00% Floor........... 8.77% 10/02/25 14,229,118 4,415,513 Gen Digital, Inc. (fka NortonLifeLock, Inc.), Term Loan B, 1 Mo. SOFR + 2.00%, 0.50% Floor.............................. 7.08% 09/12/29 4,374,118 2,726,712 Idera, Inc., Initial Term Loan, 1 Mo. SOFR + 3.75%, 0.75% Floor........................................................ 8.65% 02/15/28 2,639,457 </TABLE> See Notes to Financial Statements Page 13
FIRST TRUST SENIOR LOAN FUND (FTSL) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (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) $ 13,861,178 Misys Financial Software Ltd. (Almonde, Inc.) (Finastra), Term Loan B, 2 Mo. LIBOR + 3.50%, 1.00% Floor..................... 8.65% - 12.65% 06/13/24 $ 13,248,722 10,395,000 Proofpoint, Inc., Term Loan (Second Lien), 1 Mo. LIBOR + 6.25%, 0.50% Floor........................................... 11.27% 08/31/29 9,951,082 2,583,631 Proofpoint, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%, 0.50% Floor........................................................ 8.27% 08/31/28 2,531,416 997,437 Sophos Group PLC (Surf), Term Loan B, 3 Mo. LIBOR + 3.50%, 0.00% Floor.................................................. 8.51% 03/05/27 990,894 12,545,836 SS&C Technologies Holdings, Inc., Term Loan B-3, 1 Mo. LIBOR + 1.75%, 0.00% Floor................................... 6.77% 04/16/25 12,536,238 11,003,336 SS&C Technologies Holdings, Inc., Term Loan B-4, 1 Mo. LIBOR + 1.75%, 0.00% Floor................................... 6.77% 04/16/25 10,994,918 51,885,070 SS&C Technologies Holdings, Inc., Term Loan B-5, 1 Mo. LIBOR + 1.75%, 0.00% Floor................................... 6.77% 04/16/25 51,839,930 974,684 SUSE (Marcel Lux IV S.A.R.L.), Facility Term Loan B1 USD, Daily SOFR + 3.25%, 0.00% Floor.............................. 8.17% - 8.24% 03/15/26 968,592 --------------- 124,304,485 --------------- TRADING COMPANIES & DISTRIBUTORS -- 0.8% 19,388,040 SRS Distribution, Inc., 2021 Refinancing Term Loan, 1 Mo. LIBOR + 3.50%, 0.50% Floor................................... 8.52% 06/04/28 18,544,369 831,915 SRS Distribution, Inc., 2022 Refinancing Term Loan, 1 Mo. SOFR + 3.50%, 0.50% Floor.................................... 8.58% 06/04/28 795,868 --------------- 19,340,237 --------------- WIRELESS TELECOMMUNICATION SERVICES -- 2.2% 51,201,492 SBA Senior Finance II LLC, Term Loan B, 1 Mo. LIBOR + 1.75%, 0.00% Floor........................................... 6.78% 04/11/25 51,216,084 --------------- TOTAL SENIOR FLOATING-RATE LOAN INTERESTS.................................................... 1,957,317,937 (Cost $1,995,812,476) --------------- </TABLE> <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> CORPORATE BONDS AND NOTES -- 8.6% AEROSPACE & DEFENSE -- 0.1% 1,082,000 TransDigm, Inc. (c)............................................. 6.25% 03/15/26 1,088,808 --------------- APPLICATION SOFTWARE -- 0.1% 3,598,000 GoTo Group, Inc. (c)............................................ 5.50% 09/01/27 2,029,290 --------------- BROADCASTING -- 0.8% 2,148,000 Gray Television, Inc. (c)....................................... 5.88% 07/15/26 1,828,155 18,561,000 Nexstar Media, Inc. (c)......................................... 5.63% 07/15/27 17,451,331 --------------- 19,279,486 --------------- CABLE & SATELLITE -- 3.9% 57,771,000 CCO Holdings LLC / CCO Holdings Capital Corp. (c)............... 5.13% 05/01/27 54,598,772 53,853,000 CSC Holdings LLC (c)............................................ 7.50% 04/01/28 33,723,853 2,278,000 CSC Holdings LLC (c)............................................ 11.25% 05/15/28 2,272,487 --------------- 90,595,112 --------------- CASINOS & GAMING -- 0.0% 325,000 VICI Properties, L.P. / VICI Note Co., Inc. (c)................. 4.25% 12/01/26 310,082 --------------- </TABLE> Page 14 See Notes to Financial Statements
FIRST TRUST SENIOR LOAN FUND (FTSL) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> CORPORATE BONDS AND NOTES (CONTINUED) HEALTH CARE FACILITIES -- 0.5% $ 3,798,000 Select Medical Corp. (c)........................................ 6.25% 08/15/26 $ 3,724,087 2,015,000 Tenet Healthcare Corp........................................... 6.25% 02/01/27 2,007,722 6,407,000 Tenet Healthcare Corp........................................... 5.13% 11/01/27 6,224,501 --------------- 11,956,310 --------------- HEALTH CARE SERVICES -- 0.6% 24,212,000 Global Medical Response, Inc. (c)............................... 6.50% 10/01/25 14,916,166 --------------- INSURANCE BROKERS -- 1.3% 2,265,000 AmWINS Group, Inc. (c).......................................... 4.88% 06/30/29 2,057,360 9,728,000 AssuredPartners, Inc. (c)....................................... 7.00% 08/15/25 9,642,539 16,858,000 HUB International Ltd. (c)...................................... 7.00% 05/01/26 16,804,968 465,000 USI, Inc. (c)................................................... 6.88% 05/01/25 460,851 --------------- 28,965,718 --------------- INTEGRATED TELECOMMUNICATION SERVICES -- 0.1% 2,291,000 Zayo Group Holdings, Inc. (c)................................... 4.00% 03/01/27 1,737,098 --------------- INTERNET SERVICES & INFRASTRUCTURE -- 0.0% 763,000 Go Daddy Operating Co. LLC / GD Finance Co., Inc. (c)........... 5.25% 12/01/27 733,915 --------------- PAPER PACKAGING -- 0.2% 4,535,000 Pactiv Evergreen Group Issuer, Inc. / Pactiv Evergreen Group Issuer LLC (c)............................................... 4.00% 10/15/27 4,087,191 --------------- RESTAURANTS -- 0.1% 3,185,000 IRB Holding Corp. (c)........................................... 7.00% 06/15/25 3,227,185 --------------- SPECIALIZED FINANCE -- 0.1% 2,882,000 Radiate Holdco LLC / Radiate Finance, Inc. (c).................. 4.50% 09/15/26 2,245,937 --------------- SYSTEMS SOFTWARE -- 0.8% 788,000 Oracle Corp..................................................... 5.80% 11/10/25 808,033 18,749,000 SS&C Technologies, Inc. (c)..................................... 5.50% 09/30/27 18,172,768 --------------- 18,980,801 --------------- TOTAL CORPORATE BONDS AND NOTES.............................................................. 200,153,099 (Cost $237,641,908) --------------- FOREIGN CORPORATE BONDS AND NOTES -- 0.9% APPLICATION SOFTWARE -- 0.5% 375,000 Open Text Corp. (c)............................................. 6.90% 12/01/27 387,717 12,478,000 Open Text Corp. (c)............................................. 3.88% 02/15/28 11,078,655 --------------- 11,466,372 --------------- DATA PROCESSING & OUTSOURCED SERVICES -- 0.4% 10,755,000 Paysafe Finance PLC / Paysafe Holdings US Corp. (c)............. 4.00% 06/15/29 8,415,622 --------------- ENVIRONMENTAL & FACILITIES SERVICES -- 0.0% 1,323,000 GFL Environmental, Inc. (c)..................................... 4.00% 08/01/28 1,208,853 --------------- TOTAL FOREIGN CORPORATE BONDS AND NOTES...................................................... 21,090,847 (Cost $22,618,384) --------------- </TABLE> See Notes to Financial Statements Page 15
FIRST TRUST SENIOR LOAN FUND (FTSL) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> SHARES DESCRIPTION VALUE ---------------- --------------------------------------------------------------------------------------------- --------------- <S> <C> <C> COMMON STOCKS -- 0.0% PHARMACEUTICALS -- 0.0% 249,316 Akorn, Inc. (d) (e) (f)...................................................................... $ 233,734 (Cost $2,858,880) --------------- WARRANTS -- 0.0% MOVIES & ENTERTAINMENT -- 0.0% 972,355 Cineworld Group PLC, expiring 11/23/25 (d) (f) (g)........................................... 33,605 (Cost $0) --------------- RIGHTS -- 0.0% ELECTRIC UTILITIES -- 0.0% 4,887 Vistra Energy Corp., no expiration date (d) (g).............................................. 5,620 --------------- LIFE SCIENCES TOOLS & SERVICES -- 0.0% 1 New Millennium Holdco, Inc., Corporate Claim Trust, no expiration date (d) (g) (h) (i)....... 0 1 New Millennium Holdco, Inc., Lender Claim Trust, no expiration date (d) (g) (h) (i).......... 0 --------------- 0 --------------- TOTAL RIGHTS................................................................................. 5,620 (Cost $8,491) --------------- MONEY MARKET FUNDS -- 4.7% 110,327,471 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 4.71% (j)................................................................................. 110,327,471 (Cost $110,327,471) --------------- TOTAL INVESTMENTS -- 98.5%................................................................... 2,289,162,313 (Cost $2,369,267,610) NET OTHER ASSETS AND LIABILITIES -- 1.5%..................................................... 33,799,487 --------------- NET ASSETS -- 100.0%......................................................................... $ 2,322,961,800 =============== </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 SOFR obtained from the U.S. Department of the Treasury's Office of Financial Research, (iii) the prime rate offered by one or more United States banks or (iv) the certificate of deposit rate. Certain Senior Loans are subject to a LIBOR or SOFR floor that establishes a minimum LIBOR or SOFR rate. When a range of rates is disclosed, the Fund holds more than one contract within the same tranche with identical LIBOR or SOFR period, spread and floor, but different LIBOR or SOFR reset dates. (b) Senior Loans generally are subject to mandatory and/or optional prepayment. As a result, the actual remaining maturity of Senior Loans may be substantially less than the stated maturities shown. (c) This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A of the Securities Act of 1933, as amended (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, 2023, securities noted as such amounted to $212,203,690 or 9.1% of net assets. (d) Non-income producing security. (e) 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 (see Note 2D - Restricted Securities in the Notes to Financial Statements). (f) This issuer has filed for protection in bankruptcy court. (g) Pursuant to procedures adopted by the Trust's Board of Trustees, this security has been determined to be illiquid by the Advisor. (h) This security's value was determined using significant unobservable inputs (see Note 2A - Portfolio Valuation in the Notes to Financial Statements). Page 16 See Notes to Financial Statements
FIRST TRUST SENIOR LOAN FUND (FTSL) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) (i) This security is fair valued by the Advisor's Pricing Committee in accordance with procedures approved by the Trust's Board of Trustees, and in accordance with provisions of the Investment Company Act of 1940 and rules thereunder, as amended. At April 30, 2023, securities noted as such are valued at $0 or 0.0% of net assets. (j) Rate shown reflects yield as of April 30, 2023. LIBOR - London Interbank Offered Rate SOFR - Secured Overnight Financing Rate ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of April 30, 2023 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 4/30/2023 PRICES INPUTS INPUTS -------------- -------------- -------------- -------------- <S> <C> <C> <C> <C> Senior Floating-Rate Loan Interests*.............. $1,957,317,937 $ -- $1,957,317,937 $ -- Corporate Bonds and Notes*........................ 200,153,099 -- 200,153,099 -- Foreign Corporate Bonds and Notes*................ 21,090,847 -- 21,090,847 -- Common Stocks*.................................... 233,734 -- 233,734 -- Warrants*......................................... 33,605 -- 33,605 -- Rights: Electric Utilities............................. 5,620 -- 5,620 -- Life Sciences Tools & Services................. --** -- -- --** Money Market Funds................................ 110,327,471 110,327,471 -- -- -------------- -------------- -------------- -------------- Total Investments................................. $2,289,162,313 $ 110,327,471 $2,178,834,842 $ --** ============== ============== ============== ============== </TABLE> * See Portfolio of Investments for industry breakout. ** Investment is valued at $0. Level 3 investments are fair valued by the Advisor's Pricing Committee and are footnoted in the Portfolio of Investments. Level 3 investments values are based on unobservable and non-quantitative inputs. See Notes to Financial Statements Page 17
FIRST TRUST SENIOR LOAN FUND (FTSL) STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> ASSETS: <S> <C> Investments, at value..................................................... $2,289,162,313 Cash...................................................................... 1,058,266 Receivables: Investment securities sold............................................. 66,453,300 Interest............................................................... 8,254,070 Dividends.............................................................. 558,550 Capital shares sold.................................................... 22,596 -------------- Total Assets........................................................... 2,365,509,095 -------------- LIABILITIES: Payables: Investment securities purchased........................................ 29,316,066 Capital shares purchased............................................... 11,297,714 Investment advisory fees............................................... 1,690,960 Unrealized depreciation on unfunded loan commitments...................... 242,555 -------------- Total Liabilities...................................................... 42,547,295 -------------- NET ASSETS................................................................ $2,322,961,800 ============== NET ASSETS CONSIST OF: Paid-in capital........................................................... $2,612,297,226 Par value................................................................. 513,500 Accumulated distributable earnings (loss)................................. (289,848,926) -------------- NET ASSETS................................................................ $2,322,961,800 ============== NET ASSET VALUE, per share................................................ $ 45.24 ============== Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share)................................. 51,350,002 ============== Investments, at cost...................................................... $2,369,267,610 ============== </TABLE> Page 18 See Notes to Financial Statements
FIRST TRUST SENIOR LOAN FUND (FTSL) STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> INVESTMENT INCOME: <S> <C> Interest.................................................................. $ 100,057,723 Dividends................................................................. 4,425,122 -------------- Total investment income................................................ 104,482,845 -------------- EXPENSES: Investment advisory fees.................................................. 11,329,864 -------------- Total expenses......................................................... 11,329,864 -------------- NET INVESTMENT INCOME (LOSS).............................................. 93,152,981 -------------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on investments................................... (32,419,740) -------------- Net change in unrealized appreciation (depreciation) on: Investments............................................................ 64,803,267 Unfunded loan commitments.............................................. 499,665 -------------- Net change in unrealized appreciation (depreciation)...................... 65,302,932 -------------- NET REALIZED AND UNREALIZED GAIN (LOSS)................................... 32,883,192 -------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................................................ $ 126,036,173 ============== </TABLE> See Notes to Financial Statements Page 19
FIRST TRUST SENIOR LOAN FUND (FTSL) STATEMENTS OF CHANGES IN NET ASSETS <TABLE> <CAPTION> SIX MONTHS ENDED 4/30/2023 YEAR ENDED (UNAUDITED) 10/31/2022 -------------- -------------- <S> <C> <C> OPERATIONS: Net investment income (loss).............................................. $ 93,152,981 $ 138,794,474 Net realized gain (loss).................................................. (32,419,740) (101,739,244) Net change in unrealized appreciation (depreciation)...................... 65,302,932 (140,859,702) -------------- -------------- Net increase (decrease) in net assets resulting from operations........... 126,036,173 (103,804,472) -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations..................................................... (95,663,853) (139,547,604) -------------- -------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................................. 42,505,945 1,150,159,765 Cost of shares redeemed................................................... (688,571,095) (834,804,577) -------------- -------------- Net increase (decrease) in net assets resulting from shareholder transactions.......................................... (646,065,150) 315,355,188 -------------- -------------- Total increase (decrease) in net assets................................... (615,692,830) 72,003,112 NET ASSETS: Beginning of period....................................................... 2,938,654,630 2,866,651,518 -------------- -------------- End of period............................................................. $2,322,961,800 $2,938,654,630 ============== ============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period................................... 65,650,002 60,000,002 Shares sold............................................................... 900,000 24,150,000 Shares redeemed........................................................... (15,200,000) (18,500,000) -------------- -------------- Shares outstanding, end of period......................................... 51,350,002 65,650,002 ============== ============== </TABLE> Page 20 See Notes to Financial Statements
FIRST TRUST SENIOR LOAN FUND (FTSL) FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD <TABLE> <CAPTION> SIX MONTHS ENDED YEAR ENDED OCTOBER 31, 4/30/2023 ------------------------------------------------------------------------ (UNAUDITED) 2022 2021 2020 2019 2018 ------------ ------------ ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> <C> Net asset value, beginning of period..... $ 44.76 $ 47.78 $ 45.85 $ 47.15 $ 47.75 $ 48.26 ---------- ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)............. 1.59 1.89 1.54 1.67 2.13 1.87 Net realized and unrealized gain (loss).. 0.53 (3.01) 1.92 (1.27) (0.57) (0.43) ---------- ---------- ---------- ---------- ---------- ---------- Total from investment operations......... 2.12 (1.12) 3.46 0.40 1.56 1.44 ---------- ---------- ---------- ---------- ---------- ---------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income.................... (1.64) (1.90) (1.53) (1.67) (2.15) (1.92) Return of capital........................ -- -- -- (0.03) (0.01) (0.03) ---------- ---------- ---------- ---------- ---------- ---------- Total distributions...................... (1.64) (1.90) (1.53) (1.70) (2.16) (1.95) ---------- ---------- ---------- ---------- ---------- ---------- Net asset value, end of period........... $ 45.24 $ 44.76 $ 47.78 $ 45.85 $ 47.15 $ 47.75 ========== ========== ========== ========== ========== ========== TOTAL RETURN (a)......................... 4.78% (2.38)% 7.60% 0.90% 3.37% 3.03% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)..... $2,322,962 $2,938,655 $2,866,652 $1,276,964 $1,603,148 $1,883,903 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.................... 6.98% (c) 4.07% 3.27% 3.63% 4.50% 3.94% Portfolio turnover rate (d).............. 26% 63% 92% 76% 44% 88% </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. See Notes to Financial Statements Page 21
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) APRIL 30, 2023 (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 fourteen 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 invests at least 80% of its net assets (including investment borrowings) in first lien senior floating rate bank loans ("Senior Loans")(1). 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, such as the London Interbank Offered Rate ("LIBOR"), the Secured Overnight Financing Rate ("SOFR"), a similar reference rate, or the prime rate offered by one or more major U.S. banks. 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 readily available market quotations such as last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Pricing Committee of the Fund's investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"), in accordance with valuation procedures approved by the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act and rules thereunder. Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. The Fund's investments are valued as follows: 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 ----------------------------- (1) The terms "security" and "securities" used throughout the Notes to Financial Statements include Senior Loans. Page 22
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) APRIL 30, 2023 (UNAUDITED) 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 a third-party pricing service approved by the Advisor's Pricing Committee, which may use the following valuation inputs when available: 1) benchmark yields; 2) reported trades; 3) broker/dealer quotes; 4) issuer spreads; 5) benchmark securities; 6) bids and offers; and 7) reference data including market research publications. 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 primary exchange for such securities. Shares of open-end funds are valued based on NAV per share. Securities traded in an over-the-counter market are valued at the mean of their most recent bid and asked price, if available, and otherwise at their last trade price. Fixed income and other debt securities having a remaining maturity of sixty days or less when purchased are fair valued at cost adjusted for amortization of premiums and accretion of discounts (amortized cost), provided the Advisor's Pricing Committee has determined that the use of amortized cost is an appropriate reflection of fair value given market and issuer-specific conditions existing at the time of the determination. Factors that may be considered in determining the appropriateness of the use of amortized cost include, but are not limited to, the following: 1) the credit conditions in the relevant market and changes thereto; 2) the liquidity conditions in the relevant market and changes thereto; 3) the interest rate conditions in the relevant market and changes thereto (such as significant changes in interest rates); 4) issuer-specific conditions (such as significant credit deterioration); and 5) any other market-based data the Advisor's Pricing Committee considers relevant. In this regard, the Advisor's Pricing Committee may use last-obtained market-based data to assist it when valuing portfolio securities using amortized cost. Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Advisor's Pricing Committee at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended (the "1933 Act")) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of the Fund's NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security's fair value. As a general principle, the current fair value of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities, including, but not limited to, the following: 1) the most recent price provided by a pricing service; 2) the fundamental business data relating to the borrower/issuer; 3) an evaluation of the forces which influence the market in which these securities are purchased and sold; 4) the type, size and cost of a security; 5) the financial statements of the borrower/issuer, or the financial condition of the country of issue; Page 23
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) APRIL 30, 2023 (UNAUDITED) 6) the credit quality and cash flow of the borrower/issuer, or country of issue, based on the Pricing Committee's, sub-adviser's or portfolio manager's analysis, as applicable, or external analysis; 7) the information as to any transactions in or offers for the security; 8) the price and extent of public trading in similar securities of the issuer/borrower, or comparable companies; 9) the coupon payments; 10) the quality, value and salability of collateral, if any, securing the security; 11) 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; 12) 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; 13) borrower's/issuer's competitive position within the industry; 14) borrower's/issuer's ability to access additional liquidity through public and/or private markets; and 15) 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, 2023, 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 (the "FCA"), which regulates the London Interbank Offered Rates ("LIBOR") announced on March 5, 2021 that it intended to phase-out all LIBOR reference rates, beginning December 31, 2021. Since that announcement, the FCA has ceased publication of all non-USD LIBOR reference rates and the 1-week and 2-month USD LIBOR reference rates as of December 31, 2021. The remaining USD LIBOR settings will cease to be published or no longer be representative immediately after June 30, 2023. The International Swaps and Derivatives Association, Inc. ("ISDA") confirmed that the FCA's March 5, 2021 announcement of its intention to cease providing LIBOR reference rates, 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 Page 24
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) APRIL 30, 2023 (UNAUDITED) alternative for U.S. dollar LIBOR. The Federal Reserve Bank of New York began daily publishing of SOFR in April 2018. There is no assurance that any alternative reference rate, including SOFR, will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the same volume or liquidity. 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, 2023. 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. The commitment fees are included in "Interest" on the Statement of Operations. As of April 30, 2023, the Fund had the following unfunded loan commitments: <TABLE> <CAPTION> UNREALIZED PRINCIPAL COMMITMENT APPRECIATION BORROWER VALUE AMOUNT VALUE (DEPRECIATION) ------------------------------------------------------------- -------------- -------------- -------------- -------------- <S> <C> <C> <C> <C> athenahealth, Inc. (Minerva Merger Sub, Inc.), Term Loan $ 4,577,669 $ 4,547,434 $ 4,304,634 $ (242,800) Veritext Corp. (VT TopCo, Inc.), Term Loan 12,645 12,315 12,560 245 -------------- -------------- -------------- $ 4,559,749 $ 4,317,194 $ (242,555) ============== ============== ============== </TABLE> D. RESTRICTED SECURITIES The Fund invests in restricted securities, which are securities that may not be offered for public sale without first being registered under the 1933 Act. Prior to registration, restricted securities may only be resold in transactions exempt from registration under Rule 144A under the 1933 Act, normally to qualified institutional buyers. As of April 30, 2023, the Fund held restricted securities as shown in the following table that the Advisor has deemed illiquid pursuant to procedures adopted by the Trust's Board of Trustees. Although market instability can result in periods of increased overall market illiquidity, liquidity for each security is determined based on security-specific factors and assumptions, which require subjective judgment. The Fund does not have the right to demand that such securities be registered. These securities are valued according to the valuation procedures as stated in the Portfolio Valuation note (Note 2A) and are not expressed as a discount to the carrying value of a comparable unrestricted security. <TABLE> <CAPTION> SECURITY ACQUISITION DATE SHARES CURRENT PRICE CARRYING COST VALUE % OF NET ASSETS ----------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> Akorn, Inc. 10/15/2020 249,316 $ 0.94 $ 2,858,880 $ 233,734 0.01% </TABLE> E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment income, if any, are declared and paid monthly by the Fund, or as the Board of Trustees may determine from time to time. Distributions of net realized gains earned by the Fund, if any, are distributed at least annually. The Fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes. 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 Page 25
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) APRIL 30, 2023 (UNAUDITED) 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, 2022 was as follows: Distributions paid from: Ordinary income................................. $ 139,547,604 Capital gains................................... -- Return of capital............................... -- As of October 31, 2022, the components of distributable earnings on a tax basis for the Fund were as follows: Undistributed ordinary income................... $ 1,035,608 Accumulated capital and other gain (loss)....... (173,963,056) Net unrealized appreciation (depreciation)...... (147,293,798) F. INCOME TAXES The Fund intends to continue to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, which includes distributing substantially all of its net investment income and net realized gains to shareholders. Accordingly, no provision has been made for federal and state income taxes. However, due to the timing and amount of distributions, the Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of the Fund's taxable income exceeds the distributions from such taxable income for the calendar year. The Fund is subject to accounting standards that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. The taxable years ended 2019, 2020, 2021, and 2022 remain open to federal and state audit. As of April 30, 2023, 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, 2022, the Fund had non-expiring capital loss carryforwards available for federal income tax purposes of $173,963,056. 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, 2022, the Fund had no net late year ordinary or capital losses. As of April 30, 2023, the aggregate cost, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation/(depreciation) on investments (including short positions and derivatives, if any) for federal income tax purposes were as follows: <TABLE> <CAPTION> Gross Gross Net Unrealized Unrealized Unrealized Appreciation Tax Cost Appreciation (Depreciation) (Depreciation) -------------- -------------- -------------- -------------- <S> <C> <C> <C> <C> $2,369,267,610 $ 8,753,936 $ (88,859,233) $ (80,105,297) </TABLE> G. EXPENSES Expenses, other than the investment advisory fee and other excluded expenses, are paid by the Advisor (see Note 3). Page 26
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) APRIL 30, 2023 (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, 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. Effective November 1, 2022, the annual unitary management fee payable by the Fund to First Trust for these services will be reduced at certain levels of the Fund's net assets ("breakpoints") and calculated pursuant to the schedule below: <TABLE> <CAPTION> Breakpoints ------------------------------------------------------------------------- <S> <C> Fund net assets up to and including $2.5 billion 0.85000% Fund net assets greater than $2.5 billion up to and including $5 billion 0.82875% Fund net assets greater than $5 billion up to and including $7.5 billion 0.80750% Fund net assets greater than $7.5 billion up to and including $10 billion 0.78625% Fund net assets greater than $10 billion 0.76500% </TABLE> Prior to November 1, 2022, the Fund paid First Trust an annual unitary management fee equal to 0.85% of its average daily net assets. In addition, the Fund incurs acquired fund fees and expenses. The total of the unitary management fee and acquired fund fees and expenses represents the Fund's total annual operating expenses. The Trust has multiple service agreements with The Bank of New York Mellon ("BNYM"). Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services, and transfer agency services for the Fund. As custodian, BNYM is responsible for custody of the Fund's assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of the Fund's securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for the Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company. Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, target outcome fund or an index fund. Additionally, the Lead Independent Trustee and the Chairs 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 Chairs 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, 2023, the cost of purchases and proceeds from sales of investments, excluding short-term investments and in-kind transactions, were $639,250,012 and $1,275,549,358, respectively. For the six months ended April 30, 2023, 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 $550 million Credit Agreement with The Bank of Nova Scotia ("Scotia") as administrative agent for a group of lenders. Prior to March 1, 2023, the commitment amount was $305 million. Scotia charges a commitment fee of 0.25% of the daily amount of the excess of the commitment Page 27
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) APRIL 30, 2023 (UNAUDITED) 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, 2023. 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 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. 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, 2024. 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. Page 28
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) APRIL 30, 2023 (UNAUDITED) 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 was the following subsequent event: On May 23, 2023, the Advisor's Pricing Committee approved changes to the Advisor's Valuation Procedures for the First Trust Funds, including clarifications to certain pricing methodologies. These changes will be reflected in future reports' Notes to Financial Statements. Page 29
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) APRIL 30, 2023 (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 significant 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 more broadly diversified. 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. DEFINED OUTCOME FUNDS RISK. To the extent a fund's investment strategy is designed to deliver returns tied to the price performance of an underlying ETF, an investor may not realize the returns the fund seeks to achieve if that investor does not hold shares for the entire target outcome period. In the event an investor purchases shares after the first day of the target outcome period or sells shares prior to the end of the target outcome period, the buffer that the fund seeks to provide against a decline in the value of the underlying ETF may not be available, the enhanced returns that the fund seeks to provide (if any) may not be available and the investor may not participate in a gain in the value of the underlying ETF up to the cap for the investor's investment period. Additionally, the fund will not participate in gains of the underlying ETF above the cap and a shareholder may lose their entire investment. If the fund seeks enhanced returns, there are certain time periods when the value of the fund may fall faster than the value of the underlying ETF, and it is very unlikely that, on any given day during which the underlying ETF share price increases in value, the fund's share price will increase at the same rate as the enhanced returns sought by the fund, which is designed for an entire target outcome period. Trading flexible exchange options involves risks different from, or possibly greater than, the risks associated with investing directly in securities, such as less liquidity and correlation and valuation risks. A fund may experience substantial downside from specific flexible exchange option positions and certain positions may expire worthless. Page 30
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) APRIL 30, 2023 (UNAUDITED) 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 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 OR MODEL CONSTITUENT RISK. Certain funds may be a constituent of one or more indices or ETF models. 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 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. In addition, index rebalances may potentially result in increased trading activity in a fund's shares. 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 has ceased making LIBOR available as a reference rate over a phase-out period that began December 31, 2021. There is no assurance that any alternative reference rate, including the Secured Overnight Financing Rate ("SOFR") will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the Page 31
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) APRIL 30, 2023 (UNAUDITED) same volume or liquidity. 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. Market risk is the risk that a particular security, or shares of a fund in general, may fall in value. 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. In February 2022, Russia invaded Ukraine which has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain fund investments as well as fund performance. The COVID-19 global pandemic and the ensuing policies enacted by governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets. While the U.S. has resumed "reasonably" normal business activity, many countries continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective against emerging variants of the disease. These events also adversely affect the prices and liquidity of a fund's portfolio securities or other instruments and could result in disruptions in the trading markets. Any of such circumstances could have a materially negative impact on the value of a fund's shares and result in increased market volatility. During any such events, a fund's shares may trade at increased premiums or discounts to their net asset value and the bid/ask spread on a fund's shares may widen. 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; capital controls; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; the imposition of sanctions by foreign governments; 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. Each fund relies on third-parties for a range of services, including custody. Any delay or failure relating to engaging or maintaining such service providers may affect a fund's ability to meet its investment objective. Although the funds and the funds' investment 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. PREFERRED SECURITIES RISK. Preferred securities combine some of the characteristics of both common stocks and bonds. Preferred securities are typically subordinated to bonds and other debt securities in a company's capital structure in terms of priority to corporate income, subjecting them to greater credit risk than those debt securities. Generally, holders of preferred securities have no voting rights with respect to the issuing company unless preferred dividends have been in arrears for a specified number of periods, at which time the preferred security holders may obtain limited rights. In certain circumstances, an issuer of preferred securities may defer payment on the securities and, in some cases, redeem the securities prior to a specified date. Preferred securities may also be substantially less liquid than other securities, including common stock. Page 32
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) APRIL 30, 2023 (UNAUDITED) VALUATION RISK. The valuation of certain securities may carry more risk than that of common stock. Uncertainties in the conditions of the financial markets, unreliable reference data, lack of transparency and inconsistency of valuation models and processes may lead to inaccurate asset pricing. A fund may hold investments in sizes smaller than institutionally sized round lot positions (sometimes referred to as odd lots). However, third-party pricing services generally provide evaluations on the basis of institutionally-sized round lots. If a fund sells certain of its investments in an odd lot transaction, the sale price may be less than the value at which such securities have been held by the fund. Odd lots often trade at lower prices than institutional round lots. There is no assurance that the fund will be able to sell a portfolio security at the price established by the pricing service, which could result in a loss to the fund. 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 17, 2023 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 17, 2022 through the Liquidity Committee's annual meeting held on March 23, 2023 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, two funds breached the 15% limitation on illiquid investments for one day each, as a result of an unscheduled week-long closure of the stock exchange in Istanbul following devastating earthquakes in February, causing all Turkish equities to be re-classified as "illiquid" for one day. Each fund filed a Form N-RN on the day after the breach occurred, and one day later after the breach was cured. No fund with a highly liquid investment minimum breached that minimum during the reporting period. 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 33
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FIRST TRUST First Trust Exchange-Traded Fund IV INVESTMENT ADVISOR First Trust Advisors L.P. 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 ADMINISTRATOR, CUSTODIAN, FUND ACCOUNTANT & TRANSFER AGENT The Bank of New York Mellon 240 Greenwich Street New York, NY 10286 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deloitte & Touche LLP 111 South Wacker Drive Chicago, IL 60606 LEGAL COUNSEL Chapman and Cutler LLP 320 South Canal Street Chicago, IL 60606
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FIRST TRUST First Trust Exchange-Traded Fund IV -------------------------------------------------------------------------------- First Trust Tactical High Yield ETF (HYLS) Semi-Annual Report For the Six Months Ended April 30, 2023
-------------------------------------------------------------------------------- TABLE OF CONTENTS -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) SEMI-ANNUAL REPORT APRIL 30, 2023 Shareholder Letter........................................................... 1 Fund Performance Overview.................................................... 2 Portfolio Management......................................................... 5 Understanding Your Fund Expenses............................................. 6 Portfolio of Investments..................................................... 7 Statement of Assets and Liabilities.......................................... 20 Statement of Operations...................................................... 21 Statements of Changes in Net Assets.......................................... 22 Financial Highlights......................................................... 23 Notes to Financial Statements................................................ 24 Additional Information....................................................... 33 CAUTION REGARDING FORWARD-LOOKING STATEMENTS This report contains certain forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding the goals, beliefs, plans or current expectations of First Trust Advisors L.P. ("First Trust" or the "Advisor") and its representatives, taking into account the information currently available to them. Forward-looking statements include all statements that do not relate solely to current or historical fact. For example, forward-looking statements include the use of words such as "anticipate," "estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or other words that convey uncertainty of future events or outcomes. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the series of First Trust Exchange-Traded Fund IV (the "Trust") described in this report (First Trust Tactical High Yield ETF; hereinafter referred to as the "Fund") to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. When evaluating the information included in this report, you are cautioned not to place undue reliance on these forward-looking statements, which reflect the judgment of the Advisor and its representatives only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events and circumstances that arise after the date hereof. PERFORMANCE AND RISK DISCLOSURE There is no assurance that the Fund will achieve its investment objectives. The Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the Fund's shares may therefore be less than what you paid for them. Accordingly, you can lose money investing in the Fund. See "Risk Considerations" in the Additional Information section of this report for a discussion of 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.
-------------------------------------------------------------------------------- SHAREHOLDER LETTER -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO APRIL 30, 2023 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, 2023. It pleases me to write that on May 5, 2023, the World Health Organization officially declared that the coronavirus ("COVID-19") pandemic no longer qualified as a global health emergency. While the virus officially no longer poses an immediate threat, its full impact on the world economy remains to be seen, in my opinion. Recall, if you will, those early days of the pandemic; companies sent workers home, consumers were afraid or unwilling to leave their homes, supply chains dried up, and grocery shelves were left bare. Hoping to provide relief to their constituents and to bolster economic activity, governments across the globe funneled trillions of dollars in stimulus directly into the hands of their citizens. Unfortunately, economist Milton Friedman's age-old economic adage "there's no such thing as a free lunch" still holds. As a result of the U.S. government stimulus, gross domestic product rebounded quickly, but so did inflation. As many investors are aware, the Federal Reserve (the "Fed") has been locked in a battle with stubbornly high inflation for several years now. Inflation, as measured by the trailing 12-month rate of change in the Consumer Price Index ("CPI"), surged from 1.4% on December 31, 2020, to 9.1% as of June 30, 2022. Since then, the trailing rate on the CPI has come down, but remains elevated. On April 30, 2023, the CPI stood at 4.9%, well above the Fed's goal of 2.0%. Surging prices have not been restricted to the U.S. Headline inflation rates in each of the countries that make up the so-called Group of Ten (G-10) stand above the targets set by their central banks, according to data from Bloomberg. From the Fed's perspective, monetary policy is the most efficient means to combat rising prices. From December 31, 2020 through May 3, 2023, the Fed increased the Federal Funds target rate (upper bound) a total of ten times, raising the rate from 0.25% to 5.25%. As mentioned, tighter monetary policy resulted in a decrease in the CPI, but there have been casualties in the Fed's battle with rising prices. The most recent banking turmoil is one example. Another is the spike in mortgage rates. According to Bankrate, the national average for a 30-year mortgage stood at just 2.87% on December 31, 2020. As of May 1, 2023, the average 30-year mortgage rate had surged to 6.88%. Not all the news is negative, however. Driven by a strong U.S. labor market, consumer spending remained robust in April 2023. Notably, American corporations added 253,000 jobs during the month, and the unemployment rate stood at a 53-year low. Bob Carey, Chief Market Strategist at First Trust, recently summed up the current situation, noting that "we're not out of the woods yet." That said, even the most difficult situations don't last forever. In my opinion, like the COVID-19 pandemic, inflation, and the tighter monetary policy it ushered in, will pass with time. 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
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) The First Trust Tactical High Yield ETF's (the "Fund") investment objective 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 S&P Global Ratings, 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 in non-income producing securities including Distressed Securities (defined below) and common stocks. Companies whose financial condition is troubled or uncertain and that may be involved in bankruptcy proceedings, reorganizations or financial restructurings are referred to herein as "Distressed Securities." The Fund invests no more than 15% of its net assets in Distressed Securities, as determined at the time of investment. 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 loans other than 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 listing rules of the Nasdaq Stock Market LLC. The Fund may use certain credit derivatives to take on additional credit risk and obtain exposure to the high yield debt market, including utilizing credit default swap indices ("CDX"). The Fund may not be appropriate for all investors. <TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 6 Months 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended Ended (2/25/13) Ended Ended (2/25/13) 4/30/23 4/30/23 4/30/23 4/30/23 to 4/30/23 4/30/23 4/30/23 to 4/30/23 <S> <C> <C> <C> <C> <C> <C> <C> <C> FUND PERFORMANCE NAV* 4.06% -2.56% 2.17% 3.15% 3.50% 11.33% 36.42% 41.92% Market Price 4.32% -1.97% 2.19% 3.15% 3.50% 11.46% 36.42% 41.95% INDEX PERFORMANCE ICE BofA US High Yield Constrained Index 5.84% 1.01% 3.09% 3.93% 4.17% 16.44% 46.98% 51.51% ------------------------------------------------------------------------------------------------------------------------------------ </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. * On January 3, 2023, the fair value methodology used to value the senior loan investments held by the Fund was changed. Prior to that date, the senior loans were valued using the bid side price provided by a pricing service. After such date, the senior loans were valued using the midpoint between the bid and ask price provided by a pricing service. The change in the Fund's fair value methodology on January 3, 2023, resulted in a one-time increase in the Fund's net asset value of approximately $0.035 per share on that date, which represented a positive impact on the Fund's performance of 0.09%. Without the change to the pricing methodology, the performance of the Fund on a NAV basis would have been 3.93%, -2.65%, 2.15%, 3.14%, 3.49%, 11.23%, 36.29%, and 41.79%, in the six-months, one-year, five-year average annual, 10-year average annual, since inception average annual, five-year cumulative, ten-year cumulative and since inception cumulative periods ended April 30, 2023, respectively. Page 2
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) ----------------------------------------------------------- % OF TOTAL LONG-TERM INDUSTRY CLASSIFICATION INVESTMENTS(1) ----------------------------------------------------------- Insurance 16.1% Media 16.0 Software 15.5 Health Care Providers & Services 8.7 Hotels, Restaurants & Leisure 5.8 Health Care Technology 5.6 Containers & Packaging 4.5 Diversified Telecommunication Services 2.8 Trading Companies & Distributors 2.3 Building Products 1.9 Health Care Equipment & Supplies 1.5 IT Services 1.5 Capital Markets 1.4 Interactive Media & Services 1.4 Commercial Services & Supplies 1.3 Banks 1.3 Electric Utilities 1.2 Food Products 1.0 Wireless Telecommunication Services 0.9 Construction & Engineering 0.9 Diversified Financial Services 0.8 Life Sciences Tools & Services 0.8 Professional Services 0.7 Specialty Retail 0.7 Independent Power and Renewable Electricity Producers 0.6 Automobiles 0.6 Entertainment 0.5 Diversified Consumer Services 0.5 Electronic Equipment, Instruments & Components 0.5 Pharmaceuticals 0.4 Machinery 0.4 Aerospace & Defense 0.3 Auto Components 0.3 Consumer Finance 0.3 Construction Materials 0.2 Household Products 0.2 Real Estate Management & Development 0.1 Chemicals 0.1 Food & Staples Retailing 0.1 Semiconductors & Semiconductor Equipment 0.1 Electrical Equipment 0.1 Personal Products 0.1 Education Services 0.0* ------- Total 100.0% ======= * Amount is less than 0.1%. ----------------------------------------------------------- % OF TOTAL LONG-TERM ASSET CLASSIFICATION INVESTMENTS(1) ----------------------------------------------------------- Corporate Bonds 79.4% Senior Floating-Rate Loan Interests 11.7 Foreign Corporate Bonds 8.9 Common Stock 0.0* Warrants 0.0* Rights 0.0* ------- Total 100.0% ======= ----------------------------------------------------------- % OF SENIOR LOANS AND CREDIT QUALITY (S&P RATINGS)(2) OTHER DEBT SECURITIES(1) ----------------------------------------------------------- A+ 0.4% A- 0.9 BBB+ 1.1 BBB 2.4 BBB- 3.6 BB+ 7.3 BB 3.4 BB- 10.8 B+ 14.6 B 11.5 B- 16.8 CCC+ 23.2 CCC 3.2 CCC- 0.2 NR 0.6 ------- Total 100.0% ======= ----------------------------------------------------------- % OF TOTAL LONG-TERM TOP 10 ISSUERS INVESTMENTS(1) ----------------------------------------------------------- Charter Communications Operating, LLC 4.1% AssuredPartners, Inc. 4.0 Verscend Technologies, Inc. (Cotiviti) 3.9 Alliant Holdings Intermediate LLC / Alliant Holdings Co-Issuer 3.7 HUB International Ltd. 3.6 AmWINS Group, Inc. 3.3 Nexstar Media, Inc. 3.3 Internet Brands, Inc. (Web MD/MH Sub I, LLC) 2.9 SS&C Technologies, Inc. 2.7 Gray Television, Inc. 2.4 ------- Total 33.9% ======= (1) Percentages are based on the long positions only. Money market funds and short positions are excluded. (2) The ratings are by S&P Global Ratings. 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
-------------------------------------------------------------------------------- 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, 2023 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 4/30/21 15,267 15,784 10/31/21 15,421 16,164 4/30/22 14,565 14,999 10/31/22 13,638 14,315 4/30/23 14,192 15,151 </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
-------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) SEMI-ANNUAL REPORT APRIL 30, 2023 (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, 2023, the First Trust Leveraged Finance Team managed or supervised approximately $5.7 billion in senior secured bank loans and high-yield bonds. These assets are managed across various strategies, including two closed-end funds, an open-end fund, and four exchange-traded funds 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 The portfolio managers are primarily and jointly responsible for the day-to-day management of the Fund. Mr. Housey has served as a part of the portfolio management team of the Fund since 2013, while Mr. Scott has served as part of the portfolio management team of the Fund since 2020. Page 5
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) UNDERSTANDING YOUR FUND EXPENSES APRIL 30, 2023 (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, 2023. 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, 2022 APRIL 30, 2023 PERIOD PERIOD (a) --------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) Actual $1,000.00 $1,040.60 0.99% $5.01 Hypothetical (5% return before expenses) $1,000.00 $1,019.89 0.99% $4.96 </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, 2022 through April 30, 2023), multiplied by 181/365 (to reflect the six-month period). Page 6
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) PORTFOLIO OF INVESTMENTS APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> CORPORATE BONDS AND NOTES -- 75.0% AEROSPACE & DEFENSE -- 0.3% $ 342,000 Booz Allen Hamilton, Inc. (a)................................... 3.88% 09/01/28 $ 313,723 3,412,000 TransDigm, Inc. (a)............................................. 6.25% 03/15/26 3,433,469 1,333,000 TransDigm, Inc. (a)............................................. 6.75% 08/15/28 1,355,382 --------------- 5,102,574 --------------- AGRICULTURAL PRODUCTS -- 0.1% 1,877,000 Lamb Weston Holdings, Inc. (a).................................. 4.88% 05/15/28 1,843,674 --------------- ALTERNATIVE CARRIERS -- 0.1% 2,000,000 Level 3 Financing, Inc. (a)..................................... 4.25% 07/01/28 1,168,192 2,000,000 Level 3 Financing, Inc. (a)..................................... 3.63% 01/15/29 1,120,349 --------------- 2,288,541 --------------- APPAREL RETAIL -- 0.6% 8,080,000 Nordstrom, Inc.................................................. 4.00% 03/15/27 6,953,969 2,854,000 Nordstrom, Inc.................................................. 4.38% 04/01/30 2,235,852 --------------- 9,189,821 --------------- APPLICATION SOFTWARE -- 1.3% 13,254,000 GoTo Group, Inc. (a)............................................ 5.50% 09/01/27 7,475,322 12,000,000 McAfee Corp. (a)................................................ 7.38% 02/15/30 9,972,772 3,487,000 Open Text Holdings, Inc. (a).................................... 4.13% 12/01/31 2,889,963 --------------- 20,338,057 --------------- AUTOMOBILE MANUFACTURERS -- 0.6% 6,631,000 Ford Motor Co................................................... 9.63% 04/22/30 7,719,412 500,000 Ford Motor Credit Co. LLC....................................... 5.13% 06/16/25 487,482 250,000 General Motors Co............................................... 6.60% 04/01/36 257,272 667,000 Penske Automotive Group, Inc.................................... 3.50% 09/01/25 638,114 --------------- 9,102,280 --------------- AUTOMOTIVE RETAIL -- 0.0% 167,000 Group 1 Automotive, Inc. (a).................................... 4.00% 08/15/28 148,353 250,000 Lithia Motors, Inc. (a)......................................... 3.88% 06/01/29 216,759 --------------- 365,112 --------------- BROADCASTING -- 9.0% 28,294,000 Gray Television, Inc. (a)....................................... 5.88% 07/15/26 24,080,921 12,429,000 Gray Television, Inc. (a)....................................... 7.00% 05/15/27 10,081,732 3,591,000 Gray Television, Inc. (a)....................................... 4.75% 10/15/30 2,323,431 28,936,000 iHeartCommunications, Inc....................................... 8.38% 05/01/27 19,121,965 40,562,000 Nexstar Media, Inc. (a)......................................... 5.63% 07/15/27 38,137,001 13,255,000 Nexstar Media, Inc. (a)......................................... 4.75% 11/01/28 11,663,297 1,389,000 Scripps Escrow II, Inc. (a)..................................... 3.88% 01/15/29 1,081,055 8,355,000 Scripps Escrow, Inc. (a)........................................ 5.88% 07/15/27 6,002,734 15,319,000 Sinclair Television Group, Inc. (a)............................. 5.13% 02/15/27 13,170,490 5,000,000 Sinclair Television Group, Inc. (a)............................. 5.50% 03/01/30 3,867,600 1,000,000 Sinclair Television Group, Inc. (a)............................. 4.13% 12/01/30 796,420 509,000 Sirius XM Radio, Inc. (a)....................................... 3.13% 09/01/26 456,079 857,000 Sirius XM Radio, Inc. (a)....................................... 5.50% 07/01/29 764,342 2,000,000 Sirius XM Radio, Inc. (a)....................................... 4.13% 07/01/30 1,606,415 5,000,000 Sirius XM Radio, Inc. (a)....................................... 3.88% 09/01/31 3,783,955 4,998,000 Univision Communications, Inc. (a).............................. 5.13% 02/15/25 4,927,828 --------------- 141,865,265 --------------- </TABLE> See Notes to Financial Statements Page 7
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> CORPORATE BONDS AND NOTES (CONTINUED) BUILDING PRODUCTS -- 0.5% $ 1,000,000 American Builders & Contractors Supply Co., Inc. (a)............ 4.00% 01/15/28 $ 917,337 500,000 American Builders & Contractors Supply Co., Inc. (a)............ 3.88% 11/15/29 431,418 100,000 Beacon Roofing Supply, Inc. (a)................................. 4.13% 05/15/29 87,588 100,000 Builders FirstSource, Inc. (a).................................. 4.25% 02/01/32 87,734 1,392,000 Standard Industries, Inc. (a)................................... 5.00% 02/15/27 1,333,368 1,426,000 Standard Industries, Inc. (a)................................... 4.75% 01/15/28 1,335,116 2,492,000 Standard Industries, Inc. (a)................................... 4.38% 07/15/30 2,154,044 1,000,000 Standard Industries, Inc. (a)................................... 3.38% 01/15/31 792,536 1,000,000 TopBuild Corp. (a).............................................. 3.63% 03/15/29 864,128 --------------- 8,003,269 --------------- CABLE & SATELLITE -- 6.2% 1,000,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)............... 5.50% 05/01/26 983,061 2,828,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)............... 5.13% 05/01/27 2,672,713 4,738,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)............... 5.00% 02/01/28 4,387,708 23,466,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)............... 5.38% 06/01/29 21,548,075 20,653,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)............... 4.75% 03/01/30 17,798,056 9,707,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)............... 4.50% 08/15/30 8,161,641 2,445,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)............... 4.25% 02/01/31 2,005,183 3,456,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)............... 7.38% 03/01/31 3,388,897 1,000,000 CCO Holdings LLC / CCO Holdings Capital Corp.................... 4.50% 05/01/32 801,814 819,000 CSC Holdings LLC (a)............................................ 5.50% 04/15/27 701,381 13,619,000 CSC Holdings LLC (a)............................................ 7.50% 04/01/28 8,528,497 1,481,000 CSC Holdings LLC (a)............................................ 11.25% 05/15/28 1,477,416 42,608,000 CSC Holdings LLC (a)............................................ 5.75% 01/15/30 21,783,084 4,167,000 CSC Holdings LLC (a)............................................ 4.63% 12/01/30 2,038,235 1,000,000 CSC Holdings LLC (a)............................................ 5.00% 11/15/31 480,860 357,000 Directv Financing LLC / Directv Financing Co-Obligor, Inc. (a)..................................................... 5.88% 08/15/27 313,685 --------------- 97,070,306 --------------- CASINOS & GAMING -- 2.6% 500,000 Boyd Gaming Corp................................................ 4.75% 12/01/27 482,992 6,062,000 Boyd Gaming Corp. (a)........................................... 4.75% 06/15/31 5,555,741 1,426,000 Caesars Entertainment, Inc. (a)................................. 8.13% 07/01/27 1,456,263 5,662,000 Caesars Entertainment, Inc. (a)................................. 4.63% 10/15/29 4,972,341 173,000 Caesars Entertainment, Inc. (a)................................. 7.00% 02/15/30 174,700 179,000 CDI Escrow Issuer, Inc. (a)..................................... 5.75% 04/01/30 172,758 19,458,000 Fertitta Entertainment LLC / Fertitta Entertainment Finance Co., Inc. (a)..................................................... 6.75% 01/15/30 15,780,262 430,000 MGM Resorts International....................................... 6.75% 05/01/25 434,569 2,440,000 MGM Resorts International....................................... 5.75% 06/15/25 2,436,491 716,000 Scientific Games Holdings L.P. / Scientific Games US FinCo, Inc. (a)..................................................... 6.63% 03/01/30 635,901 3,903,000 Station Casinos LLC (a)......................................... 4.50% 02/15/28 3,593,180 5,952,000 VICI Properties L.P. / VICI Note Co., Inc. (a).................. 4.25% 12/01/26 5,678,787 140,000 VICI Properties L.P. / VICI Note Co., Inc. (a).................. 3.75% 02/15/27 131,018 100,000 VICI Properties L.P. / VICI Note Co., Inc. (a).................. 3.88% 02/15/29 89,953 --------------- 41,594,956 --------------- </TABLE> Page 8 See Notes to Financial Statements
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> CORPORATE BONDS AND NOTES (CONTINUED) COMMERCIAL PRINTING -- 0.1% $ 629,000 LABL, Inc. (a).................................................. 10.50% 07/15/27 $ 598,466 1,388,000 LABL, Inc. (a).................................................. 9.50% 11/01/28 1,430,598 --------------- 2,029,064 --------------- CONSTRUCTION & ENGINEERING -- 0.8% 500,000 Atkore, Inc. (a)................................................ 4.25% 06/01/31 440,705 13,490,000 Pike Corp. (a).................................................. 5.50% 09/01/28 12,252,967 --------------- 12,693,672 --------------- CONSTRUCTION MATERIALS -- 0.2% 176,000 GYP Holdings III Corp. (a)...................................... 4.63% 05/01/29 155,528 3,623,000 Summit Materials LLC / Summit Materials Finance Corp. (a)....... 5.25% 01/15/29 3,448,009 --------------- 3,603,537 --------------- CONSUMER FINANCE -- 0.3% 1,889,000 Black Knight InfoServ LLC (a)................................... 3.63% 09/01/28 1,709,545 3,000,000 FirstCash, Inc. (a)............................................. 4.63% 09/01/28 2,745,780 --------------- 4,455,325 --------------- DATA PROCESSING & OUTSOURCED SERVICES -- 0.0% 500,000 Block, Inc...................................................... 2.75% 06/01/26 453,068 250,000 Block, Inc...................................................... 3.50% 06/01/31 203,939 --------------- 657,007 --------------- DIVERSIFIED BANKS -- 1.2% 4,000,000 Bank of America Corp............................................ 6.11% 01/29/37 4,293,274 1,000,000 Bank of America Corp. (b)....................................... 4.24% 04/24/38 897,589 3,000,000 Bank of America Corp., Medium-Term Note......................... 5.88% 02/07/42 3,236,608 500,000 Bank of America Corp., Medium-Term Note (b)..................... 4.08% 03/20/51 420,286 2,000,000 JPMorgan Chase & Co. (b)........................................ 5.72% 09/14/33 2,066,370 4,000,000 JPMorgan Chase & Co............................................. 6.40% 05/15/38 4,528,969 1,000,000 JPMorgan Chase & Co............................................. 5.60% 07/15/41 1,044,629 1,000,000 JPMorgan Chase & Co............................................. 5.40% 01/06/42 1,033,775 1,000,000 JPMorgan Chase & Co............................................. 5.63% 08/16/43 1,044,145 500,000 Wells Fargo & Co., Medium-Term Note (b)......................... 5.01% 04/04/51 473,960 250,000 Wells Fargo Bank NA............................................. 6.60% 01/15/38 280,201 --------------- 19,319,806 --------------- DIVERSIFIED SUPPORT SERVICES -- 0.1% 700,000 Ritchie Bros Holdings, Inc. (a)................................. 6.75% 03/15/28 725,375 700,000 Ritchie Bros Holdings, Inc. (a)................................. 7.75% 03/15/31 744,625 --------------- 1,470,000 --------------- ELECTRIC UTILITIES -- 1.2% 11,077,000 PG&E Corp....................................................... 5.00% 07/01/28 10,438,056 5,000,000 Vistra Operations Co. LLC (a)................................... 5.63% 02/15/27 4,884,639 3,189,000 Vistra Operations Co. LLC (a)................................... 5.00% 07/31/27 3,035,693 --------------- 18,358,388 --------------- ELECTRICAL COMPONENTS & EQUIPMENT -- 0.0% 667,000 Sensata Technologies, Inc. (a).................................. 3.75% 02/15/31 580,182 --------------- ENVIRONMENTAL & FACILITIES SERVICES -- 0.1% 2,093,000 Waste Pro USA, Inc. (a)......................................... 5.50% 02/15/26 1,948,108 --------------- </TABLE> See Notes to Financial Statements Page 9
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> CORPORATE BONDS AND NOTES (CONTINUED) FERTILIZERS & AGRICULTURAL CHEMICALS -- 0.1% $ 250,000 Scotts Miracle-Gro (The) Co..................................... 4.50% 10/15/29 $ 216,703 1,000,000 Scotts Miracle-Gro (The) Co..................................... 4.00% 04/01/31 808,915 --------------- 1,025,618 --------------- FINANCIAL EXCHANGES & DATA -- 0.3% 750,000 MSCI, Inc. (a).................................................. 4.00% 11/15/29 676,661 4,885,000 MSCI, Inc. (a).................................................. 3.25% 08/15/33 3,973,679 --------------- 4,650,340 --------------- FOOD DISTRIBUTORS -- 0.1% 1,397,000 US Foods, Inc. (a).............................................. 4.75% 02/15/29 1,300,736 --------------- HEALTH CARE EQUIPMENT -- 0.0% 300,000 Teleflex, Inc. (a).............................................. 4.25% 06/01/28 281,637 --------------- HEALTH CARE FACILITIES -- 4.6% 1,000,000 Acadia Healthcare Co., Inc. (a)................................. 5.50% 07/01/28 966,627 1,290,000 Acadia Healthcare Co., Inc. (a)................................. 5.00% 04/15/29 1,222,352 2,284,000 Encompass Health Corp........................................... 5.75% 09/15/25 2,281,511 1,300,000 Encompass Health Corp........................................... 4.50% 02/01/28 1,227,500 1,362,000 Encompass Health Corp........................................... 4.75% 02/01/30 1,257,674 3,840,000 HCA, Inc........................................................ 5.88% 02/15/26 3,901,187 1,324,000 HCA, Inc........................................................ 5.38% 09/01/26 1,334,340 3,000,000 HCA, Inc........................................................ 3.50% 09/01/30 2,701,827 1,000,000 HCA, Inc........................................................ 5.13% 06/15/39 941,240 2,000,000 HCA, Inc........................................................ 5.25% 06/15/49 1,813,446 26,514,000 Select Medical Corp. (a)........................................ 6.25% 08/15/26 25,998,011 5,225,000 Tenet Healthcare Corp........................................... 4.88% 01/01/26 5,153,318 9,689,000 Tenet Healthcare Corp........................................... 5.13% 11/01/27 9,413,015 2,600,000 Tenet Healthcare Corp........................................... 4.63% 06/15/28 2,466,770 11,797,000 Tenet Healthcare Corp........................................... 6.13% 10/01/28 11,459,704 --------------- 72,138,522 --------------- HEALTH CARE SERVICES -- 2.5% 1,000,000 Cigna Group (The)............................................... 6.13% 11/15/41 1,097,667 500,000 Cigna Group (The)............................................... 4.90% 12/15/48 470,627 24,415,000 DaVita, Inc. (a)................................................ 4.63% 06/01/30 21,289,123 908,000 DaVita, Inc. (a)................................................ 3.75% 02/15/31 732,006 25,976,000 Global Medical Response, Inc. (a)............................... 6.50% 10/01/25 16,002,904 100,000 Service Corp. International..................................... 3.38% 08/15/30 84,829 --------------- 39,677,156 --------------- HEALTH CARE SUPPLIES -- 1.4% 200,000 180 Medical, Inc. (a)........................................... 3.88% 10/15/29 178,319 13,953,000 Medline Borrower L.P. (a)....................................... 3.88% 04/01/29 12,220,780 10,908,000 Medline Borrower L.P. (a)....................................... 5.25% 10/01/29 9,445,762 770,000 Owens & Minor, Inc. (a)......................................... 4.50% 03/31/29 618,418 --------------- 22,463,279 --------------- HEALTH CARE TECHNOLOGY -- 3.0% 15,722,000 AthenaHealth Group, Inc. (a).................................... 6.50% 02/15/30 12,928,334 4,503,000 HealthEquity, Inc. (a).......................................... 4.50% 10/01/29 4,032,212 30,258,000 Verscend Escrow Corp. (a)....................................... 9.75% 08/15/26 30,576,284 --------------- 47,536,830 --------------- </TABLE> Page 10 See Notes to Financial Statements
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> CORPORATE BONDS AND NOTES (CONTINUED) HOTELS, RESORTS & CRUISE LINES -- 0.1% $ 711,000 Wyndham Hotels & Resorts, Inc. (a).............................. 4.38% 08/15/28 $ 661,806 125,000 XHR L.P. (a).................................................... 4.88% 06/01/29 108,601 --------------- 770,407 --------------- HOUSEHOLD PRODUCTS -- 0.2% 2,154,000 Energizer Holdings, Inc. (a).................................... 6.50% 12/31/27 2,103,266 1,350,000 Energizer Holdings, Inc. (a).................................... 4.38% 03/31/29 1,181,702 --------------- 3,284,968 --------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS -- 0.6% 10,427,000 Calpine Corp. (a)............................................... 5.13% 03/15/28 9,645,121 --------------- INDUSTRIAL MACHINERY -- 0.4% 5,573,000 Gates Global LLC / Gates Corp. (a).............................. 6.25% 01/15/26 5,524,292 --------------- INSURANCE BROKERS -- 15.2% 38,556,000 Alliant Holdings Intermediate LLC / Alliant Holdings Co-Issuer (a)................................................ 6.75% 10/15/27 36,042,477 17,412,000 Alliant Holdings Intermediate LLC / Alliant Holdings Co-Issuer (a)................................................ 6.75% 04/15/28 17,408,894 1,790,000 Alliant Holdings Intermediate LLC / Alliant Holdings Co-Issuer (a)................................................ 5.88% 11/01/29 1,545,744 54,652,000 AmWINS Group, Inc. (a).......................................... 4.88% 06/30/29 49,641,866 2,000,000 Arthur J Gallagher & Co......................................... 5.50% 03/02/33 2,069,446 3,000,000 Arthur J Gallagher & Co......................................... 5.75% 03/02/53 3,086,366 25,001,000 AssuredPartners, Inc. (a)....................................... 7.00% 08/15/25 24,781,366 36,774,000 AssuredPartners, Inc. (a)....................................... 5.63% 01/15/29 31,869,741 8,120,000 BroadStreet Partners, Inc. (a).................................. 5.88% 04/15/29 7,051,628 3,761,000 GTCR AP Finance, Inc. (a)....................................... 8.00% 05/15/27 3,681,116 46,507,000 HUB International Ltd. (a)...................................... 7.00% 05/01/26 46,360,698 8,230,000 HUB International Ltd. (a)...................................... 5.63% 12/01/29 7,332,354 8,855,000 Ryan Specialty Group LLC (a).................................... 4.38% 02/01/30 7,947,363 535,000 USI, Inc. (a)................................................... 6.88% 05/01/25 530,226 --------------- 239,349,285 --------------- INTEGRATED TELECOMMUNICATION SERVICES -- 1.2% 500,000 Ciena Corp. (a)................................................. 4.00% 01/31/30 439,814 1,910,000 Zayo Group Holdings, Inc. (a)................................... 4.00% 03/01/27 1,448,214 25,891,000 Zayo Group Holdings, Inc. (a)................................... 6.13% 03/01/28 16,578,170 --------------- 18,466,198 --------------- INTERACTIVE MEDIA & SERVICES -- 1.3% 500,000 Match Group Holdings II LLC (a)................................. 4.63% 06/01/28 461,890 20,909,000 Cars.com, Inc. (a).............................................. 6.38% 11/01/28 19,721,810 --------------- 20,183,700 --------------- INTERNET SERVICES & INFRASTRUCTURE -- 0.6% 5,500,000 Go Daddy Operating Co. LLC / GD Finance Co., Inc. (a)........... 5.25% 12/01/27 5,290,340 4,891,000 Go Daddy Operating Co. LLC / GD Finance Co., Inc. (a)........... 3.50% 03/01/29 4,243,011 --------------- 9,533,351 --------------- INVESTMENT BANKING & BROKERAGE -- 0.6% 6,000,000 Goldman Sachs Group, (The), Inc................................. 6.75% 10/01/37 6,575,053 1,500,000 Goldman Sachs Group, (The), Inc................................. 6.25% 02/01/41 1,657,725 1,455,000 LPL Holdings, Inc. (a).......................................... 4.63% 11/15/27 1,376,168 </TABLE> See Notes to Financial Statements Page 11
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> CORPORATE BONDS AND NOTES (CONTINUED) INVESTMENT BANKING & BROKERAGE (CONTINUED) $ 250,000 Morgan Stanley.................................................. 6.38% 07/24/42 $ 283,450 250,000 Morgan Stanley, Global Medium-Term Note (b)..................... 5.60% 03/24/51 265,069 --------------- 10,157,465 --------------- IT CONSULTING & OTHER SERVICES -- 0.0% 250,000 Gartner, Inc. (a)............................................... 4.50% 07/01/28 235,371 250,000 Gartner, Inc. (a)............................................... 3.75% 10/01/30 218,591 --------------- 453,962 --------------- LEISURE FACILITIES -- 0.1% 250,000 Cedar Fair L.P.................................................. 5.25% 07/15/29 232,787 850,000 Cedar Fair L.P. / Canada's Wonderland Co. / Magnum Management Corp. / Millennium Op............................. 5.38% 04/15/27 815,128 717,000 SeaWorld Parks & Entertainment, Inc. (a)........................ 5.25% 08/15/29 645,967 --------------- 1,693,882 --------------- MANAGED HEALTH CARE -- 1.2% 5,269,000 Centene Corp.................................................... 4.25% 12/15/27 5,039,904 1,000,000 Molina Healthcare, Inc. (a)..................................... 4.38% 06/15/28 938,663 100,000 Molina Healthcare, Inc. (a)..................................... 3.88% 11/15/30 88,303 6,523,000 MPH Acquisition Holdings LLC (a)................................ 5.50% 09/01/28 4,993,033 1,995,000 MPH Acquisition Holdings LLC (a)................................ 5.75% 11/01/28 1,263,698 1,000,000 UnitedHealth Group, Inc......................................... 6.50% 06/15/37 1,163,108 1,000,000 UnitedHealth Group, Inc......................................... 6.63% 11/15/37 1,181,350 2,000,000 UnitedHealth Group, Inc......................................... 6.88% 02/15/38 2,434,765 1,000,000 UnitedHealth Group, Inc......................................... 5.70% 10/15/40 1,084,345 --------------- 18,187,169 --------------- METAL & GLASS CONTAINERS -- 1.4% 697,000 Ball Corp....................................................... 6.88% 03/15/28 725,531 10,648,000 Ball Corp....................................................... 2.88% 08/15/30 8,930,249 3,864,000 Berry Global, Inc. (a).......................................... 4.50% 02/15/26 3,749,878 981,000 Berry Global, Inc. (a).......................................... 5.63% 07/15/27 967,669 175,000 Crown Americas LLC.............................................. 5.25% 04/01/30 170,425 6,050,000 Owens-Brockway Glass Container, Inc. (a)........................ 6.38% 08/15/25 6,171,000 2,200,000 Silgan Holdings, Inc............................................ 4.13% 02/01/28 2,059,343 --------------- 22,774,095 --------------- MOVIES & ENTERTAINMENT -- 0.5% 5,494,000 Live Nation Entertainment, Inc. (a)............................. 5.63% 03/15/26 5,352,175 523,000 Live Nation Entertainment, Inc. (a)............................. 6.50% 05/15/27 529,580 2,606,000 WMG Acquisition Corp. (a)....................................... 3.00% 02/15/31 2,135,727 --------------- 8,017,482 --------------- PACKAGED FOODS & MEATS -- 0.8% 2,000,000 Kraft Heinz Foods Co............................................ 6.88% 01/26/39 2,288,163 2,000,000 Kraft Heinz Foods Co. (a)....................................... 7.13% 08/01/39 2,291,841 500,000 Kraft Heinz Foods Co............................................ 5.20% 07/15/45 485,143 500,000 Kraft Heinz Foods Co............................................ 4.38% 06/01/46 438,001 750,000 Performance Food Group, Inc. (a)................................ 5.50% 10/15/27 735,785 2,116,000 Post Holdings, Inc. (a)......................................... 5.75% 03/01/27 2,106,281 4,434,000 Post Holdings, Inc. (a)......................................... 5.63% 01/15/28 4,338,763 --------------- 12,683,977 --------------- </TABLE> Page 12 See Notes to Financial Statements
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> CORPORATE BONDS AND NOTES (CONTINUED) PAPER PACKAGING -- 2.7% $ 30,696,000 Graham Packaging Co., Inc. (a).................................. 7.13% 08/15/28 $ 26,744,530 2,000,000 Graphic Packaging International LLC (a)......................... 3.50% 03/15/28 1,815,082 1,000,000 Graphic Packaging International LLC (a)......................... 3.50% 03/01/29 889,437 11,095,000 Pactiv Evergreen Group Issuer, Inc. / Pactiv Evergreen Group Issuer LLC (a)............................................... 4.00% 10/15/27 9,999,424 420,000 Pactiv LLC...................................................... 7.95% 12/15/25 420,995 376,000 Sealed Air Corp. (a)............................................ 5.50% 09/15/25 376,816 1,383,000 Sealed Air Corp. (a)............................................ 6.13% 02/01/28 1,405,150 1,434,000 Sealed Air Corp. (a)............................................ 5.00% 04/15/29 1,375,988 --------------- 43,027,422 --------------- PERSONAL PRODUCTS -- 0.1% 250,000 Prestige Brands, Inc. (a)....................................... 5.13% 01/15/28 242,796 750,000 Prestige Brands, Inc. (a)....................................... 3.75% 04/01/31 636,345 --------------- 879,141 --------------- PHARMACEUTICALS -- 0.3% 500,000 Catalent Pharma Solutions, Inc. (a)............................. 5.00% 07/15/27 480,773 250,000 Catalent Pharma Solutions, Inc. (a)............................. 3.13% 02/15/29 213,004 950,000 Charles River Laboratories International, Inc. (a).............. 4.25% 05/01/28 866,156 1,000,000 Charles River Laboratories International, Inc. (a).............. 3.75% 03/15/29 878,436 1,000,000 Charles River Laboratories International, Inc. (a).............. 4.00% 03/15/31 872,285 800,000 IQVIA, Inc. (a)................................................. 5.00% 10/15/26 787,305 1,278,000 IQVIA, Inc. (a)................................................. 5.00% 05/15/27 1,248,831 --------------- 5,346,790 --------------- REAL ESTATE SERVICES -- 0.1% 1,000,000 PulteGroup, Inc................................................. 6.38% 05/15/33 1,067,981 290,000 Tri Pointe Homes, Inc........................................... 5.25% 06/01/27 279,061 500,000 Tri Pointe Homes, Inc........................................... 5.70% 06/15/28 491,435 --------------- 1,838,477 --------------- RESEARCH & CONSULTING SERVICES -- 0.7% 325,000 Clarivate Science Holdings Corp. (a)............................ 4.88% 07/01/29 293,078 12,324,000 CoreLogic, Inc. (a)............................................. 4.50% 05/01/28 10,087,502 --------------- 10,380,580 --------------- RESTAURANTS -- 1.1% 661,000 Brinker International, Inc. (a)................................. 5.00% 10/01/24 647,843 9,310,000 IRB Holding Corp. (a)........................................... 7.00% 06/15/25 9,433,311 3,000,000 McDonald's Corp., Medium-Term Note.............................. 6.30% 10/15/37 3,433,968 2,000,000 McDonald's Corp., Medium-Term Note.............................. 6.30% 03/01/38 2,286,847 1,000,000 McDonald's Corp., Medium-Term Note.............................. 5.70% 02/01/39 1,058,944 --------------- 16,860,913 --------------- SECURITY & ALARM SERVICES -- 0.2% 1,200,000 Brink's (The) Co. (a)........................................... 5.50% 07/15/25 1,189,583 2,061,000 Brink's (The) Co. (a)........................................... 4.63% 10/15/27 1,951,173 --------------- 3,140,756 --------------- SEMICONDUCTORS -- 0.1% 250,000 Broadcom, Inc. (a).............................................. 3.14% 11/15/35 193,714 250,000 Broadcom, Inc. (a).............................................. 4.93% 05/15/37 228,389 </TABLE> See Notes to Financial Statements Page 13
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> CORPORATE BONDS AND NOTES (CONTINUED) SEMICONDUCTORS (CONTINUED) $ 1,000,000 Qorvo, Inc. (a)................................................. 3.38% 04/01/31 $ 812,935 --------------- 1,235,038 --------------- SPECIALIZED CONSUMER SERVICES -- 0.4% 4,000,000 Aramark Services, Inc. (a)...................................... 6.38% 05/01/25 4,005,200 1,055,000 Aramark Services, Inc. (a)...................................... 5.00% 02/01/28 1,006,153 775,000 Carriage Services, Inc. (a)..................................... 4.25% 05/15/29 643,063 --------------- 5,654,416 --------------- SPECIALIZED FINANCE -- 0.4% 1,776,000 Park Intermediate Holdings LLC / PK Domestic Property LLC / PK Finance Co-Issuer (a)..................................... 4.88% 05/15/29 1,537,838 2,851,000 Radiate Holdco LLC / Radiate Finance, Inc. (a).................. 4.50% 09/15/26 2,221,779 6,216,000 Radiate Holdco LLC / Radiate Finance, Inc. (a).................. 6.50% 09/15/28 2,905,980 --------------- 6,665,597 --------------- SPECIALTY CHEMICALS -- 0.7% 10,214,000 Avantor Funding, Inc. (a)....................................... 4.63% 07/15/28 9,565,618 500,000 Axalta Coating Systems LLC (a).................................. 3.38% 02/15/29 432,833 250,000 HB Fuller Co.................................................... 4.25% 10/15/28 229,829 --------------- 10,228,280 --------------- SPECIALTY STORES -- 0.0% 350,000 PetSmart, Inc. / PetSmart Finance Corp. (a)..................... 4.75% 02/15/28 331,208 --------------- SYSTEMS SOFTWARE -- 4.7% 8,407,000 Boxer Parent Co., Inc. (a)...................................... 9.13% 03/01/26 8,233,385 2,500,000 Crowdstrike Holdings, Inc....................................... 3.00% 02/15/29 2,177,584 4,499,000 Gen Digital, Inc. (a)........................................... 7.13% 09/30/30 4,523,650 7,500,000 Oracle Corp..................................................... 6.25% 11/09/32 8,100,599 5,204,000 Oracle Corp..................................................... 6.50% 04/15/38 5,688,239 2,000,000 Oracle Corp..................................................... 6.13% 07/08/39 2,112,471 1,000,000 Oracle Corp..................................................... 3.60% 04/01/50 712,000 1,500,000 Oracle Corp..................................................... 6.90% 11/09/52 1,682,595 250,000 PTC, Inc. (a)................................................... 3.63% 02/15/25 241,463 41,967,000 SS&C Technologies, Inc. (a)..................................... 5.50% 09/30/27 40,677,186 --------------- 74,149,172 --------------- TECHNOLOGY DISTRIBUTORS -- 0.0% 750,000 CDW LLC / CDW Finance Corp...................................... 3.25% 02/15/29 649,218 --------------- TRADING COMPANIES & DISTRIBUTORS -- 1.2% 2,715,000 SRS Distribution, Inc. (a)...................................... 6.13% 07/01/29 2,242,699 9,816,000 SRS Distribution, Inc. (a)...................................... 6.00% 12/01/29 8,008,089 127,000 United Rentals North America, Inc............................... 5.50% 05/15/27 126,384 8,750,000 United Rentals North America, Inc. (a).......................... 6.00% 12/15/29 8,888,154 --------------- 19,265,326 --------------- WIRELESS TELECOMMUNICATION SERVICES -- 0.8% 500,000 SBA Communications Corp......................................... 3.88% 02/15/27 466,892 1,000,000 T-Mobile USA, Inc............................................... 2.70% 03/15/32 844,547 3,000,000 T-Mobile USA, Inc............................................... 5.20% 01/15/33 3,055,914 5,000,000 T-Mobile USA, Inc............................................... 5.05% 07/15/33 5,040,059 2,000,000 T-Mobile USA, Inc............................................... 4.38% 04/15/40 1,797,554 </TABLE> Page 14 See Notes to Financial Statements
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> CORPORATE BONDS AND NOTES (CONTINUED) WIRELESS TELECOMMUNICATION SERVICES (CONTINUED) $ 1,000,000 T-Mobile USA, Inc............................................... 3.40% 10/15/52 $ 724,132 1,000,000 T-Mobile USA, Inc............................................... 5.65% 01/15/53 1,032,236 --------------- 12,961,334 --------------- TOTAL CORPORATE BONDS AND NOTES.............................................................. 1,184,292,084 (Cost $1,322,650,068) --------------- FOREIGN CORPORATE BONDS AND NOTES -- 8.4% APPLICATION SOFTWARE -- 1.5% 4,318,000 ION Trading Technologies S.A.R.L. (a)........................... 5.75% 05/15/28 3,617,664 436,000 Open Text Corp. (a)............................................. 6.90% 12/01/27 450,786 11,860,000 Open Text Corp. (a)............................................. 3.88% 02/15/28 10,529,960 10,577,000 Open Text Corp. (a)............................................. 3.88% 12/01/29 8,902,441 --------------- 23,500,851 --------------- AUTO PARTS & EQUIPMENT -- 0.3% 4,432,000 Clarios Global L.P. / Clarios US Finance Co. (a)................ 8.50% 05/15/27 4,466,222 --------------- BUILDING PRODUCTS -- 1.2% 15,022,000 Cemex SAB de C.V. (a)........................................... 7.38% 06/05/27 15,593,662 1,304,000 Cemex SAB de C.V. (a)........................................... 5.45% 11/19/29 1,251,532 2,000,000 Cemex SAB de C.V. (a)........................................... 5.20% 09/17/30 1,863,263 1,000,000 Masonite International Corp. (a)................................ 5.38% 02/01/28 963,945 --------------- 19,672,402 --------------- CABLE & SATELLITE -- 0.0% 250,000 Virgin Media Finance PLC (a).................................... 5.00% 07/15/30 210,901 --------------- CASINOS & GAMING -- 0.0% 500,000 International Game Technology PLC (a)........................... 5.25% 01/15/29 480,017 --------------- DATA PROCESSING & OUTSOURCED SERVICES -- 0.8% 15,159,000 Paysafe Finance PLC / Paysafe Holdings US Corp. (a)............. 4.00% 06/15/29 11,861,685 --------------- ELECTRICAL COMPONENTS & EQUIPMENT -- 0.0% 500,000 Sensata Technologies B.V. (a)................................... 4.00% 04/15/29 452,438 --------------- ENVIRONMENTAL & FACILITIES SERVICES -- 0.7% 500,000 GFL Environmental, Inc. (a)..................................... 5.13% 12/15/26 492,625 9,173,000 GFL Environmental, Inc. (a)..................................... 4.00% 08/01/28 8,381,562 1,784,000 GFL Environmental, Inc. (a)..................................... 4.75% 06/15/29 1,662,135 1,000,000 GFL Environmental, Inc. (a)..................................... 4.38% 08/15/29 906,045 --------------- 11,442,367 --------------- INTEGRATED TELECOMMUNICATION SERVICES -- 1.0% 2,989,000 Altice France S.A. (a).......................................... 5.50% 01/15/28 2,356,075 500,000 Altice France S.A. (a).......................................... 5.13% 07/15/29 370,125 17,387,000 Altice France S.A. (a).......................................... 5.50% 10/15/29 13,031,221 --------------- 15,757,421 --------------- LIFE SCIENCES TOOLS & SERVICES -- 0.1% 2,604,000 Grifols Escrow Issuer S.A. (a).................................. 4.75% 10/15/28 2,090,669 --------------- METAL & GLASS CONTAINERS -- 0.1% 1,403,000 Trivium Packaging Finance B.V. (a).............................. 5.50% 08/15/26 1,363,370 --------------- RESEARCH & CONSULTING SERVICES -- 0.1% 774,000 Camelot Finance S.A. (a)........................................ 4.50% 11/01/26 734,022 --------------- </TABLE> See Notes to Financial Statements Page 15
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> FOREIGN CORPORATE BONDS AND NOTES (CONTINUED) RESTAURANTS -- 1.6% $ 28,132,000 1011778 BC ULC / New Red Finance, Inc. (a)...................... 4.00% 10/15/30 $ 24,584,034 --------------- SPECIALTY CHEMICALS -- 0.1% 1,000,000 Axalta Coating Systems LLC / Axalta Coating Systems Dutch Holding B B.V. (a)........................................... 4.75% 06/15/27 966,970 --------------- TRADING COMPANIES & DISTRIBUTORS -- 0.9% 6,779,000 VistaJet Malta Finance PLC / XO Management Holding, Inc. (a)..................................................... 7.88% 05/01/27 6,447,134 9,742,000 VistaJet Malta Finance PLC / XO Management Holding, Inc. (a)..................................................... 6.38% 02/01/30 8,438,859 --------------- 14,885,993 --------------- TOTAL FOREIGN CORPORATE BONDS AND NOTES...................................................... 132,469,362 (Cost $142,695,540) --------------- </TABLE> <TABLE> <CAPTION> PRINCIPAL STATED VALUE DESCRIPTION RATE (c) MATURITY (d) VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> SENIOR FLOATING-RATE LOAN INTERESTS -- 11.0% APPLICATION SOFTWARE -- 6.3% 3,000,000 Epicor Software Corp., Term Loan (Second Lien), 1 Mo. SOFR + 7.75%, 1.00% Floor........................................... 12.83% 07/30/28 2,996,955 21,231,811 Gainwell Acquisition Corp. (fka Milano), Term Loan B, 3 Mo. SOFR + 4.00%, 0.75% Floor.................................... 9.00% 10/01/27 20,515,344 10,871,102 Greeneden U.S. Holdings II LLC (Genesys Telecommunications Laboratories, Inc.), Initial Dollar Term Loan, 1 Mo. LIBOR + 4.00%, 0.75% Floor........................................... 9.02% 12/01/27 10,787,340 5,040,225 Hyland Software, Inc., Term Loan (Second Lien), 1 Mo. LIBOR + 6.25%, 0.75% Floor......................................... 11.27% 07/10/25 4,855,702 12,000,451 Internet Brands, Inc. (WebMD/MH Sub I LLC), 2020 June New Term Loan, 1 Mo. LIBOR + 3.75%, 1.00% Floor.................. 8.77% 09/15/24 11,961,450 14,466,776 Internet Brands, Inc. (WebMD/MH Sub I LLC), Initial Term Loan, 1 Mo. LIBOR + 3.75%, 0.00% Floor....................... 8.77% 09/13/24 14,427,571 17,762,992 Internet Brands, Inc. (WebMD/MH Sub I LLC), Term Loan (Second Lien), 1 Mo. SOFR + 6.25%, 0.00% Floor............... 11.23% 02/23/29 16,549,158 14,871,470 LogMeIn, Inc. (GoTo Group, Inc.), Term Loan B, 1 Mo. LIBOR + 4.75%, 0.00% Floor......................................... 9.77% 08/31/27 9,201,722 8,944,728 RealPage, Inc., Term Loan (Second Lien), 1 Mo. LIBOR + 6.50%, 0.75% Floor........................................... 11.52% 04/22/29 8,410,862 --------------- 99,706,104 --------------- ASSET MANAGEMENT & CUSTODY BANKS -- 0.4% 7,000,000 Edelman Financial Engines Center LLC, Term Loan (Second Lien), 1 Mo. LIBOR + 6.75%, 0.00% Floor...................... 11.77% 07/20/26 6,573,420 --------------- EDUCATION SERVICES -- 0.0% 357,709 Ascensus Holdings, Inc. (Mercury), Term Loan (Second Lien), 1 Mo. LIBOR + 6.50%, 0.50% Floor............................. 11.38% 08/02/29 323,056 --------------- ELECTRONIC EQUIPMENT & INSTRUMENTS -- 0.4% 6,965,207 Verifone Systems, Inc., Term Loan B, 3 Mo. LIBOR + 4.00%, 0.00% Floor.................................................. 8.96% 08/20/25 6,039,914 --------------- </TABLE> Page 16 See Notes to Financial Statements
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED VALUE DESCRIPTION RATE (C) MATURITY (D) VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED) HEALTH CARE TECHNOLOGY -- 2.3% $ 6,649,548 Ciox Health (Healthport/CT Technologies Intermediate Holdings, Inc.), New Term Loan B, 1 Mo. LIBOR + 4.25%, 0.75% Floor..... 9.27% 12/16/25 $ 6,328,508 2,238,136 Navicure, Inc. (Waystar Technologies, Inc.), Term Loan B, 1 Mo. LIBOR + 4.00%, 0.00% Floor................................... 9.02% 10/23/26 2,236,390 27,877,299 Verscend Technologies, Inc. (Cotiviti), New Term Loan B-1, 1 Mo. LIBOR + 4.00%, 0.00% Floor............................. 9.02% 08/27/25 27,886,080 --------------- 36,450,978 --------------- INTEGRATED TELECOMMUNICATION SERVICES -- 0.3% 3,241,706 Numericable (Altice France S.A. or SFR), Term Loan B-13, 3 Mo. LIBOR + 4.00%, 0.00% Floor............................. 8.86% 08/14/26 3,153,580 1,894,000 Zayo Group Holdings, Inc., Initial Dollar Term Loan, 1 Mo. LIBOR + 3.00%, 0.00% Floor................................... 8.02% 03/09/27 1,545,703 --------------- 4,699,283 --------------- SPECIALIZED CONSUMER SERVICES -- 0.1% 1,840,479 Asurion LLC, Term Loan B-3 (Second Lien), 1 Mo. LIBOR + 5.25%, 0.00% Floor........................................... 10.27% 01/31/28 1,546,775 --------------- SPECIALIZED FINANCE -- 0.4% 5,561,245 WCG Purchaser Corp. (WIRB-Copernicus Group), Term Loan B, 3 Mo. LIBOR + 4.00%, 1.00% Floor............................. 8.95% 01/08/27 5,326,616 --------------- SYSTEMS SOFTWARE -- 0.8% 5,914,053 BMC Software Finance, Inc. (Boxer Parent), 2021 Replacement Dollar Term Loan, 1 Mo. LIBOR + 3.75%, 0.00% Floor........... 8.77% 10/02/25 5,851,216 7,659,196 Misys Financial Software Ltd. (Almonde, Inc.) (Finastra), Term Loan B, 2 Mo. LIBOR + 3.50%, 1.00% Floor..................... 8.65% 06/13/24 7,320,774 --------------- 13,171,990 --------------- TOTAL SENIOR FLOATING-RATE LOAN INTERESTS.................................................... 173,838,136 (Cost $183,901,479) --------------- </TABLE> <TABLE> <CAPTION> SHARES DESCRIPTION VALUE ---------------- --------------------------------------------------------------------------------------------- --------------- <S> <C> <C> COMMON STOCKS -- 0.0% PHARMACEUTICALS -- 0.0% 259,956 Akorn, Inc. (e) (f).......................................................................... 243,709 (Cost $2,979,179) --------------- WARRANTS -- 0.0% MOVIES & ENTERTAINMENT -- 0.0% 828,940 Cineworld Group PLC, expiring 11/23/25 (e) (g) (h)........................................... 28,649 (Cost $0) --------------- RIGHTS -- 0.0% ELECTRIC UTILITIES -- 0.0% 1,629 Vistra Energy Corp., no expiration date (e) (g).............................................. 1,873 (Cost $2,830) --------------- </TABLE> See Notes to Financial Statements Page 17
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> SHARES DESCRIPTION VALUE ---------------- --------------------------------------------------------------------------------------------- --------------- <S> <C> <C> MONEY MARKET FUNDS -- 3.7% 58,063,419 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 4.71% (i)................................................................................. $ 58,063,419 (Cost $58,063,419) --------------- TOTAL INVESTMENTS -- 98.1%................................................................... 1,548,937,232 (Cost $1,710,292,515) NET OTHER ASSETS AND LIABILITIES -- 1.9%..................................................... 29,627,245 --------------- NET ASSETS -- 100.0%......................................................................... $ 1,578,564,477 =============== </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, 2023, securities noted as such amounted to $1,113,681,537 or 70.6% of net assets. (b) Fixed-to-floating or fixed-to-variable rate security. The interest rate shown reflects the fixed rate in effect at April 30, 2023. At a predetermined date, the fixed rate will change to a floating rate or a variable rate. (c) 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 SOFR obtained from the U.S. Department of the Treasury's Office of Financial Research, (iii) the prime rate offered by one or more United States banks or (iv) the certificate of deposit rate. Certain Senior Loans are subject to a LIBOR or SOFR floor that establishes a minimum LIBOR or SOFR rate. When a range of rates is disclosed, the Fund holds more than one contract within the same tranche with identical LIBOR or SOFR period, spread and floor, but different LIBOR or SOFR reset dates. (d) 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. (e) Non-income producing security. (f) 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 (see Note 2F - Restricted Securities in the Notes to Financial Statements). (g) Pursuant to procedures adopted by the Trust's Board of Trustees, this security has been determined to be illiquid by the Advisor. (h) This issuer has filed for protection in bankruptcy court. (i) Rate shown reflects yield as of April 30, 2023. LIBOR - London Interbank Offered Rate SOFR - Secured Overnight Financing Rate CREDIT DEFAULT SWAP CONTRACTS OUTSTANDING (See Note 2D - Swap Agreements in the Notes to Financial Statements): <TABLE> <CAPTION> BUY/SELL NOTIONAL PAY/RECEIVE EXPIRATION REFERENCE ENTITY PROTECTION COUNTERPARTY AMOUNT FIXED RATE DATE VALUE ------------------------------ ---------- --------------- ------------ ------------- ------------ ------------- <S> <C> <C> <C> <C> <C> <C> Markit CDX North America Goldman Sachs High Yield Index Buy & Co. LLC $ 35,000,000 5.00% 6/20/2028 $ (205,930) </TABLE> Page 18 See Notes to Financial Statements
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of April 30, 2023 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 4/30/2023 PRICES INPUTS INPUTS --------------- --------------- --------------- --------------- <S> <C> <C> <C> <C> Corporate Bonds and Notes*......................... $ 1,184,292,084 $ -- $ 1,184,292,084 $ -- Foreign Corporate Bonds and Notes*................. 132,469,362 -- 132,469,362 -- Senior Floating-Rate Loan Interests*............... 173,838,136 -- 173,838,136 -- Common Stocks*..................................... 243,709 -- 243,709 -- Warrants*.......................................... 28,649 -- 28,649 -- Rights*............................................ 1,873 -- 1,873 -- Money Market Funds................................. 58,063,419 58,063,419 -- -- --------------- --------------- --------------- --------------- Total Investments.................................. $ 1,548,937,232 $ 58,063,419 $ 1,490,873,813 $ -- =============== =============== =============== =============== LIABILITIES TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 4/30/2023 PRICES INPUTS INPUTS --------------- --------------- --------------- --------------- Credit Default Swaps............................... $ (205,930) $ -- $ (205,930) $ -- =============== =============== =============== =============== </TABLE> * See Portfolio of Investments for industry breakout. See Notes to Financial Statements Page 19
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> ASSETS: <S> <C> Investments, at value..................................................... $ 1,548,937,232 Cash segregated as collateral for open swap contracts..................... 2,313,929 Cash...................................................................... 121,998 Receivables: Interest............................................................... 23,251,541 Investment securities sold............................................. 5,030,051 Dividends.............................................................. 227,385 --------------- Total Assets........................................................... 1,579,882,136 --------------- LIABILITIES: Payables: Investment advisory fees............................................... 1,239,438 Variation margin on swaps.............................................. 78,221 --------------- Total Liabilities...................................................... 1,317,659 --------------- NET ASSETS................................................................ $ 1,578,564,477 =============== NET ASSETS CONSIST OF: Paid-in capital........................................................... $ 1,953,134,051 Par value................................................................. 396,500 Accumulated distributable earnings (loss)................................. (374,966,074) --------------- NET ASSETS................................................................ $ 1,578,564,477 =============== NET ASSET VALUE, per share................................................ $ 39.81 =============== Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share)................................. 39,650,002 =============== Investments, at cost...................................................... $ 1,710,292,515 =============== </TABLE> Page 20 See Notes to Financial Statements
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> INVESTMENT INCOME: <S> <C> Interest.................................................................. $ 52,751,224 Dividends................................................................. 881,759 --------------- Total investment income................................................ 53,632,983 --------------- EXPENSES: Investment advisory fees.................................................. 7,458,192 Margin interest expense................................................... 339,203 --------------- Total expenses......................................................... 7,797,395 --------------- NET INVESTMENT INCOME (LOSS).............................................. 45,835,588 --------------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments............................................................ (43,815,592) Swap contracts......................................................... 500,752 --------------- Net realized gain (loss).................................................. (43,314,840) --------------- Net change in unrealized appreciation (depreciation) on: Investments............................................................ 59,176,497 Swap contracts......................................................... (205,930) --------------- Net change in unrealized appreciation (depreciation)...................... 58,970,567 --------------- NET REALIZED AND UNREALIZED GAIN (LOSS)................................... 15,655,727 --------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................................................ $ 61,491,315 =============== </TABLE> See Notes to Financial Statements Page 21
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) STATEMENTS OF CHANGES IN NET ASSETS <TABLE> <CAPTION> SIX MONTHS ENDED YEAR 4/30/2023 ENDED (UNAUDITED) 10/31/2022 --------------- --------------- <S> <C> <C> OPERATIONS: Net investment income (loss).............................................. $ 45,835,588 $ 116,525,306 Net realized gain (loss).................................................. (43,314,840) (116,451,618) Net change in unrealized appreciation (depreciation)...................... 58,970,567 (241,538,892) --------------- --------------- Net increase (decrease) in net assets resulting from operations........... 61,491,315 (241,465,204) --------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations..................................................... (49,075,653) (121,509,986) Return of capital......................................................... -- (5,652,770) --------------- --------------- Total distributions to shareholders....................................... (49,075,653) (127,162,756) --------------- --------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................................. 76,660,285 249,122,772 Cost of shares redeemed................................................... (107,170,405) (590,275,979) --------------- --------------- Net increase (decrease) in net assets resulting from shareholder transactions.......................................... (30,510,120) (341,153,207) --------------- --------------- Total increase (decrease) in net assets................................... (18,094,458) (709,781,167) NET ASSETS: Beginning of period....................................................... 1,596,658,935 2,306,440,102 --------------- --------------- End of period............................................................. $ 1,578,564,477 $ 1,596,658,935 =============== =============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period................................... 40,450,002 48,300,002 Shares sold............................................................... 1,900,000 5,700,000 Shares redeemed........................................................... (2,700,000) (13,550,000) --------------- --------------- Shares outstanding, end of period......................................... 39,650,002 40,450,002 =============== =============== </TABLE> Page 22 See Notes to Financial Statements
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, 4/30/2023 ------------------------------------------------------------------------ (UNAUDITED) 2022 2021 2020 2019 2018 ------------ ------------ ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> <C> Net asset value, beginning of period $ 39.47 $ 47.75 $ 47.00 $ 48.06 $ 47.02 $ 48.95 ---------- ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 1.15 2.63 2.47 2.33 2.49 2.52 Net realized and unrealized gain (loss) 0.42 (8.00) 0.91 (1.00) 1.13 (1.76) ---------- ---------- ---------- ---------- ---------- ---------- Total from investment operations 1.57 (5.37) 3.38 1.33 3.62 0.76 ---------- ---------- ---------- ---------- ---------- ---------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (1.23) (2.78) (2.63) (2.39) (2.56) (2.69) Return of capital -- (0.13) -- -- (0.02) (0.00) (a) ---------- ---------- ---------- ---------- ---------- ---------- Total distributions (1.23) (2.91) (2.63) (2.39) (2.58) (2.69) ---------- ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 39.81 $ 39.47 $ 47.75 $ 47.00 $ 48.06 $ 47.02 ========== ========== ========== ========== ========== ========== TOTAL RETURN (b) 4.06% (11.56)% 7.25% 2.92% 7.90% 1.60% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $1,578,564 $1,596,659 $2,306,440 $1,974,126 $1,432,088 $1,253,035 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.99% (c) 1.27% 1.05% 1.01% 1.23% 1.16% Ratio of net 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 5.84% (c) 6.08% 5.11% 5.02% 5.22% 5.26% Portfolio turnover rate (d) 13% 39% 50% 68% 50% 52% </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 23
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) APRIL 30, 2023 (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 fourteen 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 S&P Global Ratings, 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 readily available market quotations such as last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Pricing Committee of the Fund's investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"), in accordance with valuation procedures approved by the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act and rules thereunder. Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. The Fund's investments are valued as follows: Corporate bonds, corporate notes, U.S. government securities and other debt securities are fair valued on the basis of valuations provided by a third-party pricing service approved by the Advisor's Pricing Committee, which may use the following valuation inputs when available: 1) benchmark yields; 2) reported trades; 3) broker/dealer quotes; 4) issuer spreads; 5) benchmark securities; 6) bids and offers; and 7) reference data including market research publications. Page 24
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) APRIL 30, 2023 (UNAUDITED) 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 primary exchange for such securities. Shares of open-end funds are valued based on NAV per share. Securities traded in an over-the-counter market are valued at the mean of their most recent bid and asked price, if available, and otherwise at their last trade price. Credit default swaps are fair valued using a pricing service or, if the pricing service does not provide a value, by quotes provided by the selling dealer or financial institution. 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 Advisor's Pricing Committee at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended (the "1933 Act")) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of the Fund's NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security's fair value. As a general principle, the current fair value of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities, including, but not limited to, the following: 1) the most recent price provided by the Pricing Service Provider; 2) the fundamental business data relating to the borrower/issuer; 3) an evaluation of the forces which influence the market in which these securities are purchased and sold; 4) the type, size and cost of the security; 5) the financial statements of the borrower/issuer, or the financial condition of the country of issue; ----------------------------- (1) The terms "security" and "securities" used throughout the Notes to Financial Statements include Senior Loans. Page 25
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) APRIL 30, 2023 (UNAUDITED) 6) the credit quality and cash flow of the issuer/borrower, or the country of issue, based on the Pricing Committee's, sub-advisor's or portfolio manager's analysis, as applicable, or external analysis; 7) the information as to any transaction in or offers for the security; 8) the price and extent of public trading in similar securities of the issuer/borrower, or comparable companies; 9) the coupon payments; 10) the quality, value and salability of collateral, if any, securing the security; 11) 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; 12) 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; 13) borrower's/issuer's competitive position within the industry; 14) borrower's/issuer's ability to access additional liquidity through public and/or private markets; and 15) 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, 2023, 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 (the "FCA"), which regulates the London Interbank Offered Rates ("LIBOR") announced on March 5, 2021 that it intended to phase-out all LIBOR reference rates, beginning December 31, 2021. Since that announcement, the FCA has ceased publication of all non-USD LIBOR reference rates and the 1-week and 2-month USD LIBOR reference rates as of December 31, 2021. The remaining USD LIBOR settings will cease to be published or no longer be representative immediately after June 30, 2023. The International Swaps and Derivatives Association, Inc. ("ISDA") confirmed that the FCA's March 5, 2021 announcement of its intention to cease providing LIBOR reference rates, 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. There is no assurance that any alternative reference rate, including SOFR, will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the same volume or liquidity. Page 26
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) APRIL 30, 2023 (UNAUDITED) 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, 2023. C. SHORT SALES Short sales are utilized for investment and risk management purposes and are transactions in which securities or other instruments (such as options, forwards, futures or other derivative contracts) are sold that are not currently owned in the Fund's portfolio. When the Fund engages in a short sale, the Fund must borrow the security sold short and deliver the security to the counterparty. Short selling allows the Fund to profit from a decline in a market price to the extent such decline exceeds the transaction costs and the costs of borrowing the securities. The Fund is charged a fee or premium to borrow the securities sold short and is obligated to repay the lenders of the securities. Any dividends or interest that accrues on the securities during the period of the loan are due to the lenders. A gain, limited to the price at which the security was sold short, or a loss, unlimited in size, will be recognized upon the termination of the short sale; which is effected by the Fund purchasing the security sold short and delivering the security to the lender. Any such gain or loss may be offset, completely or in part, by the change in the value of the long portion of the Fund's portfolio. The Fund is subject to the risk it may be unable to reacquire a security to terminate a short position except at a price substantially in excess of the last quoted price. Also, there is the risk that the counterparty to a short sale may fail to honor its contractual terms, causing a loss to the Fund. There were no short sales outstanding as of April 30, 2023. 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, 2023, the Fund had $0 in borrowings, which approximates fair value, as shown in "Borrowings" on the Statement of Assets and Liabilities. The borrowings are categorized as Level 2 within the fair value hierarchy. 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, 2023, the Fund had no debit margin balance. For the six months ended April 30, 2023, the Fund had margin interest expense of $339,203, as shown on the Statement of Operations. For the six months ended April 30, 2023, the average margin balance and interest rates were $43,984,270 and 4.68%, respectively. D. SWAP AGREEMENTS The Fund may enter into credit default swap contracts ("CDS") for investment purposes or to manage credit risk. A CDS is an agreement between two parties ("Counterparties") to exchange the credit risk of an issuer. Swap agreements may be privately negotiated in the over-the-counter market as a bilateral contract or centrally cleared. A buyer of a CDS is said to buy protection by paying a fixed payment over the life of the agreement and in some situations an upfront payment to the seller of the CDS. If a defined credit event occurs (such as payment default or bankruptcy), the Fund as a protection buyer would cease paying its fixed payment, the Fund would deliver eligible bonds issued by the reference entity to the seller, and the seller would pay the full notional value, or the "par value," of the referenced obligation to the Fund. A seller of a CDS is said to sell protection and thus would receive a fixed payment over the life of the agreement and an upfront payment, if applicable. If a credit event occurs, the Fund as a protection seller would cease to receive the fixed payment stream, the Fund would pay the buyer "par value" or the full notional value of the referenced obligation, and the Fund would receive the eligible bonds issued by the reference entity. In turn, these bonds may be sold in order to realize a recovery value. Alternatively, the seller of the CDS and its Counterparty may agree to net the notional amount and the market value of the bonds and make a cash payment equal to the difference to the buyer of protection. If no credit event occurs, the Fund receives the fixed payment over the life of the agreement. As the seller, the Fund would effectively add leverage to its portfolio because, in addition to its total net assets, the Fund would be subject to investment exposure on the notional amount of the CDS. In connection with these agreements, cash and securities may be identified as collateral in accordance with the terms of the respective swap agreements to provide assets of value and recourse in the event of default under the swap agreement or bankruptcy/insolvency of a party to the swap agreement. In the event of a default by the Counterparty, the Fund will seek withdrawal of this collateral and may incur certain costs exercising its right with respect to the Page 27
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) APRIL 30, 2023 (UNAUDITED) collateral. If a Counterparty becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, the Fund may experience significant delays in obtaining any recovery in a bankruptcy or other reorganization proceeding. The Fund may obtain only limited recovery or may obtain no recovery in such circumstances. Upon entering into a centrally cleared swap, the Fund is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap. Cash deposited is segregated and included in "Cash segregated as collateral for open swap contracts" on the Statement of Assets and Liabilities. The daily change in valuation of centrally cleared swaps is included in "variation margin on swaps payable" in the Statement of Assets and Liabilities. Payments received from (paid to) the Counterparty, including at termination, are recorded as "net realized gain (loss) on swap contracts" on the Statement of Operations. Credit default swap contracts are marked to market daily based upon quotations from brokers, market makers or an independent pricing service and the change in value, if any, is recorded as unrealized appreciation (depreciation). For a credit default swap contract sold by the Fund, payment of the agreed upon amount made by the Fund in the event of default of the referenced debt obligation is recorded as the cost of the reference debt obligation purchased/received. 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. The commitment fees are included in "Interest" on the Statement of Operations. As of April 30, 2023, the Fund had no unfunded loan commitments. F. RESTRICTED SECURITIES The Fund invests in restricted securities, which are securities that may not be offered for public sale without first being registered under the 1933 Act. Prior to registration, restricted securities may only be resold in transactions exempt from registration under Rule 144A under the 1933 Act, normally to qualified institutional buyers. As of April 30, 2023, the Fund held restricted securities as shown in the following table that the Advisor has deemed illiquid pursuant to procedures adopted by the Trust's Board of Trustees. Although market instability can result in periods of increased overall market illiquidity, liquidity for each security is determined based on security-specific factors and assumptions, which require subjective judgment. The Fund does not have the right to demand that such securities be registered. These securities are valued according to the valuation procedures as stated in the Portfolio Valuation note (Note 2A) and are not expressed as a discount to the carrying value of a comparable unrestricted security. <TABLE> <CAPTION> SECURITY ACQUISITION DATE SHARES CURRENT PRICE CARRYING COST VALUE % OF NET ASSETS -------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> Akorn, Inc. 10/15/2020 259,956 $ 0.94 $ 2,979,179 $ 243,709 0.02% </TABLE> G. 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. The Fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes. 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 28
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) APRIL 30, 2023 (UNAUDITED) The tax character of distributions paid during the fiscal year ended October 31, 2022 was as follows: Distributions paid from: Ordinary income................................. $ 121,509,986 Capital gains................................... -- Return of capital............................... 5,652,770 As of October 31, 2022, the components of distributable earnings on a tax basis for the Fund were as follows: Undistributed ordinary income................... $ -- Accumulated capital and other gain (loss)....... (160,242,757) Net unrealized appreciation (depreciation)...... (227,138,979) H. 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, 2020, 2021, and 2022 remain open to federal and state audit. As of April 30, 2023, 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, 2022, the Fund had non-expiring capital loss carryforwards available for federal income tax purposes of $160,242,757. 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, 2022, the Fund had no net late year ordinary or capital losses. As of April 30, 2023, the aggregate cost, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation/(depreciation) on investments (including short positions and derivatives, if any) for federal income tax purposes were as follows: <TABLE> <CAPTION> Gross Gross Net Unrealized Unrealized Unrealized Appreciation Tax Cost Appreciation (Depreciation) (Depreciation) -------------- -------------- -------------- -------------- <S> <C> <C> <C> <C> $1,710,292,515 $ 7,431,649 $ (168,992,862) $ (161,561,213) </TABLE> I. 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. Page 29
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) APRIL 30, 2023 (UNAUDITED) Pursuant to the Investment Management Agreement between the Trust and the Advisor, First Trust manages the investment of the Fund's assets and is responsible for the Fund's expenses, including the cost of transfer agency, custody, fund administration, legal, audit and other services, but excluding fee payments under the Investment Management Agreement, interest, taxes, 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. Effective November 1, 2022, the annual unitary management fee payable by the Fund to First Trust for these services will be reduced at certain levels of the Fund's net assets ("breakpoints") and calculated pursuant to the schedule below: <TABLE> <CAPTION> Breakpoints ------------------------------------------------------------------------- <S> <C> 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% </TABLE> Prior to November 1, 2022, the Fund paid First Trust an annual unitary management fee equal to 0.95% of its average daily net assets. The Trust has multiple service agreements with The Bank of New York Mellon ("BNYM"). Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services, and transfer agency services for the Fund. As custodian, BNYM is responsible for custody of the Fund's assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of the Fund's securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for the Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company. Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, a target outcome fund or an index fund. Additionally, the Lead Independent Trustee and the Chairs 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 Chairs 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, 2023, the cost of purchases and proceeds from sales of investments, excluding short-term investments, investments sold short and in-kind transactions, were $196,844,485 and $374,185,068, respectively. The cost of purchases to cover short sales and the proceeds of short sales were $0 and $0, respectively. For the six months ended April 30, 2023, 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, has a $200 million Credit Agreement with BNYM ("Line of Credit"), 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. 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, 2023 associated with the Line of Credit. Page 30
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) APRIL 30, 2023 (UNAUDITED) 6. DERIVATIVE TRANSACTIONS The following table presents the types of derivatives held by the Fund at April 30, 2023, 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> Swap contracts Credit Risk Swap contracts, at value $ -- Swap contracts, at value* $ 205,930 </TABLE> * Includes cumulative appreciation/depreciation on swap 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, 2023, on the Fund's derivative instruments, as well as the primary underlying risk exposure associated with the instruments. <TABLE> <CAPTION> STATEMENT OF OPERATIONS LOCATION ----------------------------------------------------------------------------- <S> <C> CREDIT RISK EXPOSURE Net realized gain (loss) on swap contracts $ 500,752 Net change in unrealized appreciation (depreciation) on swap contracts (205,930) </TABLE> The Fund entered into credit default swap agreements on February 9, 2023. For the period February 9, 2023 through April 30, 2023, the average volume of credit default swaps was $10,373,457. 7. CREATIONS, REDEMPTIONS AND TRANSACTION FEES The Fund generally issues and redeems its shares in primary market transactions through a creation and redemption mechanism and does not sell or redeem individual shares. Instead, financial entities known as "Authorized Participants" have contractual arrangements with the Fund'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 31
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) APRIL 30, 2023 (UNAUDITED) 8. DISTRIBUTION PLAN The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Fund is authorized to pay an amount up to 0.25% of its average daily net assets each year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the Fund, for amounts expended to finance activities primarily intended to result in the sale 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, 2024. 9. INDEMNIFICATION The Trust, on behalf of the Fund, has a variety of indemnification obligations under contracts with its service providers. The Trust's maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 10. SUBSEQUENT EVENTS Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued and has determined that there was the following subsequent event: On May 23, 2023, the Advisor's Pricing Committee approved changes to the Advisor's Valuation Procedures for the First Trust Funds, including clarifications to certain pricing methodologies. These changes will be reflected in future reports' Notes to Financial Statements. Page 32
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) APRIL 30, 2023 (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 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 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 significant 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 more broadly diversified. 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. DEFINED OUTCOME FUNDS RISK. To the extent a fund's investment strategy is designed to deliver returns tied to the price performance of an underlying ETF, an investor may not realize the returns the fund seeks to achieve if that investor does not hold shares for the entire target outcome period. In the event an investor purchases shares after the first day of the target outcome period or sells shares prior to the end of the target outcome period, the buffer that the fund seeks to provide against a decline in the value of the underlying ETF may not be available, the enhanced returns that the fund seeks to provide (if any) may not be available and the investor may not participate in a gain in the value of the underlying ETF up to the cap for the investor's investment period. Additionally, the fund will not participate in gains of the underlying ETF above the cap and a shareholder may lose their entire investment. If the fund seeks enhanced returns, there are certain time periods when the value of the fund may fall faster than the value of the underlying ETF, and it is very unlikely that, on any given day during which the underlying ETF share price increases in value, the fund's share price will increase at the same rate as the enhanced returns sought by the fund, which is designed for an entire target outcome period. Trading flexible exchange options involves risks different from, or possibly greater than, the risks associated with investing directly in securities, such as less liquidity and correlation and valuation risks. A fund may experience substantial downside from specific flexible exchange option positions and certain positions may expire worthless. Page 33
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) APRIL 30, 2023 (UNAUDITED) 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 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 OR MODEL CONSTITUENT RISK. Certain funds may be a constituent of one or more indices or ETF models. 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 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. In addition, index rebalances may potentially result in increased trading activity in a fund's shares. 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 has ceased making LIBOR available as a reference rate over a phase-out period that began December 31, 2021. There is no assurance that any alternative reference rate, including the Secured Overnight Financing Rate ("SOFR") will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the Page 34
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) APRIL 30, 2023 (UNAUDITED) same volume or liquidity. 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. Market risk is the risk that a particular security, or shares of a fund in general, may fall in value. 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. In February 2022, Russia invaded Ukraine which has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain fund investments as well as fund performance. The COVID-19 global pandemic and the ensuing policies enacted by governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets. While the U.S. has resumed "reasonably" normal business activity, many countries continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective against emerging variants of the disease. These events also adversely affect the prices and liquidity of a fund's portfolio securities or other instruments and could result in disruptions in the trading markets. Any of such circumstances could have a materially negative impact on the value of a fund's shares and result in increased market volatility. During any such events, a fund's shares may trade at increased premiums or discounts to their net asset value and the bid/ask spread on a fund's shares may widen. 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; capital controls; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; the imposition of sanctions by foreign governments; 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. Each fund relies on third-parties for a range of services, including custody. Any delay or failure relating to engaging or maintaining such service providers may affect a fund's ability to meet its investment objective. Although the funds and the funds' investment 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. PREFERRED SECURITIES RISK. Preferred securities combine some of the characteristics of both common stocks and bonds. Preferred securities are typically subordinated to bonds and other debt securities in a company's capital structure in terms of priority to corporate income, subjecting them to greater credit risk than those debt securities. Generally, holders of preferred securities have no voting rights with respect to the issuing company unless preferred dividends have been in arrears for a specified number of periods, at which time the preferred security holders may obtain limited rights. In certain circumstances, an issuer of preferred securities may defer payment on the securities and, in some cases, redeem the securities prior to a specified date. Preferred securities may also be substantially less liquid than other securities, including common stock. Page 35
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) APRIL 30, 2023 (UNAUDITED) VALUATION RISK. The valuation of certain securities may carry more risk than that of common stock. Uncertainties in the conditions of the financial markets, unreliable reference data, lack of transparency and inconsistency of valuation models and processes may lead to inaccurate asset pricing. A fund may hold investments in sizes smaller than institutionally sized round lot positions (sometimes referred to as odd lots). However, third-party pricing services generally provide evaluations on the basis of institutionally-sized round lots. If a fund sells certain of its investments in an odd lot transaction, the sale price may be less than the value at which such securities have been held by the fund. Odd lots often trade at lower prices than institutional round lots. There is no assurance that the fund will be able to sell a portfolio security at the price established by the pricing service, which could result in a loss to the fund. 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 17, 2023 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 17, 2022 through the Liquidity Committee's annual meeting held on March 23, 2023 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 any highly liquid investment minimum. As stated in the written report, during the review period, two funds breached the 15% limitation on illiquid investments for one day each, as a result of an unscheduled week-long closure of the stock exchange in Istanbul following devastating earthquakes in February, causing all Turkish equities to be re-classified as "illiquid" for one day. Each fund filed a Form N-RN on the day after the breach occurred, and one day later after the breach was cured. No fund with a highly liquid investment minimum breached that minimum during the reporting period. 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 36
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 South Wacker Drive Chicago, IL 60606 LEGAL COUNSEL Chapman and Cutler LLP 320 South Canal Street Chicago, IL 60606
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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, 2023
-------------------------------------------------------------------------------- TABLE OF CONTENTS -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) SEMI-ANNUAL REPORT APRIL 30, 2023 Shareholder Letter........................................................... 1 Fund Performance Overview.................................................... 2 Portfolio Management......................................................... 5 Understanding Your Fund Expenses............................................. 6 Portfolio of Investments..................................................... 7 Statement of Assets and Liabilities.......................................... 26 Statement of Operations...................................................... 27 Statements of Changes in Net Assets.......................................... 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 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 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.
-------------------------------------------------------------------------------- SHAREHOLDER LETTER -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO APRIL 30, 2023 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, 2023. It pleases me to write that on May 5, 2023, the World Health Organization officially declared that the coronavirus ("COVID-19") pandemic no longer qualified as a global health emergency. While the virus officially no longer poses an immediate threat, its full impact on the world economy remains to be seen, in my opinion. Recall, if you will, those early days of the pandemic; companies sent workers home, consumers were afraid or unwilling to leave their homes, supply chains dried up, and grocery shelves were left bare. Hoping to provide relief to their constituents and to bolster economic activity, governments across the globe funneled trillions of dollars in stimulus directly into the hands of their citizens. Unfortunately, economist Milton Friedman's age-old economic adage "there's no such thing as a free lunch" still holds. As a result of the U.S. government stimulus, gross domestic product rebounded quickly, but so did inflation. As many investors are aware, the Federal Reserve (the "Fed") has been locked in a battle with stubbornly high inflation for several years now. Inflation, as measured by the trailing 12-month rate of change in the Consumer Price Index ("CPI"), surged from 1.4% on December 31, 2020, to 9.1% as of June 30, 2022. Since then, the trailing rate on the CPI has come down, but remains elevated. On April 30, 2023, the CPI stood at 4.9%, well above the Fed's goal of 2.0%. Surging prices have not been restricted to the U.S. Headline inflation rates in each of the countries that make up the so-called Group of Ten (G-10) stand above the targets set by their central banks, according to data from Bloomberg. From the Fed's perspective, monetary policy is the most efficient means to combat rising prices. From December 31, 2020 through May 3, 2023, the Fed increased the Federal Funds target rate (upper bound) a total of ten times, raising the rate from 0.25% to 5.25%. As mentioned, tighter monetary policy resulted in a decrease in the CPI, but there have been casualties in the Fed's battle with rising prices. The most recent banking turmoil is one example. Another is the spike in mortgage rates. According to Bankrate, the national average for a 30-year mortgage stood at just 2.87% on December 31, 2020. As of May 1, 2023, the average 30-year mortgage rate had surged to 6.88%. Not all the news is negative, however. Driven by a strong U.S. labor market, consumer spending remained robust in April 2023. Notably, American corporations added 253,000 jobs during the month, and the unemployment rate stood at a 53-year low. Bob Carey, Chief Market Strategist at First Trust, recently summed up the current situation, noting that "we're not out of the woods yet." That said, even the most difficult situations don't last forever. In my opinion, like the COVID-19 pandemic, inflation, and the tighter monetary policy it ushered in, will pass with time. 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
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) The First Trust Enhanced Short Maturity ETF's (the "Fund") 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. 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 portfolio is expected to have an average duration of less than one year and an average maturity of 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) 4/30/23 4/30/23 4/30/23 to 4/30/23 4/30/23 to 4/30/23 <S> <C> <C> <C> <C> <C> <C> FUND PERFORMANCE NAV 2.39% 2.95% 1.56% 1.31% 8.04% 12.05% Market Price 2.37% 2.90% 1.55% 1.31% 8.02% 12.03% INDEX PERFORMANCE ICE BofA 0-1 Year U.S. Treasury Index 2.19% 2.42% 1.47% 1.08% 7.58% 9.80% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> Total returns for the period since inception are calculated from the inception date of the Fund. "Average Annual Total Returns" represent the average annual change in value of an investment over the period indicated. "Cumulative Total Returns" represent the total change in value of an investment over the period indicated. The total returns would have been lower if certain fees had not been waived and expenses reimbursed by the Advisor. 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
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) -------------------------------------------------------- % OF TOTAL ASSET CLASSIFICATION INVESTMENTS & CASH -------------------------------------------------------- Commercial Paper 41.3% Corporate Bonds and Notes 41.0 Foreign Corporate Bonds and Notes 8.5 Asset-Backed Securities 3.4 U.S. Government Agency Mortgage-Backed Securities 2.3 U.S. Government Bonds and Notes 2.1 Mortgage-Backed Securities 0.8 Certificates of Deposit 0.6 Cash 0.0* ------- Total 100.0% ======= -------------------------------------------------------- % OF TOTAL CREDIT QUALITY(1) INVESTMENTS & CASH -------------------------------------------------------- Government and Agency 4.3% AAA 3.3 AA+ 0.1 AA 0.1 AA- 0.3 A+ 1.2 A 4.9 A- 11.5 BBB+ 14.7 BBB 10.9 BBB- 4.6 BB+ 0.0* Not Rated 44.1 Cash 0.0* ------- Total 100.0% ======= * Amount is less than 0.1%. -------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS INVESTMENTS -------------------------------------------------------- U.S. Treasury Note, 2.50%, 08/15/23 1.0% U.S. Treasury Note, 1.75%, 05/15/23 0.7 Energy Transfer, L.P., 5.58%, 05/01/23 0.6 FMC Corp., 5.58%, 05/01/23 0.6 Bayer US Finance II LLC, 3.88%, 12/15/23 0.5 Johnson & Johnson, 3.38%, 12/05/23 0.5 Verizon Master Trust, Series 2022-7, Class A1A, 5.23%, 11/22/27 0.5 AutoNation, Inc., 5.48%, 05/01/23 0.5 General Motors Financial Co., Inc., 5.22%, 05/01/23 0.5 Targa Resources Corp., 5.58%, 05/01/23 0.5 ------- Total 5.9% ======= ----------------------------- (1) The ratings are by S&P Global Ratings. 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
-------------------------------------------------------------------------------- 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, 2023 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 10/31/21 10,936 10,751 4/30/22 10,884 10,720 10/31/22 10,944 10,745 4/30/23 11,205 10,980 </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. Performance in securitized product investment strategies can be impacted from the benefits of purchasing odd lot positions. The impact of these investments can be particularly meaningful when funds have limited assets under management and may not be a sustainable source of performance as a fund grows in size. 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
-------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) SEMI-ANNUAL REPORT APRIL 30, 2023 (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 AND PORTFOLIO MANAGER JEREMIAH CHARLES - SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER JAMES SNYDER - SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER ERIC R. MAISEL, CFA - SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER SCOTT SKOWRONSKI, CFA - SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER The portfolio managers are primarily and jointly responsible for the day-to-day management of the Fund. Each portfolio manager has served as part of the portfolio management team of the Fund since 2014, except for Eric R. Maisel, who has served as part of the portfolio management team of the Fund since 2015, and Scott Skowronski, who has served as part of the portfolio management team of the Fund since 2022. Page 5
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) UNDERSTANDING YOUR FUND EXPENSES APRIL 30, 2023 (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, 2023. 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, 2022 APRIL 30, 2023 PERIOD (a) PERIOD (b) --------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) Actual $1,000.00 $1,023.90 0.29% $1.46 Hypothetical (5% return before expenses) $1,000.00 $1,023.36 0.29% $1.45 </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, 2022 through April 30, 2023), multiplied by 181/365 (to reflect the six-month period). Page 6
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> ANNUALIZED PRINCIPAL YIELD ON DATE STATED VALUE DESCRIPTION OF PURCHASE MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> COMMERCIAL PAPER -- 41.7% AGRICULTURE -- 0.6% $ 15,000,000 BAT International Finance PLC................................... 5.41% 07/17/23 $ 14,830,647 20,000,000 Philip Morris International, Inc................................ 5.11% 05/08/23 19,980,425 10,400,000 Philip Morris International, Inc................................ 5.26% 10/24/23 10,142,669 --------------- 44,953,741 --------------- AUTO MANUFACTURERS -- 2.7% 10,000,000 American Honda Finance Corp..................................... 5.39% 05/11/23 9,985,260 15,000,000 American Honda Finance Corp..................................... 5.32% 05/22/23 14,954,205 25,000,000 American Honda Finance Corp..................................... 5.34% 05/23/23 24,919,855 10,000,000 American Honda Finance Corp..................................... 5.32% 05/24/23 9,966,563 40,000,000 General Motors Financial Co., Inc............................... 5.22% 05/01/23 40,000,000 22,500,000 Hyundai Capital America......................................... 5.19% 05/12/23 22,464,844 10,000,000 Mercedes-Benz Finance North America LLC......................... 5.46% 05/05/23 9,994,022 12,500,000 Mercedes-Benz Finance North America LLC......................... 5.13% 05/11/23 12,482,453 25,000,000 VW Credit, Inc.................................................. 5.23% 05/05/23 24,985,687 20,000,000 VW Credit, Inc.................................................. 5.19% 05/08/23 19,980,127 16,000,000 VW Credit, Inc.................................................. 5.23% 05/10/23 15,979,405 20,000,000 VW Credit, Inc.................................................. 5.31% 05/19/23 19,947,777 --------------- 225,660,198 --------------- BANKS -- 3.8% 15,000,000 ANZ New Zealand Int'l Ltd., SOFR + 0.36% (a).................... 4.67% 11/02/23 15,000,000 10,000,000 Australia & New Zealand Banking Group Ltd., SOFR + 0.43% (a).................................................... 4.23% 06/06/23 10,000,000 21,500,000 Barclays PLC.................................................... 5.25% 05/09/23 21,475,285 15,000,000 Barclays PLC.................................................... 4.99% 05/24/23 14,953,004 12,000,000 BPCE S.A........................................................ 5.14% 08/01/23 11,846,634 15,000,000 Commonwealth Bank of Australia, SOFR + 0.66% (a)................ 5.21% 05/02/23 15,000,000 14,000,000 Cooperatieve Rabobank UA........................................ 5.05% 07/31/23 13,826,091 11,920,000 Cooperatieve Rabobank UA........................................ 5.16% 10/20/23 11,637,206 16,000,000 Mitsubishi UFJ Trust & Banking Corp............................. 5.14% 07/28/23 15,804,001 16,000,000 MUFG Bank Ltd................................................... 5.11% 07/20/23 15,822,741 12,000,000 National Bank of Canada......................................... 5.10% 08/01/23 11,847,576 10,000,000 Royal Bank of Canada............................................ 3.91% 07/19/23 10,000,000 13,408,000 Royal Bank of Canada, SOFR + 0.73% (a).......................... 5.03% 08/08/23 13,425,279 16,000,000 Skandinaviska Enskilda Banken AB, SOFR + 0.26% (a).............. 5.06% 08/25/23 16,000,000 29,000,000 Skandinaviska Enskilda Banken AB, SOFR + 0.46% (a).............. 5.25% 10/03/23 29,001,162 25,000,000 Svenska Handelsbanken AB........................................ 5.05% 07/24/23 24,712,778 15,000,000 Svenska Handelsbanken AB, SOFR + 0.65% (a)...................... 5.45% 03/21/24 14,999,935 10,000,000 Toronto-Dominion Bank (The)..................................... 3.95% 07/19/23 10,000,000 12,000,000 Toronto-Dominion Bank (The)..................................... 5.16% 11/01/23 11,695,480 15,000,000 Toronto-Dominion Bank (The), SOFR + 0.68% (a)................... 5.48% 04/11/24 15,000,000 13,000,000 Westpac Banking Corp............................................ 5.25% 01/26/24 12,514,393 --------------- 314,561,565 --------------- BEVERAGES -- 1.5% 19,600,000 Constellation Brands, Inc....................................... 5.36% 05/01/23 19,600,000 13,000,000 Constellation Brands, Inc....................................... 5.60% 05/05/23 12,992,030 13,000,000 Constellation Brands, Inc....................................... 5.51% 05/08/23 12,986,122 19,000,000 Constellation Brands, Inc....................................... 5.60% 05/22/23 18,938,976 18,000,000 Constellation Brands, Inc....................................... 5.63% 05/23/23 17,939,114 20,000,000 Diageo Capital PLC.............................................. 5.26% 05/31/23 19,913,951 </TABLE> See Notes to Financial Statements Page 7
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> ANNUALIZED PRINCIPAL YIELD ON DATE STATED VALUE DESCRIPTION OF PURCHASE MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> COMMERCIAL PAPER (CONTINUED) BEVERAGES (CONTINUED) $ 20,000,000 Keurig Dr Pepper, Inc........................................... 5.25% 05/08/23 $ 19,979,895 --------------- 122,350,088 --------------- BIOTECHNOLOGY -- 0.6% 20,000,000 CSLB Holdings, Inc.............................................. 5.30% 05/03/23 19,994,190 25,000,000 CSLB Holdings, Inc.............................................. 5.30% 05/04/23 24,989,107 --------------- 44,983,297 --------------- BUILDING MATERIALS -- 1.2% 40,000,000 Vulcan Materials Co............................................. 5.29% 05/09/23 39,953,673 15,000,000 Vulcan Materials Co............................................. 5.23% 05/10/23 14,980,676 30,000,000 Vulcan Materials Co............................................. 5.32% - 5.34% 05/16/23 29,934,462 10,000,000 Vulcan Materials Co............................................. 5.31% 05/24/23 9,966,631 --------------- 94,835,442 --------------- CHEMICALS -- 2.1% 25,800,000 Cabot Corp...................................................... 4.97% 05/01/23 25,800,000 50,000,000 FMC Corp........................................................ 5.58% 05/01/23 50,000,000 10,000,000 Nutrien Ltd..................................................... 5.11% 05/02/23 9,998,600 15,000,000 Nutrien Ltd..................................................... 5.11% 05/03/23 14,995,799 16,000,000 Nutrien Ltd..................................................... 5.31% 05/10/23 15,979,059 17,000,000 Nutrien Ltd..................................................... 5.35% 05/19/23 16,955,264 26,000,000 Sherwin-Williams (The) Co....................................... 5.22% - 5.24% 05/16/23 25,944,276 13,000,000 Sherwin-Williams (The) Co....................................... 5.30% 05/22/23 12,960,492 --------------- 172,633,490 --------------- COMMERCIAL SERVICES -- 1.0% 30,000,000 Global Payments, Inc............................................ 5.71% 05/01/23 30,000,000 20,000,000 Global Payments, Inc............................................ 5.82% 05/11/23 19,968,146 20,000,000 S&P Global, Inc................................................. 5.18% 05/02/23 19,997,162 16,000,000 S&P Global, Inc................................................. 5.13% 05/04/23 15,993,254 --------------- 85,958,562 --------------- COSMETICS/PERSONAL CARE -- 0.5% 10,000,000 Haleon UK Capital PLC........................................... 5.37% 05/15/23 9,979,463 17,000,000 Haleon UK Capital PLC........................................... 5.49% 05/16/23 16,961,709 10,000,000 Haleon UK Capital PLC........................................... 5.37% 05/23/23 9,967,738 --------------- 36,908,910 --------------- DIVERSIFIED FINANCIAL SERVICES -- 0.7% 25,000,000 ABN AMRO Funding USA LLC........................................ 5.30% 11/06/23 24,332,256 10,000,000 Citigroup Global Markets, Inc., SOFR + 0.52% (a)................ 5.07% 06/16/23 10,000,000 20,000,000 Nasdaq, Inc..................................................... 5.24% 05/17/23 19,954,134 --------------- 54,286,390 --------------- ELECTRIC -- 6.4% 20,000,000 American Electric Power Co., Inc................................ 5.38% 05/08/23 19,979,373 20,000,000 American Electric Power Co., Inc................................ 5.38% 05/11/23 19,970,554 14,000,000 American Electric Power Co., Inc................................ 5.24% 05/12/23 13,977,916 10,000,000 American Electric Power Co., Inc................................ 5.20% 05/18/23 9,975,852 10,000,000 American Electric Power Co., Inc................................ 5.38% 05/22/23 9,969,168 20,000,000 Baltimore Gas and Electric Co................................... 5.19% 05/05/23 19,988,636 30,000,000 CenterPoint Energy, Inc......................................... 5.00% 05/01/23 30,000,000 10,000,000 CenterPoint Energy, Inc......................................... 5.56% 05/08/23 9,989,346 </TABLE> Page 8 See Notes to Financial Statements
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (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) $ 15,000,000 CenterPoint Energy, Inc......................................... 5.43% - 5.56% 05/10/23 $ 14,979,626 20,000,000 CenterPoint Energy, Inc......................................... 5.43% 05/11/23 19,970,309 15,000,000 CenterPoint Energy, Inc......................................... 5.43% 05/15/23 14,968,838 10,000,000 Commonwealth Edison Co.......................................... 5.13% 05/04/23 9,995,785 14,000,000 Commonwealth Edison Co.......................................... 5.13% 05/05/23 13,992,133 21,400,000 Consolidated Edison Co. of New York, Inc........................ 4.97% 05/01/23 21,400,000 15,000,000 Dominion Energy, Inc............................................ 5.21% 05/16/23 14,967,955 20,000,000 Duke Energy Corp................................................ 5.22% 05/05/23 19,988,565 10,000,000 Duke Energy Corp................................................ 5.22% 05/17/23 9,977,190 10,000,000 Duke Energy Corp................................................ 5.22% 05/18/23 9,975,761 10,000,000 NextEra Energy Capital Holdings, Inc............................ 5.72% 05/09/23 9,987,489 15,000,000 NextEra Energy Capital Holdings, Inc............................ 5.56% 05/11/23 14,977,174 20,000,000 NextEra Energy Capital Holdings, Inc............................ 5.35% 05/30/23 19,915,380 25,000,000 NextEra Energy Capital Holdings, Inc............................ 5.35% 06/02/23 24,883,265 16,000,000 Sempra Energy................................................... 5.87% 05/01/23 16,000,000 17,000,000 Sempra Energy................................................... 5.28% 05/03/23 16,995,086 27,000,000 Sempra Energy................................................... 5.31% 05/11/23 26,960,742 10,000,000 Southern California Edison Co................................... 5.44% 05/09/23 9,988,099 16,000,000 Southern California Edison Co................................... 5.50% 05/18/23 15,959,133 10,000,000 Southern California Edison Co................................... 5.60% 05/22/23 9,967,902 16,000,000 Southern Co. Funding Corp....................................... 5.24% 05/09/23 15,981,636 12,476,000 Virginia Electric and Power Co.................................. 5.14% 05/08/23 12,463,715 16,000,000 Virginia Electric and Power Co.................................. 5.19% 05/10/23 15,979,542 20,000,000 WEC Energy Group, Inc........................................... 4.99% 05/01/23 20,000,000 15,000,000 WEC Energy Group, Inc........................................... 5.21% 05/04/23 14,993,578 --------------- 529,119,748 --------------- ELECTRONICS -- 1.7% 20,000,000 Arrow Electronics, Inc.......................................... 5.61% 05/01/23 20,000,000 30,000,000 Arrow Electronics, Inc.......................................... 5.38% 05/04/23 29,986,736 25,000,000 Jabil, Inc...................................................... 5.65% 05/01/23 25,000,000 15,000,000 Jabil, Inc...................................................... 5.79% 05/02/23 14,997,622 15,000,000 Jabil, Inc...................................................... 5.80% 05/03/23 14,995,236 15,000,000 Jabil, Inc...................................................... 5.80% 05/12/23 14,973,817 20,000,000 Jabil, Inc...................................................... 5.80% 05/19/23 19,942,973 --------------- 139,896,384 --------------- ENVIRONMENTAL CONTROL -- 1.0% 25,000,000 Republic Services, Inc.......................................... 5.02% 05/01/23 25,000,000 25,000,000 Waste Management, Inc........................................... 5.35% 05/04/23 24,989,008 20,000,000 Waste Management, Inc........................................... 5.24% 05/15/23 19,959,847 16,000,000 Waste Management, Inc........................................... 5.25% 05/25/23 15,944,988 --------------- 85,893,843 --------------- FOOD -- 3.4% 20,000,000 Campbell Soup Co................................................ 5.08% 05/04/23 19,991,645 20,000,000 Campbell Soup Co................................................ 5.24% 05/10/23 19,974,184 13,000,000 Campbell Soup Co................................................ 5.22% 05/17/23 12,970,330 30,000,000 Conagra Brands, Inc............................................. 5.38% 05/01/23 30,000,000 15,000,000 Conagra Brands, Inc............................................. 5.65% 05/03/23 14,995,355 16,000,000 Conagra Brands, Inc............................................. 5.65% 05/05/23 15,990,092 20,000,000 McCormick & Co., Inc............................................ 5.30% 05/04/23 19,991,293 </TABLE> See Notes to Financial Statements Page 9
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> ANNUALIZED PRINCIPAL YIELD ON DATE STATED VALUE DESCRIPTION OF PURCHASE MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> COMMERCIAL PAPER (CONTINUED) FOOD (CONTINUED) $ 16,000,000 McCormick & Co., Inc............................................ 5.19% 05/09/23 $ 15,981,813 16,000,000 McCormick & Co., Inc............................................ 5.25% 05/23/23 15,949,518 20,000,000 McCormick & Co., Inc............................................ 5.24% 05/26/23 19,928,441 15,000,000 Mondelez International, Inc..................................... 5.18% 05/10/23 14,980,864 10,000,000 Mondelez International, Inc..................................... 5.19% 05/11/23 9,985,811 16,000,000 Mondelez International, Inc..................................... 5.23% 05/12/23 15,974,803 30,000,000 Mondelez International, Inc..................................... 5.36% 05/18/23 29,925,320 20,000,000 Mondelez International, Inc..................................... 5.28% 05/26/23 19,927,993 --------------- 276,567,462 --------------- HEALTH CARE PRODUCTS -- 1.1% 20,000,000 Boston Scientific Corp.......................................... 5.35% 05/04/23 19,991,214 16,250,000 Boston Scientific Corp.......................................... 5.24% 05/08/23 16,233,688 12,000,000 Boston Scientific Corp.......................................... 5.18% 05/09/23 11,986,392 10,000,000 Boston Scientific Corp.......................................... 5.19% 05/10/23 9,987,228 20,000,000 Boston Scientific Corp.......................................... 5.24% 05/16/23 19,957,040 15,000,000 Thermo Fisher Scientific, Inc................................... 5.19% 05/23/23 14,953,263 --------------- 93,108,825 --------------- HEALTH CARE SERVICES -- 0.6% 15,000,000 Humana, Inc..................................................... 5.66% 05/08/23 14,983,747 10,000,000 Humana, Inc..................................................... 5.51% 06/06/23 9,945,976 25,000,000 UnitedHealth Group, Inc......................................... 5.20% 05/02/23 24,996,436 --------------- 49,926,159 --------------- HOUSEHOLD PRODUCTS/WARES -- 0.4% 15,000,000 Reckitt Benckiser Treasury Services PLC......................... 5.19% 05/15/23 14,970,178 20,000,000 Reckitt Benckiser Treasury Services PLC......................... 5.19% 05/22/23 19,940,416 --------------- 34,910,594 --------------- INSURANCE -- 0.4% 14,000,000 Marsh & McLennan Cos., Inc...................................... 5.13% 05/01/23 14,000,000 20,000,000 Marsh & McLennan Cos., Inc...................................... 5.26% 06/01/23 19,910,987 --------------- 33,910,987 --------------- LODGING -- 0.9% 15,000,000 Marriott International, Inc..................................... 5.13% 05/05/23 14,991,579 12,000,000 Marriott International, Inc..................................... 5.24% 05/19/23 11,969,051 16,000,000 Marriott International, Inc..................................... 5.27% 05/24/23 15,947,067 20,000,000 Marriott International, Inc..................................... 5.30% 05/30/23 19,916,162 15,000,000 Marriott International, Inc..................................... 5.35% 06/02/23 14,930,000 --------------- 77,753,859 --------------- MINING -- 0.6% 25,000,000 Glencore Funding LLC............................................ 5.41% 05/17/23 24,940,876 25,000,000 Glencore Funding LLC............................................ 5.41% 05/22/23 24,922,400 --------------- 49,863,276 --------------- MISCELLANEOUS MANUFACTURING -- 0.7% 15,000,000 Parker-Hannifin Corp............................................ 5.06% 05/01/23 15,000,000 10,000,000 Parker-Hannifin Corp............................................ 5.59% 05/03/23 9,996,937 15,000,000 Parker-Hannifin Corp............................................ 5.43% 05/09/23 14,982,167 15,000,000 Parker-Hannifin Corp............................................ 5.24% 05/18/23 14,963,489 --------------- 54,942,593 --------------- </TABLE> Page 10 See Notes to Financial Statements
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (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 -- 1.9% $ 15,700,000 Canadian Natural Resources Ltd.................................. 5.66% 05/03/23 $ 15,695,129 9,600,000 Canadian Natural Resources Ltd.................................. 5.78% 05/17/23 9,575,750 25,000,000 Canadian Natural Resources Ltd.................................. 5.82% 05/25/23 24,904,773 10,000,000 Suncor Energy, Inc.............................................. 5.16% 05/01/23 10,000,000 15,000,000 Suncor Energy, Inc.............................................. 5.20% 05/08/23 14,985,068 10,000,000 Suncor Energy, Inc.............................................. 5.51% 05/19/23 9,972,890 20,000,000 Suncor Energy, Inc.............................................. 5.51% 05/23/23 19,933,791 30,000,000 Suncor Energy, Inc.............................................. 5.40% - 5.78% 05/24/23 29,893,481 20,000,000 Suncor Energy, Inc.............................................. 5.46% 06/02/23 19,904,698 --------------- 154,865,580 --------------- OIL & GAS SERVICES -- 0.2% 20,000,000 Baker Hughes Holdings LLC....................................... 5.10% 05/08/23 19,980,467 --------------- PHARMACEUTICALS -- 1.2% 20,000,000 Bayer Corp...................................................... 6.09% 07/21/23 19,733,467 24,000,000 Becton Dickinson & Co........................................... 5.09% 05/04/23 23,989,957 16,000,000 Becton Dickinson & Co........................................... 5.30% 05/10/23 15,979,119 16,000,000 Becton Dickinson & Co........................................... 5.31% 05/24/23 15,946,665 20,000,000 Becton Dickinson & Co........................................... 5.32% 06/07/23 19,892,797 --------------- 95,542,005 --------------- PIPELINES -- 1.8% 20,000,000 Enbridge US, Inc................................................ 5.34% 05/19/23 19,947,500 50,400,000 Energy Transfer, L.P............................................ 5.58% 05/01/23 50,400,000 40,000,000 Targa Resources Corp............................................ 5.58% 05/01/23 40,000,000 15,000,000 TransCanada PipeLines Ltd....................................... 5.20% 05/03/23 14,995,730 7,500,000 TransCanada PipeLines Ltd....................................... 5.29% 05/09/23 7,491,315 10,000,000 TransCanada PipeLines Ltd....................................... 5.37% 05/17/23 9,976,529 5,000,000 TransCanada PipeLines Ltd....................................... 5.30% 05/23/23 4,984,088 --------------- 147,795,162 --------------- REAL ESTATE INVESTMENT TRUSTS -- 0.3% 25,000,000 Crown Castle, Inc............................................... 5.91% 05/04/23 24,987,865 --------------- RETAIL -- 0.9% 40,000,000 AutoNation, Inc................................................. 5.48% 05/01/23 40,000,000 20,000,000 AutoZone, Inc................................................... 5.08% 05/08/23 19,980,547 16,000,000 Dollar General Corp............................................. 5.24% 05/09/23 15,981,663 --------------- 75,962,210 --------------- SOFTWARE -- 1.9% 16,000,000 Fidelity National Information Services, Inc..................... 5.40% 05/02/23 15,997,635 20,000,000 Fidelity National Information Services, Inc..................... 5.34% - 5.40% 05/03/23 19,994,103 16,100,000 Fidelity National Information Services, Inc..................... 5.20% 05/05/23 16,090,836 18,000,000 Fidelity National Information Services, Inc..................... 5.34% 05/10/23 17,976,327 20,000,000 Fidelity National Information Services, Inc..................... 5.43% 05/12/23 19,967,326 23,000,000 Fiserv, Inc..................................................... 5.09% - 5.12% 05/02/23 22,996,786 15,000,000 Fiserv, Inc..................................................... 5.15% 05/03/23 14,995,768 11,000,000 Fiserv, Inc..................................................... 5.21% 05/10/23 10,985,882 16,000,000 Oracle Corp..................................................... 5.32% 05/25/23 15,944,265 --------------- 154,948,928 --------------- </TABLE> See Notes to Financial Statements Page 11
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> ANNUALIZED PRINCIPAL YIELD ON DATE STATED VALUE DESCRIPTION OF PURCHASE MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> COMMERCIAL PAPER (CONTINUED) TELECOMMUNICATIONS -- 1.1% $ 15,000,000 AT&T, Inc....................................................... 5.62% 10/17/23 $ 14,619,745 15,000,000 AT&T, Inc....................................................... 5.85% 12/19/23 14,458,667 16,000,000 Bell Telephone Co. of Canada or Bell Canada (The)............... 5.35% 05/05/23 15,990,628 16,000,000 Bell Telephone Co. of Canada or Bell Canada (The)............... 5.24% 05/17/23 15,963,315 30,000,000 Verizon Communications, Inc..................................... 5.10% 05/11/23 29,958,137 --------------- 90,990,492 --------------- TRANSPORTATION -- 0.5% 20,000,000 Canadian Pacific Railway Co..................................... 5.24% 05/05/23 19,988,533 20,000,000 Canadian Pacific Railway Co..................................... 5.36% 05/09/23 19,976,533 --------------- 39,965,066 --------------- TOTAL COMMERCIAL PAPER....................................................................... 3,428,063,188 (Cost $3,428,063,188) --------------- </TABLE> <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> CORPORATE BONDS AND NOTES -- 41.4% AEROSPACE/DEFENSE -- 1.2% 2,361,000 Boeing (The) Co................................................. 4.51% 05/01/23 2,361,000 9,443,000 General Dynamics Corp........................................... 3.38% 05/15/23 9,438,014 30,458,000 L3Harris Technologies, Inc...................................... 3.85% 06/15/23 30,403,443 32,443,000 Northrop Grumman Corp........................................... 3.25% 08/01/23 32,259,328 20,645,000 Northrop Grumman Corp........................................... 2.93% 01/15/25 20,030,788 --------------- 94,492,573 --------------- AUTO MANUFACTURERS -- 1.1% 20,000,000 American Honda Finance Corp., Medium-Term Note, 3 Mo. LIBOR + 0.37% (a)...................................... 5.23% 05/10/23 19,997,284 6,159,000 BMW US Capital LLC, SOFR Compounded Index + 0.53% (a) (b)................................................ 5.37% 04/01/24 6,143,415 4,000,000 Daimler Trucks Finance North America LLC (b).................... 1.13% 12/14/23 3,889,442 5,000,000 Daimler Trucks Finance North America LLC, SOFR + 0.60% (a) (b)................................................ 5.41% 12/14/23 4,997,404 3,900,000 General Motors Financial Co., Inc............................... 4.15% 06/19/23 3,891,062 15,000,000 General Motors Financial Co., Inc., SOFR + 0.76% (a)............ 5.55% 03/08/24 14,934,387 7,000,000 Hyundai Capital America (b)..................................... 1.00% 09/17/24 6,584,707 3,000,000 Nissan Motor Acceptance Co. LLC, 3 Mo. LIBOR + 0.64% (a) (b)................................................ 5.65% 03/08/24 2,966,514 10,000,000 Toyota Motor Credit Corp., Series B, SOFR + 0.29% (a)........... 5.09% 09/13/24 9,926,326 1,000,000 Toyota Motor Credit Corp., Medium-Term Note..................... 2.50% 03/22/24 978,210 15,676,000 Volkswagen Group of America Finance LLC (b)..................... 3.13% 05/12/23 15,665,430 --------------- 89,974,181 --------------- BANKS -- 6.2% 10,000,000 Bank of America Corp., SOFR + 0.69% (a)......................... 5.53% 04/22/25 9,925,106 1,975,000 Bank of America Corp. (c)....................................... 3.37% 01/23/26 1,903,765 10,397,000 Bank of America Corp., Medium-Term Note......................... 4.13% 01/22/24 10,311,322 24,771,000 Bank of America Corp., Medium-Term Note......................... 4.00% 04/01/24 24,500,152 15,000,000 Bank of America Corp., Medium-Term Note, 3 Mo. Bloomberg Short Term Bank Yield + 0.43% (a).................. 5.27% 05/28/24 14,969,550 </TABLE> Page 12 See Notes to Financial Statements
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> CORPORATE BONDS AND NOTES (CONTINUED) BANKS (CONTINUED) $ 23,004,000 Bank of America Corp., Medium-Term Note (c)..................... 3.86% 07/23/24 $ 22,905,805 5,000,000 Bank of America Corp., Medium-Term Note (c)..................... 3.09% 10/01/25 4,826,643 8,000,000 Bank of New York Mellon (The) Corp., Medium-Term Note......................................................... 1.60% 04/24/25 7,530,933 11,955,000 Bank of New York Mellon (The) Corp., Medium-Term Note......................................................... 3.35% 04/25/25 11,601,217 4,253,000 Citigroup, Inc. (c)............................................. 1.68% 05/15/24 4,246,760 34,824,000 Citigroup, Inc. (c)............................................. 4.04% 06/01/24 34,773,987 14,727,000 Citigroup, Inc.................................................. 3.75% 06/16/24 14,521,381 10,588,000 Fifth Third Bancorp............................................. 1.63% 05/05/23 10,584,626 5,341,000 Fifth Third Bancorp............................................. 3.65% 01/25/24 5,252,879 7,000,000 Goldman Sachs Group (The), Inc.................................. 1.22% 12/06/23 6,836,609 26,116,000 Goldman Sachs Group (The), Inc.................................. 3.63% 02/20/24 25,779,521 26,844,000 Goldman Sachs Group (The), Inc.................................. 3.00% 03/15/24 26,282,359 12,500,000 Goldman Sachs Group (The), Inc., SOFR + 0.50% (a)............... 5.30% 09/10/24 12,429,926 4,000,000 Goldman Sachs Group (The), Inc., SOFR + 0.49% (a)............... 5.33% 10/21/24 3,962,712 10,000,000 Goldman Sachs Group (The), Inc.................................. 5.70% 11/01/24 10,093,074 11,000,000 JPMorgan Chase & Co............................................. 3.38% 05/01/23 11,000,000 30,309,000 JPMorgan Chase & Co. (c)........................................ 3.80% 07/23/24 30,186,373 4,900,000 JPMorgan Chase & Co............................................. 3.88% 09/10/24 4,817,903 10,000,000 JPMorgan Chase & Co., SOFR + 0.54% (a).......................... 5.31% 06/01/25 9,905,322 10,000,000 JPMorgan Chase & Co. (c)........................................ 5.55% 12/15/25 10,050,097 30,000,000 Morgan Stanley, Series F........................................ 3.88% 04/29/24 29,589,574 12,515,000 Morgan Stanley, Global Medium-Term Note......................... 3.70% 10/23/24 12,277,513 15,000,000 Morgan Stanley, Global Medium-Term Note (c)..................... 0.79% 01/22/25 14,470,125 5,000,000 Morgan Stanley, Medium-Term Note................................ 4.10% 05/22/23 4,994,720 30,344,000 Morgan Stanley, Medium-Term Note, SOFR + 0.46% (a).................................................... 5.29% 01/25/24 30,321,921 14,646,000 PNC Financial Services Group, (The), Inc........................ 3.50% 01/23/24 14,433,222 566,000 State Street Corp. (c).......................................... 4.86% 01/26/26 565,418 26,945,000 Truist Bank (c)................................................. 3.69% 08/02/24 26,791,496 15,000,000 Truist Financial Corp., Medium-Term Note........................ 3.75% 12/06/23 14,834,438 12,000,000 Truist Financial Corp., Medium-Term Note, SOFR + 0.40% (a).................................................... 5.19% 06/09/25 11,552,333 14,758,000 Wells Fargo & Co., Medium-Term Note............................. 3.75% 01/24/24 14,592,395 2,401,000 Wells Fargo & Co., Medium-Term Note (c)......................... 1.65% 06/02/24 2,393,030 --------------- 506,014,207 --------------- BEVERAGES -- 0.9% 5,000,000 Anheuser-Busch InBev Worldwide, Inc., 3 Mo. LIBOR + 0.74% (a).................................................... 5.94% 01/12/24 5,007,532 21,035,000 Constellation Brands, Inc....................................... 3.60% 05/09/24 20,695,111 5,000,000 Constellation Brands, Inc....................................... 4.75% 11/15/24 4,992,357 15,000,000 Constellation Brands, Inc....................................... 5.00% 02/02/26 14,958,040 19,619,000 Keurig Dr Pepper, Inc........................................... 0.75% 03/15/24 18,893,292 10,000,000 PepsiCo, Inc.................................................... 0.40% 10/07/23 9,812,561 --------------- 74,358,893 --------------- BIOTECHNOLOGY -- 1.6% 17,796,000 Amgen, Inc...................................................... 2.25% 08/19/23 17,623,893 10,000,000 Amgen, Inc...................................................... 3.63% 05/22/24 9,862,417 25,229,000 Amgen, Inc...................................................... 5.25% 03/02/25 25,457,533 7,000,000 Amgen, Inc...................................................... 5.51% 03/02/26 7,028,730 </TABLE> See Notes to Financial Statements Page 13
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> CORPORATE BONDS AND NOTES (CONTINUED) BIOTECHNOLOGY (CONTINUED) $ 33,756,000 Gilead Sciences, Inc............................................ 2.50% 09/01/23 $ 33,429,775 30,179,000 Gilead Sciences, Inc............................................ 0.75% 09/29/23 29,639,401 12,081,000 Gilead Sciences, Inc............................................ 3.70% 04/01/24 11,914,021 --------------- 134,955,770 --------------- BUILDING MATERIALS -- 0.5% 38,660,000 Martin Marietta Materials, Inc.................................. 0.65% 07/15/23 38,265,056 3,618,000 Martin Marietta Materials, Inc.................................. 4.25% 07/02/24 3,581,064 --------------- 41,846,120 --------------- CHEMICALS -- 0.1% 6,140,000 International Flavors & Fragrances, Inc......................... 3.20% 05/01/23 6,140,000 3,140,000 Westlake Chemical Corp.......................................... 0.88% 08/15/24 2,976,361 --------------- 9,116,361 --------------- COMMERCIAL SERVICES -- 1.0% 33,443,000 Global Payments, Inc............................................ 3.75% 06/01/23 33,378,968 13,846,000 Global Payments, Inc............................................ 4.00% 06/01/23 13,825,979 3,049,000 Global Payments, Inc............................................ 1.50% 11/15/24 2,879,279 30,451,000 Moody's Corp.................................................... 4.88% 02/15/24 30,293,019 3,356,000 PayPal Holdings, Inc............................................ 1.35% 06/01/23 3,342,486 --------------- 83,719,731 --------------- COSMETICS/PERSONAL CARE -- 0.0% 1,000,000 Kenvue, Inc. (b)................................................ 5.50% 03/22/25 1,017,403 --------------- DIVERSIFIED FINANCIAL SERVICES -- 0.3% 7,280,000 American Express Co............................................. 3.70% 08/03/23 7,244,805 2,292,000 American Express Co., 3 Mo. LIBOR + 0.75% (a)................... 6.05% 08/03/23 2,292,410 3,766,000 American Express Co............................................. 3.38% 05/03/24 3,696,977 8,000,000 Capital One Financial Corp., SOFR + 0.69% (a)................... 5.48% 12/06/24 7,833,326 --------------- 21,067,518 --------------- ELECTRIC -- 3.9% 22,171,000 Alabama Power Co., Series 13-A.................................. 3.55% 12/01/23 21,950,759 7,224,000 American Electric Power Co., Inc., Series A, 3 Mo. LIBOR + 0.48% (a)............................................ 5.78% 11/01/23 7,213,030 18,860,000 Baltimore Gas and Electric Co................................... 3.35% 07/01/23 18,793,020 7,070,000 CenterPoint Energy, Inc., SOFR Compounded Index + 0.65% (a).................................................... 5.37% 05/13/24 7,038,822 10,537,000 Delmarva Power & Light Co....................................... 3.50% 11/15/23 10,435,211 13,573,000 Dominion Energy, Inc., Series D, 3 Mo. LIBOR + 0.53% (a).................................................... 5.40% 09/15/23 13,562,682 3,000,000 Duke Energy Corp., SOFR + 0.25% (a)............................. 5.05% 06/10/23 2,999,565 36,703,000 Duke Energy Corp................................................ 3.75% 04/15/24 36,122,997 26,335,000 Georgia Power Co., Series A..................................... 2.10% 07/30/23 26,118,880 10,000,000 NextEra Energy Capital Holdings, Inc., SOFR Compounded Index + 0.40% (a)................................. 5.24% 11/03/23 9,975,496 15,488,000 NextEra Energy Capital Holdings, Inc............................ 4.26% 09/01/24 15,345,590 11,950,000 Northern States Power Co........................................ 2.60% 05/15/23 11,933,436 15,000,000 Oklahoma Gas and Electric Co.................................... 0.55% 05/26/23 14,955,648 20,786,000 Pacific Gas and Electric Co..................................... 4.25% 08/01/23 20,713,321 5,000,000 Pacific Gas and Electric Co..................................... 3.85% 11/15/23 4,945,426 </TABLE> Page 14 See Notes to Financial Statements
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> CORPORATE BONDS AND NOTES (CONTINUED) ELECTRIC (CONTINUED) $ 5,637,000 Public Service Electric and Gas Co., Medium-Term Note......................................................... 2.38% 05/15/23 $ 5,629,415 25,570,000 Public Service Enterprise Group, Inc............................ 0.84% 11/08/23 24,965,721 4,000,000 Southern California Edison Co., Series J........................ 0.70% 08/01/23 3,954,953 7,550,000 Southern (The) Co., Series 2021, SOFR Compounded Index + 0.37% (a)............................................ 5.08% 05/10/23 7,549,160 29,943,000 Virginia Electric and Power Co.................................. 3.45% 02/15/24 29,561,774 30,990,000 WEC Energy Group, Inc........................................... 0.80% 03/15/24 29,826,939 --------------- 323,591,845 --------------- ENVIRONMENTAL CONTROL -- 1.4% 31,280,000 Republic Services, Inc.......................................... 4.75% 05/15/23 31,267,102 38,630,000 Republic Services, Inc.......................................... 2.50% 08/15/24 37,443,985 5,044,000 Republic Services, Inc.......................................... 3.20% 03/15/25 4,910,012 26,631,000 Waste Management, Inc........................................... 2.40% 05/15/23 26,604,068 5,412,000 Waste Management, Inc........................................... 3.50% 05/15/24 5,330,469 12,296,000 Waste Management, Inc........................................... 3.13% 03/01/25 11,996,024 --------------- 117,551,660 --------------- FOOD -- 0.3% 17,368,000 Conagra Brands, Inc............................................. 4.30% 05/01/24 17,199,098 10,000,000 ConAgra Brands, Inc............................................. 0.50% 08/11/23 9,864,351 --------------- 27,063,449 --------------- GAS -- 0.1% 5,000,000 Southern California Gas Co., 3 Mo. LIBOR + 0.35% (a)............ 5.49% 09/14/23 4,987,732 --------------- HEALTH CARE PRODUCTS -- 2.1% 15,000,000 Abbott Laboratories............................................. 3.40% 11/30/23 14,887,800 15,000,000 Baxter International, Inc....................................... 0.87% 12/01/23 14,586,042 10,000,000 Baxter International, Inc., SOFR Compounded Index + 0.26% (a).................................................... 5.03% 12/01/23 9,956,326 9,177,000 Baxter International, Inc....................................... 1.32% 11/29/24 8,646,452 10,000,000 Baxter International, Inc., SOFR Compounded Index + 0.44% (a).................................................... 5.20% 11/29/24 9,811,605 4,242,000 Boston Scientific Corp.......................................... 3.45% 03/01/24 4,179,931 16,000,000 PerkinElmer, Inc................................................ 0.55% 09/15/23 15,726,662 18,995,000 Stryker Corp.................................................... 0.60% 12/01/23 18,489,927 34,553,000 Thermo Fisher Scientific, Inc................................... 0.80% 10/18/23 33,870,367 10,000,000 Thermo Fisher Scientific, Inc., SOFR Compounded Index + 0.39% (a).................................................... 5.23% 10/18/23 9,987,171 20,452,000 Thermo Fisher Scientific, Inc................................... 1.22% 10/18/24 19,481,676 1,000,000 Thermo Fisher Scientific, Inc., SOFR Compounded Index + 0.53% (a).................................................... 5.37% 10/18/24 1,000,042 5,177,000 Zimmer Biomet Holdings, Inc..................................... 1.45% 11/22/24 4,903,919 7,000,000 Zimmer Biomet Holdings, Inc..................................... 3.55% 04/01/25 6,815,826 --------------- 172,343,746 --------------- HEALTH CARE SERVICES -- 2.7% 34,358,000 Aetna, Inc...................................................... 2.80% 06/15/23 34,249,548 7,323,000 Aetna, Inc...................................................... 3.50% 11/15/24 7,147,514 32,000,000 Elevance Health, Inc............................................ 3.50% 08/15/24 31,416,347 8,780,000 Elevance Health, Inc............................................ 2.38% 01/15/25 8,447,879 16,667,000 Elevance Health, Inc............................................ 4.90% 02/08/26 16,644,770 </TABLE> See Notes to Financial Statements Page 15
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> CORPORATE BONDS AND NOTES (CONTINUED) HEALTH CARE SERVICES (CONTINUED) $ 29,451,000 HCA, Inc........................................................ 5.00% 03/15/24 $ 29,318,663 7,600,000 HCA, Inc........................................................ 5.38% 02/01/25 7,606,608 33,000,000 Humana, Inc..................................................... 0.65% 08/03/23 32,606,493 3,669,000 Humana, Inc..................................................... 3.85% 10/01/24 3,612,773 12,600,000 Humana, Inc..................................................... 4.50% 04/01/25 12,530,825 14,800,000 Humana, Inc..................................................... 5.70% 03/13/26 14,920,890 6,600,000 Roche Holdings, Inc. (b)........................................ 0.45% 03/05/24 6,346,959 4,799,000 UnitedHealth Group, Inc......................................... 3.50% 06/15/23 4,789,385 10,000,000 UnitedHealth Group, Inc......................................... 3.50% 02/15/24 9,887,297 6,591,000 UnitedHealth Group, Inc......................................... 0.55% 05/15/24 6,309,282 --------------- 225,835,233 --------------- INSURANCE -- 1.4% 15,069,000 Allstate (The) Corp............................................. 3.15% 06/15/23 15,022,567 5,000,000 Athene Global Funding, SOFR Compounded Index + 0.70% (a) (b)................................................ 5.45% 05/24/24 4,949,646 3,000,000 Brighthouse Financial Global Funding, SOFR + 0.76% (a) (b)................................................ 5.60% 04/12/24 2,967,137 9,600,000 Brown & Brown, Inc.............................................. 4.20% 09/15/24 9,491,800 11,587,000 Marsh & McLennan Cos., Inc...................................... 4.05% 10/15/23 11,513,909 30,509,000 Marsh & McLennan Cos., Inc...................................... 3.88% 03/15/24 30,132,823 5,906,000 Marsh & McLennan Cos., Inc...................................... 3.50% 06/03/24 5,797,561 3,100,000 Marsh & McLennan Cos., Inc...................................... 3.50% 03/10/25 3,038,397 7,000,000 Metropolitan Life Global Funding I, SOFR + 0.30% (a) (b)................................................ 5.14% 09/27/24 6,954,004 5,000,000 New York Life Global Funding, SOFR Compounded Index + 0.43% (a) (b)........................................ 5.21% 06/06/24 4,986,383 13,054,000 Principal Life Global Funding II, SOFR + 0.45% (a) (b).......... 5.29% 04/12/24 13,028,953 5,000,000 Principal Life Global Funding II, SOFR + 0.38% (a) (b).......... 5.14% 08/23/24 4,974,217 --------------- 112,857,397 --------------- LODGING -- 0.1% 10,500,000 Hyatt Hotels Corp............................................... 1.30% 10/01/23 10,345,973 --------------- MACHINERY-DIVERSIFIED -- 0.5% 3,955,000 John Deere Capital Corp., Global Medium-Term Note, 3 Mo. LIBOR + 0.55% (a)...................................... 5.53% 06/07/23 3,954,414 9,500,000 John Deere Capital Corp., Medium-Term Note...................... 0.40% 10/10/23 9,318,914 15,000,000 John Deere Capital Corp., Medium-Term Note...................... 5.15% 03/03/25 15,184,048 15,549,000 Rockwell Automation, Inc........................................ 0.35% 08/15/23 15,329,745 --------------- 43,787,121 --------------- MEDIA -- 0.7% 35,087,000 Charter Communications Operating LLC / Charter Communications Operating Capital............................. 4.50% 02/01/24 34,684,648 11,612,000 Charter Communications Operating LLC / Charter Communications Operating Capital, 3 Mo. LIBOR + 1.65% (a).................................................... 6.95% 02/01/24 11,660,805 7,387,000 Comcast Corp.................................................... 3.70% 04/15/24 7,297,553 5,400,000 Comcast Corp.................................................... 3.38% 02/15/25 5,304,209 --------------- 58,947,215 --------------- </TABLE> Page 16 See Notes to Financial Statements
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> CORPORATE BONDS AND NOTES (CONTINUED) MISCELLANEOUS MANUFACTURING -- 0.1% $ 8,312,000 Parker-Hannifin Corp............................................ 3.65% 06/15/24 $ 8,189,910 --------------- OIL & GAS -- 0.1% 5,000,000 Chevron Corp.................................................... 1.14% 05/11/23 4,995,694 --------------- PHARMACEUTICALS -- 5.4% 34,847,000 AbbVie, Inc..................................................... 2.85% 05/14/23 34,813,878 16,398,000 AbbVie, Inc..................................................... 3.75% 11/14/23 16,254,852 20,877,000 AbbVie, Inc..................................................... 3.85% 06/15/24 20,636,170 15,425,000 AbbVie, Inc..................................................... 2.60% 11/21/24 14,896,092 18,095,000 AmerisourceBergen Corp.......................................... 3.40% 05/15/24 17,765,706 23,951,000 Astrazeneca Finance LLC......................................... 0.70% 05/28/24 22,920,891 41,852,000 Bayer US Finance II LLC (b)..................................... 3.88% 12/15/23 41,426,730 22,743,000 Becton Dickinson & Co........................................... 3.36% 06/06/24 22,354,975 15,126,000 Bristol-Myers Squibb Co......................................... 3.25% 11/01/23 14,986,270 24,205,000 Cigna Group (The)............................................... 3.00% 07/15/23 24,075,325 31,381,000 Cigna Group (The)............................................... 3.75% 07/15/23 31,267,887 30,358,000 Cigna Group (The)............................................... 3.50% 06/15/24 29,862,528 5,257,000 Cigna Group (The)............................................... 5.69% 03/15/26 5,291,155 29,320,000 CVS Health Corp................................................. 4.00% 12/05/23 29,087,758 11,450,000 CVS Health Corp................................................. 3.38% 08/12/24 11,236,587 4,954,000 CVS Health Corp................................................. 2.63% 08/15/24 4,810,477 40,964,000 Johnson & Johnson............................................... 3.38% 12/05/23 40,514,681 40,000,000 McKesson Corp................................................... 3.80% 03/15/24 39,480,918 19,350,000 McKesson Corp................................................... 5.25% 02/15/26 19,362,195 --------------- 441,045,075 --------------- PIPELINES -- 3.0% 20,014,000 Energy Transfer, L.P............................................ 5.88% 01/15/24 20,011,581 14,014,000 Energy Transfer, L.P. / Regency Energy Finance Corp............. 4.50% 11/01/23 13,929,671 40,393,000 Enterprise Products Operating LLC............................... 3.90% 02/15/24 39,964,738 17,481,000 Enterprise Products Operating LLC............................... 3.75% 02/15/25 17,265,637 12,000,000 Kinder Morgan Energy Partners, L.P.............................. 4.15% 02/01/24 11,906,498 7,302,000 Kinder Morgan Energy Partners, L.P.............................. 4.30% 05/01/24 7,237,642 37,249,000 Kinder Morgan, Inc. (b)......................................... 5.63% 11/15/23 37,242,818 11,465,000 Plains All American Pipeline, L.P. / PAA Finance Corp........... 3.85% 10/15/23 11,367,335 39,028,000 Spectra Energy Partners, L.P.................................... 4.75% 03/15/24 38,784,515 18,413,000 Williams Cos., (The), Inc....................................... 4.50% 11/15/23 18,331,680 27,695,000 Williams Cos., (The), Inc....................................... 4.30% 03/04/24 27,472,089 --------------- 243,514,204 --------------- REAL ESTATE INVESTMENT TRUSTS -- 0.4% 17,074,000 Crown Castle, Inc............................................... 3.15% 07/15/23 16,996,588 15,190,000 Public Storage, SOFR + 0.47% (a)................................ 5.31% 04/23/24 15,144,910 --------------- 32,141,498 --------------- RETAIL -- 0.8% 3,000,000 AutoZone, Inc................................................... 3.13% 07/15/23 2,992,102 30,000,000 AutoZone, Inc................................................... 3.13% 04/18/24 29,379,725 12,005,000 Lowe's Cos., Inc................................................ 3.88% 09/15/23 11,948,693 22,327,000 O'reilly Automotive, Inc........................................ 3.85% 06/15/23 22,260,887 --------------- 66,581,407 --------------- </TABLE> See Notes to Financial Statements Page 17
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> CORPORATE BONDS AND NOTES (CONTINUED) SEMICONDUCTORS -- 0.7% $ 9,955,000 Marvell Technology, Inc......................................... 4.20% 06/22/23 $ 9,936,044 16,156,000 Microchip Technology, Inc....................................... 4.33% 06/01/23 16,136,916 5,820,000 Microchip Technology, Inc....................................... 0.98% 09/01/24 5,479,380 1,727,000 Qorvo, Inc. (b)................................................. 1.75% 12/15/24 1,619,054 25,343,000 Skyworks Solutions, Inc......................................... 0.90% 06/01/23 25,242,414 --------------- 58,413,808 --------------- SOFTWARE -- 3.1% 8,054,000 Cadence Design Systems, Inc..................................... 4.38% 10/15/24 7,969,418 17,700,000 Fidelity National Information Services, Inc..................... 0.60% 03/01/24 16,977,052 33,142,000 Fiserv, Inc..................................................... 3.80% 10/01/23 32,922,359 19,472,000 Fiserv, Inc..................................................... 2.75% 07/01/24 18,926,118 20,877,000 Infor, Inc. (b)................................................. 1.45% 07/15/23 20,697,171 8,979,000 Microsoft Corp.................................................. 3.63% 12/15/23 8,927,298 825,000 Oracle Corp..................................................... 3.63% 07/15/23 821,929 16,849,000 Oracle Corp..................................................... 2.40% 09/15/23 16,666,117 34,555,000 Oracle Corp..................................................... 3.40% 07/08/24 33,889,922 20,119,000 Oracle Corp..................................................... 2.95% 11/15/24 19,481,584 34,542,000 Roper Technologies, Inc......................................... 3.65% 09/15/23 34,338,211 2,061,000 Roper Technologies, Inc......................................... 2.35% 09/15/24 1,988,112 25,567,000 VMware, Inc..................................................... 0.60% 08/15/23 25,216,449 20,178,000 VMware, Inc..................................................... 1.00% 08/15/24 19,109,905 --------------- 257,931,645 --------------- TELECOMMUNICATIONS -- 0.7% 9,936,000 AT&T, Inc., SOFR Compounded Index + 0.64% (a)................... 5.48% 03/25/24 9,919,944 10,000,000 AT&T, Inc., 3 Mo. LIBOR + 1.18% (a)............................. 6.33% 06/12/24 10,062,876 23,124,000 T-Mobile USA, Inc............................................... 3.50% 04/15/25 22,506,602 11,421,000 Verizon Communications, Inc., SOFR Compounded Index + 0.50% (a).................................................. 5.33% 03/22/24 11,411,892 --------------- 53,901,314 --------------- TRANSPORTATION -- 0.8% 17,620,000 CSX Corp........................................................ 3.40% 08/01/24 17,258,134 22,665,000 Union Pacific Corp.............................................. 3.50% 06/08/23 22,625,657 25,000,000 Union Pacific Corp.............................................. 3.65% 02/15/24 24,705,670 1,539,000 Union Pacific Corp.............................................. 3.75% 03/15/24 1,522,679 --------------- 66,112,140 --------------- WATER -- 0.2% 16,425,000 American Water Capital Corp..................................... 3.85% 03/01/24 16,281,948 --------------- TOTAL CORPORATE BONDS AND NOTES.............................................................. 3,402,982,771 (Cost $3,410,735,344) --------------- FOREIGN CORPORATE BONDS AND NOTES -- 8.5% BANKS -- 4.3% 10,000,000 Bank of Montreal, Medium-Term Note, SOFR Compounded Index + 0.32% (a)................................. 5.16% 07/09/24 9,941,497 31,043,000 Bank of Montreal, Medium-Term Note, Series E.................... 3.30% 02/05/24 30,551,981 30,000,000 Bank of Montreal, Medium-Term Note, Series H.................... 4.25% 09/14/24 29,618,276 25,000,000 Bank of Nova Scotia (The), SOFR Compounded Index + 0.45% (a).................................................... 5.28% 04/15/24 24,898,287 8,000,000 Bank of Nova Scotia (The), SOFR + 0.38% (a)..................... 5.22% 07/31/24 7,955,440 </TABLE> Page 18 See Notes to Financial Statements
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> FOREIGN CORPORATE BONDS AND NOTES (CONTINUED) BANKS (CONTINUED) $ 5,000,000 Banque Federative du Credit Mutuel S.A., SOFR Compounded Index + 0.41% (a) (b)............................. 5.10% 02/04/25 $ 4,942,261 15,623,000 Barclays PLC (c)................................................ 4.34% 05/16/24 15,607,631 8,500,000 Canadian Imperial Bank of Commerce, SOFR + 0.34% (a).................................................... 5.17% 06/22/23 8,500,254 18,350,000 Cooperatieve Rabobank UA (b).................................... 3.88% 09/26/23 18,220,309 5,000,000 Danske Bank A/S (b) (c)......................................... 0.98% 09/10/25 4,665,049 10,000,000 Deutsche Bank AG/New York NY, Series E, SOFR + 0.50% (a).................................................... 5.20% 11/08/23 9,910,355 6,200,000 Federation des Caisses Desjardins du Quebec, SOFR + 0.43% (a) (b)................................................ 5.18% 05/21/24 6,164,939 6,000,000 ING Groep N.V., 3 Mo. LIBOR + 1.00% (a)......................... 6.18% 10/02/23 6,010,567 11,282,000 Lloyds Banking Group PLC........................................ 4.05% 08/16/23 11,223,370 5,000,000 Macquarie Group Ltd., SOFR + 0.71% (a) (b)...................... 5.55% 10/14/25 4,920,755 3,306,000 Mizuho Financial Group, Inc. (c)................................ 0.85% 09/08/24 3,249,891 5,000,000 National Bank of Canada, SOFR + 0.49% (a)....................... 5.19% 08/06/24 4,975,861 7,615,000 NatWest Group PLC (c)........................................... 2.36% 05/22/24 7,598,120 14,885,000 NatWest Markets PLC, SOFR + 0.53% (a) (b)....................... 5.25% 08/12/24 14,761,103 8,000,000 Royal Bank of Canada, SOFR Compounded Index + 0.36% (a).................................................... 5.20% 07/29/24 7,944,407 18,454,000 Royal Bank of Canada, Global Medium-Term Note, SOFR Compounded Index + 0.30% (a)................................. 5.14% 01/19/24 18,404,976 8,700,000 Royal Bank of Canada, Global Medium-Term Note................... 4.95% 04/25/25 8,708,498 10,000,000 Sumitomo Mitsui Trust Bank Ltd., SOFR + 0.44% (a) (b)................................................ 5.24% 09/16/24 9,940,120 26,662,000 Toronto-Dominion Bank (The), Global Medium-Term Note......................................................... 3.25% 03/11/24 26,188,073 3,374,000 Toronto-Dominion Bank (The), Medium-Term Note................... 2.35% 03/08/24 3,286,663 10,000,000 Toronto-Dominion Bank (The), Medium-Term Note, SOFR + 0.91% (a)............................................. 5.70% 03/08/24 10,004,230 5,000,000 UBS AG/London, SOFR + 0.45% (a) (b)............................. 5.16% 08/09/24 4,970,144 40,000,000 UBS Group AG (b) (c)............................................ 1.01% 07/30/24 39,444,736 --------------- 352,607,793 --------------- BEVERAGES -- 0.1% 11,000,000 JDE Peet's N.V. (b)............................................. 0.80% 09/24/24 10,270,010 --------------- BIOTECHNOLOGY -- 0.4% 30,000,000 Royalty Pharma PLC.............................................. 0.75% 09/02/23 29,486,248 --------------- CHEMICALS -- 0.3% 19,133,000 Nutrien Ltd..................................................... 1.90% 05/13/23 19,107,921 7,600,000 Nutrien Ltd..................................................... 5.90% 11/07/24 7,699,524 --------------- 26,807,445 --------------- HEALTH CARE PRODUCTS -- 0.1% 12,674,000 DH Europe Finance II Sarl....................................... 2.20% 11/15/24 12,190,617 --------------- INSURANCE -- 0.2% 16,860,000 Aon Global Ltd.................................................. 4.00% 11/27/23 16,708,054 --------------- OIL & GAS -- 0.4% 30,000,000 Canadian Natural Resources Ltd.................................. 3.80% 04/15/24 29,512,615 --------------- </TABLE> See Notes to Financial Statements Page 19
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> FOREIGN CORPORATE BONDS AND NOTES (CONTINUED) OIL & GAS SERVICES -- 0.2% $ 15,776,000 Schlumberger Investment S.A..................................... 3.65% 12/01/23 $ 15,624,074 --------------- PHARMACEUTICALS -- 1.2% 12,436,000 AstraZeneca PLC................................................. 0.30% 05/26/23 12,396,934 12,000,000 AstraZeneca PLC................................................. 3.50% 08/17/23 11,948,974 8,860,000 GlaxoSmithKline Capital PLC..................................... 0.53% 10/01/23 8,689,246 5,275,000 Sanofi.......................................................... 3.38% 06/19/23 5,259,705 30,393,000 Shire Acquisitions Investments Ireland DAC...................... 2.88% 09/23/23 30,081,886 27,517,000 Takeda Pharmaceutical Co., Ltd.................................. 4.40% 11/26/23 27,364,510 --------------- 95,741,255 --------------- PIPELINES -- 0.9% 17,142,000 Enbridge, Inc................................................... 4.00% 10/01/23 17,040,022 5,442,000 Enbridge, Inc................................................... 0.55% 10/04/23 5,324,664 5,362,000 Enbridge, Inc................................................... 2.15% 02/16/24 5,224,922 3,000,000 Enbridge, Inc., SOFR Compounded Index + 0.63% (a)............... 5.36% 02/16/24 2,992,122 8,092,000 Enbridge, Inc................................................... 3.50% 06/10/24 7,969,528 36,500,000 TransCanada Pipelines Ltd....................................... 3.75% 10/16/23 36,203,227 --------------- 74,754,485 --------------- SEMICONDUCTORS -- 0.4% 32,166,000 Broadcom Corp. / Broadcom Cayman Finance Ltd.................... 3.63% 01/15/24 31,774,849 --------------- TRANSPORTATION -- 0.0% 5,000,000 Canadian Pacific Railway Co..................................... 1.35% 12/02/24 4,725,982 --------------- TOTAL FOREIGN CORPORATE BONDS AND NOTES...................................................... 700,203,427 (Cost $703,240,415) --------------- ASSET-BACKED SECURITIES -- 3.5% American Credit Acceptance Receivables Trust 83,645 Series 2022-1, Class A (b)................................... 0.99% 12/15/25 83,507 BMW Vehicle Lease Trust 15,000,000 Series 2023-1, Class A3...................................... 5.16% 11/25/25 15,030,394 BMW Vehicle Owner Trust 8,543,067 Series 2022-A, Class A2A..................................... 2.52% 12/26/24 8,472,461 Chase Auto Owner Trust 10,465,788 Series 2022-AA, Class A2 (b)................................. 3.86% 10/27/25 10,381,294 Dell Equipment Finance Trust 12,000,000 Series 2023-1, Class A2 (b).................................. 5.65% 09/22/28 12,017,797 DT Auto Owner Trust 1,639,737 Series 2021-4A, Class A (b).................................. 0.56% 09/15/25 1,624,079 3,521,057 Series 2022-1A, Class A (b).................................. 1.58% 04/15/26 3,470,025 Exeter Automobile Receivables Trust 1,437,686 Series 2020-3A, Class C...................................... 1.32% 07/15/25 1,431,567 First Investors Auto Owner Trust 653,552 Series 2021-1A, Class A (b).................................. 0.45% 03/16/26 650,219 Flagship Credit Auto Trust 3,681,744 Series 2021-3, Class A (b)................................... 0.36% 07/15/27 3,585,519 Ford Credit Auto Owner Trust 3,568,280 Series 2022-B, Class A2A..................................... 3.44% 02/15/25 3,541,244 12,500,000 Series 2023-A, Class A2A..................................... 5.14% 03/15/26 12,481,657 Foursight Capital Automobile Receivables Trust 1,239,872 Series 2022-1, Class A2 (b).................................. 1.15% 09/15/25 1,225,333 </TABLE> Page 20 See Notes to Financial Statements
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> ASSET-BACKED SECURITIES (CONTINUED) GLS Auto Receivables Issuer Trust $ 1,710,415 Series 2021-4A, Class A (b).................................. 0.84% 07/15/25 $ 1,693,965 1,608,319 Series 2022-1A, Class A (b).................................. 1.98% 08/15/25 1,591,398 GM Financial Automobile Leasing Trust 1,101,333 Series 2022-3, Class A2A..................................... 4.01% 10/21/24 1,094,769 GM Financial Consumer Automobile Receivables Trust 7,177,451 Series 2022-2, Class A2...................................... 2.52% 05/16/25 7,094,020 Honda Auto Receivables Owner Trust 13,434,218 Series 2022-2, Class A2...................................... 3.81% 03/18/25 13,327,132 Hyundai Auto Receivables Trust 2,890,233 Series 2022-A, Class A2A..................................... 1.81% 02/18/25 2,856,487 John Deere Owner Trust 20,000,000 Series 2022-C, Class A2...................................... 4.98% 08/15/25 19,954,876 14,000,000 Series 2023-A, Class A2...................................... 5.28% 03/16/26 14,040,606 MVW Owner Trust 1,394,277 Series 2018-1A, Class A (b).................................. 3.45% 01/21/36 1,357,698 OSCAR US Funding Trust IX LLC 339,541 Series 2018-2A, Class A4 (b)................................. 3.63% 09/10/25 339,779 OSCAR US Funding XIII LLC 2,324,460 Series 2021-2A, Class A2 (b)................................. 0.39% 08/12/24 2,314,102 OSCAR US Funding XIV LLC 5,143,123 Series 2022-1A, Class A2 (b)................................. 1.60% 03/10/25 5,070,171 Sierra Timeshare Receivables Funding LLC 3,406,667 Series 2018-2A, Class A (b).................................. 3.50% 06/20/35 3,374,613 Toyota Auto Receivables Owner Trust 6,839,605 Series 2022-C, Class A2A..................................... 3.83% 08/15/25 6,778,963 Verizon Master Trust 3,000,000 Series 2022-1, Class A....................................... 1.04% 01/20/27 2,970,520 20,862,000 Series 2022-3, Class A, steps up to 3.76% on 11/20/23 (d).............................................. 3.01% 05/20/27 20,573,433 15,000,000 Series 2022-5, Class A1A, steps up to 4.47% on 01/20/24 (d).............................................. 3.72% 07/20/27 14,799,966 40,000,000 Series 2022-7, Class A1A, steps up to 5.98% on 11/20/24 (d).............................................. 5.23% 11/22/27 40,151,112 20,000,000 Series 2023-2, Class A....................................... 4.89% 04/13/28 20,044,542 Westlake Automobile Receivables Trust 1,225,575 Series 2021-2A, Class A2A (b)................................ 0.32% 04/15/25 1,220,219 317,788 Series 2021-3A, Class A2 (b)................................. 0.57% 09/16/24 317,169 6,000,000 Series 2022-1A, Class A3 (b)................................. 2.42% 07/15/25 5,890,536 World Omni Auto Receivables Trust 10,532,962 Series 2022-B, Class A2A..................................... 2.77% 10/15/25 10,407,387 13,342,316 Series 2022-C, Class A2...................................... 3.73% 03/16/26 13,195,159 --------------- TOTAL ASSET-BACKED SECURITIES................................................................ 284,453,718 (Cost $286,244,886) --------------- U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 2.3% COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.1% Federal Home Loan Mortgage Corporation 18,957 Series 2003-2723, Class KN................................... 5.00% 12/15/23 18,913 90,973 Series 2004-2783, Class YB................................... 5.00% 04/15/24 90,625 57,013 Series 2014-4387, Class DE................................... 2.00% 01/15/32 56,742 4,346,558 Series 2017-4671, Class CA................................... 3.50% 08/15/43 4,255,464 </TABLE> See Notes to Financial Statements Page 21
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (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 $ 3 Series 2009-14, Class EB..................................... 4.50% 03/25/24 $ 4 45,561 Series 2013-74, Class EL..................................... 3.00% 04/25/41 45,391 2,076,069 Series 2014-20, Class NA..................................... 3.00% 06/25/33 2,007,064 1,729,961 Series 2015-28, Class GC..................................... 2.50% 06/25/34 1,661,700 2,665,535 Series 2017-18, Class VB..................................... 3.00% 05/25/40 2,622,077 --------------- 10,757,980 --------------- COMMERCIAL MORTGAGE-BACKED SECURITIES -- 2.2% Federal Home Loan Mortgage Corporation Multifamily Structured Pass Through Certificates 17,528,438 Series 2013-K032, Class A2................................... 3.31% 05/25/23 17,472,800 28,948,868 Series 2013-K034, Class A2................................... 3.53% 07/25/23 28,763,769 20,018,108 Series 2013-K035, Class A2................................... 3.46% 08/25/23 19,874,270 32,018,086 Series 2014-K036, Class A2................................... 3.53% 10/25/23 31,715,115 12,889,011 Series 2014-K038, Class A2................................... 3.39% 03/25/24 12,692,674 2,701,034 Series 2014-K041, Class A1................................... 2.72% 08/25/24 2,684,681 23,925,000 Series 2014-K041, Class A2................................... 3.17% 10/25/24 23,323,279 15,404,337 Series 2015-K045, Class A2................................... 3.02% 01/25/25 14,934,818 3,162,117 Series 2015-K046, Class A1................................... 2.70% 01/25/25 3,117,167 18,000,000 Series 2015-K046, Class A2................................... 3.21% 03/25/25 17,553,560 4,236,331 Series 2017-K725, Class A2................................... 3.00% 01/25/24 4,167,817 1,332,912 Series 2017-KJ12, Class A2................................... 3.04% 08/25/24 1,317,439 --------------- 177,617,389 --------------- PASS-THROUGH SECURITIES -- 0.0% Federal Home Loan Mortgage Corporation 893 Pool G15435.................................................. 5.00% 11/01/24 897 985 Pool G15821.................................................. 5.00% 07/01/25 990 2,545 Pool G15874.................................................. 5.00% 06/01/26 2,558 Federal National Mortgage Association 2 Pool AE0237.................................................. 5.50% 11/01/23 2 3,536 Pool AE0812.................................................. 5.00% 07/01/25 3,556 3,968 Pool AL5764.................................................. 5.00% 09/01/25 3,985 80 Pool AL5812.................................................. 5.50% 05/01/25 79 1,174 Pool AL6212.................................................. 4.50% 01/01/27 1,172 4,981 Pool AL6798.................................................. 5.00% 09/01/25 5,002 46,737 Pool BM1299.................................................. 5.00% 03/01/27 46,935 Government National Mortgage Association 1,799 Pool 783524.................................................. 5.00% 09/15/24 1,813 --------------- 66,989 --------------- TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES...................................... 188,442,358 (Cost $189,238,891) --------------- U.S. GOVERNMENT BONDS AND NOTES -- 2.0% 60,000,000 U.S. Treasury Note.............................................. 1.75% 05/15/23 59,933,685 85,000,000 U.S. Treasury Note.............................................. 2.50% 08/15/23 84,333,840 25,000,000 U.S. Treasury Note.............................................. 2.88% 10/31/23 24,754,507 --------------- TOTAL U.S. GOVERNMENT BONDS AND NOTES........................................................ 169,022,032 (Cost $169,917,863) --------------- </TABLE> Page 22 See Notes to Financial Statements
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> MORTGAGE-BACKED SECURITIES -- 0.8% COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.5% BRAVO Residential Funding Trust $ 6,047,349 Series 2021-NQM1, Class A1 (b)............................... 0.94% 02/25/49 $ 5,341,215 CIM Trust 1,249,204 Series 2019-INV1, Class A2, 1 Mo. LIBOR + 1.00% (a) (b)............................................. 5.85% 02/25/49 1,202,075 661,758 Series 2019-INV2, Class A11, 1 Mo. LIBOR + 0.95% (a) (b)............................................. 5.80% 05/25/49 640,583 4,738,028 Series 2019-INV3, Class A11, 1 Mo. LIBOR + 1.00% (a) (b)............................................. 5.50% 08/25/49 4,448,335 COLT Mortgage Loan Trust 3,179,472 Series 2020-2R, Class A1 (b)................................. 1.33% 10/26/65 2,874,557 Credit Suisse Mortgage Trust 4,497,388 Series 2019-AFC1, Class A1, steps up to 3.57% on 08/26/23 (b) (d).......................................... 2.57% 07/25/49 4,181,910 4,962,654 Series 2020-NQM1, Class A1, steps up to 2.21% on 09/26/24 (b) (d).......................................... 1.21% 05/25/65 4,520,056 GCAT Trust 2,656,651 Series 2020-NQM1, Class A1, steps up to 3.25% on 02/26/24 (b) (d).......................................... 2.25% 01/25/60 2,518,928 JP Morgan Mortgage Trust 3,177,001 Series 2019-7, Class A11, 1 Mo. LIBOR + 0.90% (a) (b)............................................. 5.75% 02/25/50 3,025,388 200,405 Series 2019-8, Class A11, 1 Mo. LIBOR + 0.85% (a) (b)............................................. 5.70% 03/25/50 187,031 2,769,779 Series 2019-INV1, Class A11, 1 Mo. LIBOR + 0.95% (a) (b)............................................. 5.80% 10/25/49 2,673,747 71,139 Series 2019-LTV2, Class A11, 1 Mo. LIBOR + 0.90% (a) (b)............................................. 5.92% 12/25/49 71,136 233,925 Series 2019-LTV3, Class A11, 1 Mo. LIBOR + 0.85% (a) (b)............................................. 5.70% 03/25/50 232,614 3,709,815 Series 2020-2, Class A11, 1 Mo. LIBOR + 0.80% (a) (b)............................................. 5.65% 07/25/50 3,507,736 491,290 Series 2020-LTV1, Class A11, 1 Mo. LIBOR + 1.00% (a) (b)............................................. 5.85% 06/25/50 483,158 OBX Trust 1,841,778 Series 2020-INV1, Class A11, 1 Mo. LIBOR + 0.90% (a) (b)............................................. 5.75% 12/25/49 1,711,543 Residential Mortgage Loan Trust 309,800 Series 2019-3, Class A2 (b).................................. 2.94% 09/25/59 303,989 Starwood Mortgage Residential Trust 1,053,746 Series 2020-1, Class A1 (b).................................. 2.28% 02/25/50 1,004,736 Verus Securitization Trust 1,235,837 Series 2019-4, Class A2, steps up to 3.85% on 10/26/23 (b) (d).......................................... 2.85% 11/25/59 1,194,497 741,193 Series 2019-INV2, Class A2, steps up to 3.95% on 08/25/23 (b) (d).......................................... 3.12% 07/25/59 718,784 882,660 Series 2020-4, Class A2, steps up to 2.91% on 07/26/24 (b) (d).......................................... 1.91% 05/25/65 823,168 --------------- 41,665,186 --------------- </TABLE> See Notes to Financial Statements Page 23
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> MORTGAGE-BACKED SECURITIES (CONTINUED) COMMERCIAL MORTGAGE-BACKED SECURITIES -- 0.3% COMM Mortgage Trust $ 12,788,112 Series 2013-LC13, Class A5................................... 4.21% 08/10/46 $ 12,693,179 FREMF Mortgage Trust 4,815,106 Series 2013-K30, Class B (b) (e)............................. 3.55% 06/25/45 4,788,906 JPMBB Commercial Mortgage Securities Trust 6,180,690 Series 2013-C14, Class A4.................................... 4.13% 08/15/46 6,161,125 KNDL Mortgage Trust 4,100,000 Series 2019-KNSQ, Class A, 1 Mo. LIBOR + 0.80% (a) (b)............................................. 5.75% 05/15/36 4,065,441 --------------- 27,708,651 --------------- TOTAL MORTGAGE-BACKED SECURITIES............................................................. 69,373,837 (Cost $72,605,136) --------------- CERTIFICATES OF DEPOSIT -- 0.6% BANKS -- 0.6% 15,000,000 Bank of Montreal, SOFR + 0.65% (a).............................. 5.46% 07/03/23 15,011,839 15,000,000 Truist Bank..................................................... 5.11% 10/31/23 14,976,150 20,000,000 Wells Fargo Bank N.A., SOFR + 0.42% (a)......................... 5.23% 11/17/23 20,002,242 --------------- TOTAL CERTIFICATES OF DEPOSIT................................................................ 49,990,231 (Cost $50,000,000) --------------- TOTAL INVESTMENTS -- 100.8%.................................................................. 8,292,531,562 (Cost $8,310,045,723) --------------- NET OTHER ASSETS AND LIABILITIES -- (0.8)%................................................... (69,631,544) --------------- NET ASSETS -- 100.0%......................................................................... $ 8,222,900,018 =============== </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 (the "1933 Act"), and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Pursuant to procedures adopted by the Trust's Board of Trustees, this security has been determined to be liquid by First Trust Advisors L.P., the Fund's advisor. Although market instability can result in periods of increased overall market illiquidity, liquidity for each security is determined based on security specific factors and assumptions, which require subjective judgment. At April 30, 2023, securities noted as such amounted to $411,483,769 or 5.0% of net assets. (c) Fixed-to-floating or fixed-to-variable rate security. The interest rate shown reflects the fixed rate in effect at April 30, 2023. At a predetermined date, the fixed rate will change to a floating rate or a variable rate. (d) Step-up security. A security where the coupon increases or steps up at a predetermined date. (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. LIBOR - London Interbank Offered Rate SOFR - Secured Overnight Financing Rate Page 24 See Notes to Financial Statements
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of April 30, 2023 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 4/30/2023 PRICES INPUTS INPUTS -------------- -------------- -------------- -------------- <S> <C> <C> <C> <C> Commercial Paper*.................................. $3,428,063,188 $ -- $3,428,063,188 $ -- Corporate Bonds and Notes*......................... 3,402,982,771 -- 3,402,982,771 -- Foreign Corporate Bonds and Notes*................. 700,203,427 -- 700,203,427 -- Asset-Backed Securities............................ 284,453,718 -- 284,453,718 -- U.S. Government Agency Mortgage-Backed Securities...................................... 188,442,358 -- 188,442,358 -- U.S. Government Bonds and Notes.................... 169,022,032 -- 169,022,032 -- Mortgage-Backed Securities......................... 69,373,837 -- 69,373,837 -- Certificates of Deposit*........................... 49,990,231 -- 49,990,231 -- -------------- -------------- -------------- -------------- Total Investments.................................. $8,292,531,562 $ -- $8,292,531,562 $ -- ============== ============== ============== ============== </TABLE> * See Portfolio of Investments for industry breakout. See Notes to Financial Statements Page 25
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> ASSETS: <S> <C> Investments, at value..................................................... $8,292,531,562 Cash...................................................................... 3,006,505 Receivables: Investment securities sold............................................. 10,137,500 Interest............................................................... 37,611,936 -------------- Total Assets........................................................... 8,343,287,503 -------------- LIABILITIES: Payables: Investment securities purchased ....................................... 88,456,755 Distributions to shareholders.......................................... 29,564,041 Investment advisory fees............................................... 2,366,689 -------------- Total Liabilities...................................................... 120,387,485 -------------- NET ASSETS................................................................ $8,222,900,018 ============== NET ASSETS CONSIST OF: Paid-in capital........................................................... $8,253,661,350 Par value................................................................. 1,381,497 Accumulated distributable earnings (loss)................................. (32,142,829) -------------- NET ASSETS................................................................ $8,222,900,018 ============== NET ASSET VALUE, per share................................................ $ 59.52 ============== Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share)............................................. 138,149,724 ============== Investments, at cost...................................................... $8,310,045,723 ============== </TABLE> Page 26 See Notes to Financial Statements
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> INVESTMENT INCOME: <S> <C> Interest.................................................................. $ 166,322,610 -------------- Total investment income................................................ 166,322,610 -------------- EXPENSES: Investment advisory fees.................................................. 17,288,434 -------------- Total expenses......................................................... 17,288,434 Less fees waived by the investment advisor............................. (6,321,030) -------------- Net expenses........................................................... 10,967,404 -------------- NET INVESTMENT INCOME (LOSS).............................................. 155,355,206 -------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on investments................................... (2,407,013) Net change in unrealized appreciation (depreciation) on investments....... 29,835,082 -------------- NET REALIZED AND UNREALIZED GAIN (LOSS)................................... 27,428,069 -------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................................................ $ 182,783,275 ============== </TABLE> See Notes to Financial Statements Page 27
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) STATEMENTS OF CHANGES IN NET ASSETS <TABLE> <CAPTION> SIX MONTHS ENDED YEAR 4/30/2023 ENDED (UNAUDITED) 10/31/2022 -------------- --------------- <S> <C> <C> OPERATIONS: Net investment income (loss).............................................. $ 155,355,206 $ 61,249,235 Net realized gain (loss).................................................. (2,407,013) (194,021) Net change in unrealized appreciation (depreciation)...................... 29,835,082 (47,431,584) -------------- --------------- Net increase (decrease) in net assets resulting from operations........... 182,783,275 13,623,630 -------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations..................................................... (154,991,525) (61,314,422) -------------- --------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................................. 1,731,078,348 3,362,454,346 Cost of shares redeemed................................................... (419,734,035) (841,978,719) -------------- --------------- Net increase (decrease) in net assets resulting from shareholder transactions........................................................... 1,311,344,313 2,520,475,627 -------------- --------------- Total increase (decrease) in net assets................................... 1,339,136,063 2,472,784,835 NET ASSETS: Beginning of period....................................................... 6,883,763,955 4,410,979,120 -------------- --------------- End of period............................................................. $8,222,900,018 $ 6,883,763,955 ============== =============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period................................... 116,099,724 73,649,724 Shares sold............................................................... 29,100,000 56,550,000 Shares redeemed........................................................... (7,050,000) (14,100,000) -------------- --------------- Shares outstanding, end of period......................................... 138,149,724 116,099,724 ============== =============== </TABLE> Page 28 See Notes to Financial Statements
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, 4/30/2023 ------------------------------------------------------------------------ (UNAUDITED) 2022 2021 2020 2019 2018 ------------ ------------ ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> <C> Net asset value, beginning of period..... $ 59.29 $ 59.89 $ 60.03 $ 60.09 $ 59.97 $ 60.02 ---------- ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)............. 1.17 0.64 0.28 0.85 1.48 1.15 Net realized and unrealized gain (loss).. 0.23 (0.60) (0.15) (0.05) 0.11 (0.01) ---------- ---------- ---------- ---------- ---------- ---------- Total from investment operations......... 1.40 0.04 0.13 0.80 1.59 1.14 ---------- ---------- ---------- ---------- ---------- ---------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income.................... (1.17) (0.64) (0.27) (0.86) (1.47) (1.19) Return of capital........................ -- -- -- -- -- (0.00)(a) ---------- ---------- ---------- ---------- ---------- ---------- Total distributions...................... (1.17) (0.64) (0.27) (0.86) (1.47) (1.19) ---------- ---------- ---------- ---------- ---------- ---------- Net asset value, end of period........... $ 59.52 $ 59.29 $ 59.89 $ 60.03 $ 60.09 $ 59.97 ========== ========== ========== ========== ========== ========== TOTAL RETURN (b)......................... 2.39% 0.08% 0.22% 1.34% 2.68% 1.92% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)..... $8,222,900 $6,883,764 $4,410,979 $5,168,783 $5,065,750 $3,070,454 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................................ 0.29% (c) 0.25% 0.25% 0.38% 0.39% 0.33% Ratio of net investment income (loss) to average net assets.................... 4.04% (c) 1.26% 0.47% 1.41% 2.47% 2.04% Portfolio turnover rate (d).............. 34% 56% 82% 73% 73% 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. 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. See Notes to Financial Statements Page 29
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) APRIL 30, 2023 (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 fourteen 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 portfolio is expected to have an average duration of less than one year and an average maturity of 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 readily available market quotations such as last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Pricing Committee of the Fund's investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"), in accordance with valuation procedures approved by the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act and rules thereunder. Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. The Fund's investments are valued as follows: 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 Advisor's Pricing Committee, which may use the following valuation inputs when available: 1) benchmark yields; 2) reported trades; Page 30
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) APRIL 30, 2023 (UNAUDITED) 3) broker/dealer quotes; 4) issuer spreads; 5) benchmark securities; 6) bids and offers; and 7) reference data including market research publications. Pricing services generally value fixed-income securities assuming orderly transactions of an institutional round lot size, but a Fund may hold or transact in such securities in smaller, odd lot sizes. Odd lots may trade at lower prices than institutional round lots. Securities traded in an over-the-counter market are valued at the mean of their most recent bid and asked price, if available, and otherwise at their last trade 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. 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. Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Advisor's Pricing Committee at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended (the "1933 Act")) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of the Fund's NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security's fair value. As a general principle, the current fair value of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities, including, but not limited to, the following: 1) the most recent price provided by the Pricing Service Provider; 2) the fundamental business data relating to the borrower/issuer; 3) an evaluation of the forces which influence the market in which these securities are purchased and sold; 4) the type, size and cost of the security; 5) the financial statements of the borrower/issuer or the financial condition of the country of issue; 6) the credit quality and cash flow of the borrower/issuer, or country of issue, based on the Pricing Committee's, sub-advisor's or portfolio manager's analysis, as applicable, or external analysis; ----------------------------- (1) The terms "security" and "securities" used throughout the Notes to Financial Statements include Senior Loans. Page 31
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) APRIL 30, 2023 (UNAUDITED) 7) the information as to any transactions in or offers for the security; 8) the price and extent of public trading in similar securities of the borrower/issuer, or comparable companies; 9) the coupon payments; 10) the quality, value and salability of collateral, if any, securing the security; 11) 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); 12) 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); 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. 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, 2023, 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 (the "FCA"), which regulates the London Interbank Offered Rates ("LIBOR") announced on March 5, 2021 that it intended to phase-out all LIBOR reference rates, beginning December 31, 2021. Since that announcement, the FCA has ceased publication of all non-USD LIBOR reference rates and the 1-week and 2-month USD LIBOR reference rates as of December 31, 2021. The remaining USD LIBOR settings will cease to be published or no longer be representative immediately after June 30, 2023. The International Swaps and Derivatives Association, Inc. ("ISDA") confirmed that the FCA's March 5, 2021 announcement of its intention to cease providing LIBOR reference rates, 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. There is no assurance that any alternative reference rate, including SOFR, will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the same volume or liquidity. At this time, it is not possible to predict the full impact of the elimination of LIBOR and the establishment of an alternative reference rate on the Fund or its investments. Page 32
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) APRIL 30, 2023 (UNAUDITED) 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. The Fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes. 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, 2022 was as follows: Distributions paid from: Ordinary income................................. $ 46,350,806 Capital gains................................... -- Return of capital............................... -- As of October 31, 2022, the components of distributable earnings on a tax basis for the Fund were as follows: Undistributed ordinary income................... $ 322,904 Accumulated capital and other gain (loss)....... (12,864,893) Net unrealized appreciation (depreciation)...... (47,392,590) 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 2019, 2020, 2021, and 2022 remain open to federal and state audit. As of April 30, 2023, 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, 2022, the Fund had non-expiring capital loss carryforwards available for federal income tax purposes of $12,864,893. 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, 2022, the Fund had no net late year ordinary or capital losses. Page 33
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) APRIL 30, 2023 (UNAUDITED) As of April 30, 2023, the aggregate cost, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation/(depreciation) on investments (including short positions and derivatives, if any) for federal income tax purposes were as follows: <TABLE> <CAPTION> Gross Gross Net Unrealized Unrealized Unrealized Appreciation Tax Cost Appreciation (Depreciation) (Depreciation) ---------------- ------------ -------------- --------------- <S> <C> <C> <C> <C> $ 8,310,045,723 $ 3,337,071 $ (20,851,232) $ (17,514,161) </TABLE> 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. Effective November 1, 2022, the annual unitary management fee payable by the Fund to First Trust for these services will be reduced at a certain levels of the Fund's net assets ("breakpoints") and calculated pursuant to the schedule below: <TABLE> <CAPTION> Breakpoints ------------------------------------------------------------------------- <S> <C> Fund net assets up to and including $2.5 billion 0.45000% Fund net assets greater than $2.5 billion up to and including $5 billion 0.43875% Fund net assets greater than $5 billion up to and including $7.5 billion 0.42750% Fund net assets greater than $7.5 billion up to and including $10 billion 0.41625% Fund net assets greater than $10 billion 0.40500% </TABLE> Prior to November 1, 2022, the Fund paid First Trust an annual unitary management fee equal to 0.45% of its average daily net assets. First Trust has contractually agreed to waive management fees of 0.10% (0.20% prior to March 1, 2023) of average daily net assets until June 1, 2023. At that point, it is expected the waiver agreement will expire and will not be renewed. During any period in which the waiver agreement is in effect, the Fund will not be eligible for the breakpoints described above. 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 June 1, 2023. 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 April 30, 2023, the Advisor waived fees of $6,321,030. 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 target outcome fund, or an index fund. Page 34
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) APRIL 30, 2023 (UNAUDITED) Additionally, the Lead Independent Trustee and the Chairs 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 Chairs 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, 2023, were $291,151,620 and $1,485,338,408, 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, 2023 were $275,255,259 and $614,667,800, respectively. For the six months ended April 30, 2023, 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. 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, 2024. Page 35
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) APRIL 30, 2023 (UNAUDITED) 7. INDEMNIFICATION The Trust, on behalf of the Fund, has a variety of indemnification obligations under contracts with its service providers. The Trust's maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 8. SUBSEQUENT EVENTS Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued and has determined that there were the following subsequent events: Effective June 1, 2023 the 0.10% management fee waiver expired and the Fund is eligible for the breakpoints as previously mentioned in Note 3. On May 23, 2023, the Advisor's Pricing Committee approved changes to the Advisor's Valuation Procedures for the First Trust Funds, including clarifications to certain pricing methodologies. These changes will be reflected in future reports' Notes to Financial Statements. Page 36
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) APRIL 30, 2023 (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 significant 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 more broadly diversified. 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. DEFINED OUTCOME FUNDS RISK. To the extent a fund's investment strategy is designed to deliver returns tied to the price performance of an underlying ETF, an investor may not realize the returns the fund seeks to achieve if that investor does not hold shares for the entire target outcome period. In the event an investor purchases shares after the first day of the target outcome period or sells shares prior to the end of the target outcome period, the buffer that the fund seeks to provide against a decline in the value of the underlying ETF may not be available, the enhanced returns that the fund seeks to provide (if any) may not be available and the investor may not participate in a gain in the value of the underlying ETF up to the cap for the investor's investment period. Additionally, the fund will not participate in gains of the underlying ETF above the cap and a shareholder may lose their entire investment. If the fund seeks enhanced returns, there are certain time periods when the value of the fund may fall faster than the value of the underlying ETF, and it is very unlikely that, on any given day during which the underlying ETF share price increases in value, the fund's share price will increase at the same rate as the enhanced returns sought by the fund, which is designed for an entire target outcome period. Trading flexible exchange options involves risks different from, or possibly greater than, the risks associated with investing directly in securities, such as less liquidity and correlation and valuation risks. A fund may experience substantial downside from specific flexible exchange option positions and certain positions may expire worthless. Page 37
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) APRIL 30, 2023 (UNAUDITED) 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 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 OR MODEL CONSTITUENT RISK. Certain funds may be a constituent of one or more indices or ETF models. 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 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. In addition, index rebalances may potentially result in increased trading activity in a fund's shares. 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 has ceased making LIBOR available as a reference rate over a phase-out period that began December 31, 2021. There is no assurance that any alternative reference rate, including the Secured Overnight Financing Rate ("SOFR") will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the Page 38
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) APRIL 30, 2023 (UNAUDITED) same volume or liquidity. 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. Market risk is the risk that a particular security, or shares of a fund in general, may fall in value. 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. In February 2022, Russia invaded Ukraine which has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain fund investments as well as fund performance. The COVID-19 global pandemic and the ensuing policies enacted by governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets. While the U.S. has resumed "reasonably" normal business activity, many countries continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective against emerging variants of the disease. These events also adversely affect the prices and liquidity of a Fund's portfolio securities or other instruments and could result in disruptions in the trading markets. Any of such circumstances could have a materially negative impact on the value of a Fund's shares and result in increased market volatility. During any such events, a Fund's shares may trade at increased premiums or discounts to their net asset value and the bid/ask spread on a Fund's shares may widen. 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; capital controls; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; the imposition of sanctions by foreign governments; 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. Each fund relies on third-parties for a range of services, including custody. Any delay or failure relating to engaging or maintaining such service providers may affect a fund's ability to meet its investment objective. Although the funds and the funds' investment 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. PREFERRED SECURITIES RISK. Preferred securities combine some of the characteristics of both common stocks and bonds. Preferred securities are typically subordinated to bonds and other debt securities in a company's capital structure in terms of priority to corporate income, subjecting them to greater credit risk than those debt securities. Generally, holders of preferred securities have no voting rights with respect to the issuing company unless preferred dividends have been in arrears for a specified number of periods, at which time the preferred security holders may obtain limited rights. In certain circumstances, an issuer of preferred securities may defer payment on the securities and, in some cases, redeem the securities prior to a specified date. Preferred securities may also be substantially less liquid than other securities, including common stock. VALUATION RISK. The valuation of certain securities may carry more risk than that of common stock. Uncertainties in the conditions of the financial markets, unreliable reference data, lack of transparency and inconsistency of valuation models and processes may lead to inaccurate asset pricing. A fund may hold investments in sizes smaller than institutionally sized round lot positions Page 39
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) APRIL 30, 2023 (UNAUDITED) (sometimes referred to as odd lots). However, third-party pricing services generally provide evaluations on the basis of institutionally-sized round lots. If a fund sells certain of its investments in an odd lot transaction, the sale price may be less than the value at which such securities have been held by the fund. Odd lots often trade at lower prices than institutional round lots. There is no assurance that the fund will be able to sell a portfolio security at the price established by the pricing service, which could result in a loss to the fund. 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 17, 2023 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 17, 2022 through the Liquidity Committee's annual meeting held on March 23, 2023 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 any highly liquid investment minimum. As stated in the written report, during the review period, two funds breached the 15% limitation on illiquid investments for one day each, as a result of an unscheduled week-long closure of the stock exchange in Istanbul following devastating earthquakes in February, causing all Turkish equities to be re-classified as "illiquid" for one day. Each fund filed a Form N-RN on the day after the breach occurred, and one day later after the breach was cured. No fund with a highly liquid investment minimum breached that minimum during the reporting period. 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 40
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 South Wacker Drive Chicago, IL 60606 LEGAL COUNSEL Chapman and Cutler LLP 320 South Canal Street Chicago, IL 60606
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FIRST TRUST First Trust Exchange-Traded Fund IV -------------------------------------------------------------------------------- First Trust High Income Strategic Focus ETF (HISF) Semi-Annual Report For the Six Months Ended April 30, 2023
-------------------------------------------------------------------------------- TABLE OF CONTENTS -------------------------------------------------------------------------------- FIRST TRUST HIGH INCOME STRATEGIC FOCUS ETF (HISF) SEMI-ANNUAL REPORT APRIL 30, 2023 Shareholder Letter........................................................... 1 Fund Performance Overview.................................................... 2 Portfolio Management......................................................... 4 Understanding Your Fund Expenses............................................. 5 Portfolio of Investments..................................................... 6 Statement of Assets and Liabilities.......................................... 7 Statement of Operations...................................................... 8 Statements of Changes in Net Assets.......................................... 9 Financial Highlights......................................................... 10 Notes to Financial Statements................................................ 11 Additional Information....................................................... 17 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 High Income Strategic Focus 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 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.
-------------------------------------------------------------------------------- SHAREHOLDER LETTER -------------------------------------------------------------------------------- FIRST TRUST HIGH INCOME STRATEGIC FOCUS ETF (HISF) SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO APRIL 30, 2023 Dear Shareholders: First Trust is pleased to provide you with the semi-annual report for the First Trust High Income Strategic Focus ETF (the "Fund"), which contains detailed information about the Fund for the six months ended April 30, 2023. It pleases me to write that on May 5, 2023, the World Health Organization officially declared that the coronavirus ("COVID-19") pandemic no longer qualified as a global health emergency. While the virus officially no longer poses an immediate threat, its full impact on the world economy remains to be seen, in my opinion. Recall, if you will, those early days of the pandemic; companies sent workers home, consumers were afraid or unwilling to leave their homes, supply chains dried up, and grocery shelves were left bare. Hoping to provide relief to their constituents and to bolster economic activity, governments across the globe funneled trillions of dollars in stimulus directly into the hands of their citizens. Unfortunately, economist Milton Friedman's age-old economic adage "there's no such thing as a free lunch" still holds. As a result of the U.S. government stimulus, gross domestic product rebounded quickly, but so did inflation. As many investors are aware, the Federal Reserve (the "Fed") has been locked in a battle with stubbornly high inflation for several years now. Inflation, as measured by the trailing 12-month rate of change in the Consumer Price Index ("CPI"), surged from 1.4% on December 31, 2020, to 9.1% as of June 30, 2022. Since then, the trailing rate on the CPI has come down, but remains elevated. On April 30, 2023, the CPI stood at 4.9%, well above the Fed's goal of 2.0%. Surging prices have not been restricted to the U.S. Headline inflation rates in each of the countries that make up the so-called Group of Ten (G-10) stand above the targets set by their central banks, according to data from Bloomberg. From the Fed's perspective, monetary policy is the most efficient means to combat rising prices. From December 31, 2020 through May 3, 2023, the Fed increased the Federal Funds target rate (upper bound) a total of ten times, raising the rate from 0.25% to 5.25%. As mentioned, tighter monetary policy resulted in a decrease in the CPI, but there have been casualties in the Fed's battle with rising prices. The most recent banking turmoil is one example. Another is the spike in mortgage rates. According to Bankrate, the national average for a 30-year mortgage stood at just 2.87% on December 31, 2020. As of May 1, 2023, the average 30-year mortgage rate had surged to 6.88%. Not all the news is negative, however. Driven by a strong U.S. labor market, consumer spending remained robust in April 2023. Notably, American corporations added 253,000 jobs during the month, and the unemployment rate stood at a 53-year low. Bob Carey, Chief Market Strategist at First Trust, recently summed up the current situation, noting that "we're not out of the woods yet." That said, even the most difficult situations don't last forever. In my opinion, like the COVID-19 pandemic, inflation, and the tighter monetary policy it ushered in, will pass with time. 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
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) -------------------------------------------------------------------------------- FIRST TRUST HIGH INCOME STRATEGIC FOCUS ETF (HISF) The First Trust High Income Strategic Focus ETF's (the "Fund") primary investment objective is to seek risk-adjusted income. The Fund's secondary investment objective is capital appreciation. Under normal market conditions, the Fund seeks to achieve its investment objectives by investing in a portfolio of U.S.-listed exchange-traded funds ("Underlying ETFs") that is designed to follow the High Income Model (the "High Income Model") developed by the Fund's investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"). The Fund, through its investments in the Underlying ETFs comprising the High Income Model, seeks to provide investors with a diversified income stream by holding a blend of fixed income assets that are actively managed to seek levels of high income and total return. The High Income Model is principally composed of ETFs for which First Trust serves as investment advisor. Therefore, a significant portion of the ETFs in which the Fund invests are advised by First Trust. However, the Fund may also invest in ETFs other than First Trust ETFs. Shares of the Fund are listed on The Nasdaq Stock Market LLC under the ticker symbol "HISF." <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) 4/30/23 4/30/23 4/30/23 to 4/30/23 4/30/23 to 4/30/23 <S> <C> <C> <C> <C> <C> <C> FUND PERFORMANCE NAV 4.73% -0.83% 2.24% 2.75% 11.73% 26.68% Market Price 4.73% -0.83% 2.24% 2.75% 11.71% 26.70% INDEX PERFORMANCE Blended Index(1) 6.60% 0.07% 1.82% 2.11% 9.45% 19.95% Bloomberg U.S. Aggregate Bond Index 6.91% -0.43% 1.18% 1.37% 6.03% 12.62% Russell 3000(R) Index 7.30% 1.50% 10.60% 10.60% 65.50% 140.57% Prior Blended Index(2) 5.67% 3.32% 4.56% 3.75% 24.97% 37.83% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> On February 28, 2022, the Fund changed its principal investment strategies. Therefore, the Fund's performance and historical returns shown above are not necessarily indicative of the performance that the Fund, under its current strategy, would have generated. ----------------------------- (1) The Blended Index is comprised of the Bloomberg US Aggregate Bond Index (the "Agg") (70%) and the ICE BofA U.S. High Yield Constrained Index (30%). (2) The Prior 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 EM USD Aggregate Index and Bloomberg 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 Prior 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 Prior Blended Index for each period shown above. Page 2
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- 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. ------------------------------------------------------- % OF FUND ALLOCATION NET ASSETS ------------------------------------------------------- Exchange-Traded Funds 99.9% Net Other Assets and Liabilities 0.1 ------- Total 100.0% ======= <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT AUGUST 13, 2014 - APRIL 30, 2023 First Trust High Income Blended Bloomberg U.S. Russell 3000(R) Prior Blended Strategic Focus ETF Index Aggregate Bond Index Index Index <S> <C> <C> <C> <C> <C> 8/13/14 $10,000 $10,000 $10,000 $10,000 $10,000 10/31/14 10,177 10,053 10,080 10,371 10,129 4/30/15 10,330 10,246 10,288 10,863 10,191 10/31/15 9,989 10,133 10,280 10,837 9,735 4/30/16 10,436 10,406 10,571 10,844 10,006 10/31/16 10,856 10,755 10,731 11,297 10,446 4/30/17 11,275 10,878 10,659 12,859 10,981 10/31/17 11,442 11,112 10,827 14,006 11,058 4/30/18 11,340 10,959 10,625 14,537 11,029 10/31/18 11,303 10,982 10,605 14,929 11,093 4/30/19 12,100 11,591 11,187 16,379 11,766 10/31/19 12,502 12,146 11,826 16,942 11,977 4/30/20 11,156 12,279 12,401 16,208 10,915 10/31/20 11,604 12,785 12,558 18,662 11,270 4/30/21 13,166 12,952 12,367 24,462 13,434 10/31/21 13,499 13,141 12,498 26,854 13,849 4/30/22 12,775 11,987 11,314 23,699 13,341 10/31/22 12,096 11,253 10,534 22,420 13,044 4/30/23 12,668 11,996 11,262 24,057 13,784 </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 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
-------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT -------------------------------------------------------------------------------- FIRST TRUST HIGH INCOME STRATEGIC FOCUS ETF (HISF) SEMI-ANNUAL REPORT APRIL 30, 2023 (UNAUDITED) INVESTMENT ADVISOR First Trust Advisors L.P. ("First Trust" or the "Advisor") is the investment advisor to the First Trust High Income Strategic Focus ETF (the "Fund" or "HISF"). 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 DANIEL J. LINDQUIST, CHAIRMAN OF THE INVESTMENT COMMITTEE AND MANAGING DIRECTOR OF FIRST TRUST; DAVID G. MCGAREL, CHIEF INVESTMENT OFFICER, CHIEF OPERATING OFFICER AND MANAGING DIRECTOR OF FIRST TRUST; CHRIS A. PETERSON, CFA, SENIOR VICE PRESIDENT OF FIRST TRUST; WILLIAM HOUSEY, CFA, MANAGING DIRECTOR OF FIXED INCOME OF FIRST TRUST; AND STEVE COLLINS, CFA, SENIOR VICE PRESIDENT OF FIRST TRUST The portfolio managers are primarily and jointly responsible for the day-to-day management of the Fund. Daniel J. Lindquist, David G. McGarel and William Housey have served as part of the portfolio management team of the Fund since 2014. Chris A. Peterson has served as part of the portfolio management team of the Fund since 2016. Steve Collins has served as part of the portfolio management team of the Fund since 2021. Page 4
FIRST TRUST HIGH INCOME STRATEGIC FOCUS ETF (HISF) UNDERSTANDING YOUR FUND EXPENSES APRIL 30, 2023 (UNAUDITED) As a shareholder of First Trust High Income Strategic Focus 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, 2023. 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, 2022 APRIL 30, 2023 PERIOD (a) PERIOD (a) (b) ------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> FIRST TRUST HIGH INCOME STRATEGIC FOCUS ETF (HISF) Actual $1,000.00 $1,047.30 0.20% $1.02 Hypothetical (5% return before expenses) $1,000.00 $1,023.80 0.20% $1.00 </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, 2022 through April 30, 2023), multiplied by 181/365 (to reflect the six-month period). Page 5
FIRST TRUST HIGH INCOME STRATEGIC FOCUS ETF (HISF) PORTFOLIO OF INVESTMENTS APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> SHARES DESCRIPTION VALUE ---------------- -------------------------------------------------------------------------------------------- --------------- <S> <C> <C> EXCHANGE-TRADED FUNDS (a) -- 99.9% CAPITAL MARKETS -- 99.9% 67,258 First Trust Enhanced Short Maturity ETF..................................................... $ 4,003,196 119,820 First Trust Institutional Preferred Securities and Income ETF............................... 2,022,562 319,393 First Trust Limited Duration Investment Grade Corporate ETF................................. 6,020,558 125,375 First Trust Low Duration Opportunities ETF.................................................. 6,012,985 150,866 First Trust Tactical High Yield ETF......................................................... 6,013,519 355,693 First Trust TCW Opportunistic Fixed Income ETF.............................................. 16,084,437 --------------- TOTAL INVESTMENTS -- 99.9%.................................................................. 40,157,257 (Cost $42,436,443) NET OTHER ASSETS AND LIABILITIES -- 0.1%.................................................... 33,117 --------------- NET ASSETS -- 100.0%........................................................................ $ 40,190,374 =============== </TABLE> (a) Represents investments in affiliated funds. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of April 30, 2023 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 4/30/2023 PRICES INPUTS INPUTS --------------- --------------- --------------- --------------- <S> <C> <C> <C> <C> Exchange-Traded Funds*.......................... $ 40,157,257 $ 40,157,257 $ -- $ -- =============== =============== =============== =============== </TABLE> * See Portfolio of Investments for industry breakout. Page 6 See Notes to Financial Statements
FIRST TRUST HIGH INCOME STRATEGIC FOCUS ETF (HISF) STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> ASSETS: <S> <C> Investments, at value - Affiliated..................................... $ 40,157,257 Cash................................................................... 21,424 Receivables: Dividends........................................................... 14,393 Reclaims............................................................ 3,706 ---------------- Total Assets........................................................ 40,196,780 ---------------- LIABILITIES: Investment advisory fees payable....................................... 6,406 ---------------- Total Liabilities................................................... 6,406 ---------------- NET ASSETS............................................................. $ 40,190,374 ================ NET ASSETS CONSIST OF: Paid-in capital........................................................ $ 51,356,288 Par value.............................................................. 9,000 Accumulated distributable earnings (loss).............................. (11,174,914) ---------------- NET ASSETS............................................................. $ 40,190,374 ================ NET ASSET VALUE, per share............................................. $ 44.66 ================ Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share).......................................... 900,002 ================ Investments, at cost - Affiliated...................................... $ 42,436,443 ================ </TABLE> See Notes to Financial Statements Page 7
FIRST TRUST HIGH INCOME STRATEGIC FOCUS ETF (HISF) STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> INVESTMENT INCOME: <S> <C> Dividends - Affiliated................................................. $ 797,132 Dividends - Unaffiliated............................................... 32,533 ---------------- Total investment income............................................. 829,665 ---------------- EXPENSES: Investment advisory fees............................................... 38,335 ---------------- Total expenses...................................................... 38,335 ---------------- NET INVESTMENT INCOME (LOSS)........................................... 791,330 ---------------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments - Affiliated............................................ (605,218) Investments - Unaffiliated.......................................... (208,577) In-kind redemptions - Affiliated.................................... (45,162) In-kind redemptions - Unaffiliated.................................. (9,025) ---------------- Net realized gain (loss)............................................... (867,982) ---------------- Net change in unrealized appreciation (depreciation) on: Investments - Affiliated............................................ 1,582,793 Investments - Unaffiliated.......................................... 271,407 Foreign currency translation........................................ 2 ---------------- Net change in unrealized appreciation (depreciation)................... 1,854,202 ---------------- NET REALIZED AND UNREALIZED GAIN (LOSS)................................ 986,220 ---------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS..................................................... $ 1,777,550 ================ </TABLE> Page 8 See Notes to Financial Statements
FIRST TRUST HIGH INCOME STRATEGIC FOCUS ETF (HISF) STATEMENTS OF CHANGES IN NET ASSETS <TABLE> <CAPTION> SIX MONTHS ENDED YEAR 4/30/2023 ENDED (UNAUDITED) 10/31/2022 ---------------- ---------------- <S> <C> <C> OPERATIONS: Net investment income (loss)........................................... $ 791,330 $ 1,672,092 Net realized gain (loss)............................................... (867,982) (2,561,708) Net change in unrealized appreciation (depreciation)................... 1,854,202 (5,806,862) ---------------- ---------------- Net increase (decrease) in net assets resulting from operations........ 1,777,550 (6,696,478) ---------------- ---------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations.................................................. (784,527) (2,147,053) ---------------- ---------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold.............................................. 2,231,606 63,936,474 Cost of shares redeemed................................................ (2,196,095) (86,408,488) ---------------- ---------------- Net increase (decrease) in net assets resulting from shareholder transactions....................................... 35,511 (22,472,014) ---------------- ---------------- Total increase (decrease) in net assets................................ 1,028,534 (31,315,545) NET ASSETS: Beginning of period.................................................... 39,161,840 70,477,385 ---------------- ---------------- End of period.......................................................... $ 40,190,374 $ 39,161,840 ================ ================ CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period................................ 900,002 1,400,002 Shares sold............................................................ 50,000 1,300,000 Shares redeemed........................................................ (50,000) (1,800,000) ---------------- ---------------- Shares outstanding, end of period...................................... 900,002 900,002 ================ ================ </TABLE> See Notes to Financial Statements Page 9
FIRST TRUST HIGH INCOME STRATEGIC FOCUS ETF (HISF) FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD <TABLE> <CAPTION> SIX MONTHS ENDED YEAR ENDED OCTOBER 31, 4/30/2023 ------------------------------------------------------------------- (UNAUDITED) 2022 2021 2020 2019 2018 ----------- ----------- ----------- ----------- ----------- ----------- <S> <C> <C> <C> <C> <C> <C> Net asset value, beginning of period $ 43.51 $ 50.34 $ 44.98 $ 50.62 $ 47.72 $ 50.68 --------- --------- --------- --------- --------- --------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.91 0.99 1.47 1.46 1.63 1.69 Net realized and unrealized gain (loss) 1.14 (6.12) 5.80 (a) (5.07) 3.34 (2.26) --------- --------- --------- --------- --------- --------- Total from investment operations 2.05 (5.13) 7.27 (3.61) 4.97 (0.57) --------- --------- --------- --------- --------- --------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.90) (1.70) (1.91) (1.97) (2.07) (2.10) Return of capital -- -- -- (0.06) -- (0.29) --------- --------- --------- --------- --------- --------- Total distributions (0.90) (1.70) (1.91) (2.03) (2.07) (2.39) --------- --------- --------- --------- --------- --------- Net asset value, end of period $ 44.66 $ 43.51 $ 50.34 $ 44.98 $ 50.62 $ 47.72 ========= ========= ========= ========= ========= ========= TOTAL RETURN (b) 4.73% (10.38)% 16.33% (a) (7.19)% 10.60% (1.21)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 40,190 $ 39,162 $ 70,477 $ 60,719 $ 91,120 $ 83,504 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets (c) 0.20% (d) 0.46% 0.85% 0.85% 0.85% 0.86% (e) Ratio of net expenses to average net assets (c) 0.20% (d) 0.30% 0.42% 0.46% 0.50% 0.50% (e) Ratio of net investment income (loss) to average net assets 4.13% (d) 2.83% 2.94% 3.08% 3.21% 3.40% Portfolio turnover rate (f) 29% (g) 149% 101% 118% 91% 113% </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) 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. (c) 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. (d) Annualized. (e) 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. (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 variation in the portfolio turnover rate is due to the change in the Fund's principal investment strategies which was effective February 28, 2022. Page 10 See Notes to Financial Statements
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- FIRST TRUST HIGH INCOME STRATEGIC FOCUS ETF (HISF) APRIL 30, 2023 (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 fourteen funds that are offering shares. This report covers the First Trust High Income Strategic Focus ETF, which trades under the ticker "HISF" 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 seek risk-adjusted income. The Fund's secondary investment objective is capital appreciation. Under normal market conditions, the Fund seeks to achieve its investment objectives by investing in a portfolio of U.S.-listed exchange-traded funds ("Underlying ETFs") that is designed to follow the High Income Model (the "High Income Model") developed by the Fund's investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"). The Fund, through its investments in the Underlying ETFs comprising the High Income Model, seeks to provide investors with a diversified income stream by holding a blend of fixed income assets that are actively managed to seek levels of high income and total return. The High Income Model is principally composed of ETFs for which First Trust serves as investment advisor. Therefore, a significant portion of the ETFs in which the Fund invests are advised by First Trust. However, the Fund may also invest in ETFs other than First Trust ETFs. 2. SIGNIFICANT ACCOUNTING POLICIES The Fund is considered an investment company and follows accounting and reporting guidance under Financial Accounting Standards Board Accounting Standards Codification Topic 946, "Financial Services-Investment Companies." The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of the financial statements. The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. PORTFOLIO VALUATION The Fund's NAV is determined daily as of the close of regular trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV is determined as of that time. The Fund's NAV is calculated by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding. The Fund's investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent readily available market quotations such as last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Advisor's Pricing Committee in accordance with valuation procedures approved by the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act and rules thereunder. Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. All 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: 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 primary exchange for such securities. Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Advisor's Pricing Committee at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the Page 11
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST HIGH INCOME STRATEGIC FOCUS ETF (HISF) APRIL 30, 2023 (UNAUDITED) value of the security after the market has closed but before the calculation of the Fund's NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security's fair value. As a general principle, the current fair value of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities including, but not limited to, the following: 1) the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price; 2) the type of security; 3) the size of the holding; 4) the initial cost of the security; 5) transactions in comparable securities; 6) price quotes from dealers and/or third-party pricing services; 7) relationships among various securities; 8) information obtained by contacting the issuer, analysts, or the appropriate stock exchange; 9) an analysis of the issuer's financial statements; 10) the existence of merger proposals or tender offers that might affect the value of the security; and 11) other relevant factors. The Fund is subject to fair value accounting standards that define fair value, establish the framework for measuring fair value and provide a three-level hierarchy for fair valuation based upon the inputs to the valuation as of the measurement date. The three levels of the fair value hierarchy are as follows: 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, 2023, 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. C. FOREIGN CURRENCY The books and records of the Fund are maintained in U.S. dollars. Foreign currencies and other assets and liabilities are translated into U.S. dollars at the exchange rates prevailing at the end of the period. 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. D. AFFILIATED TRANSACTIONS The Fund invests in securities of affiliated funds. Dividend income, 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 12
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST HIGH INCOME STRATEGIC FOCUS ETF (HISF) APRIL 30, 2023 (UNAUDITED) Amounts related to these investments at April 30, 2023 and for the six months then ended are as follows: <TABLE> <CAPTION> CHANGE IN SHARES VALUE UNREALIZED REALIZED VALUE AT AT APPRECIATION GAIN AT DIVIDEND SECURITY NAME 4/30/2023 10/31/2022 PURCHASES SALES (DEPRECIATION) (LOSS) 4/30/2023 INCOME ---------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> <C> <C> First Trust Enhanced Short Maturity ETF 67,258 $ 3,934,721 $ 272,977 $ (219,045) $ 14,432 $ 111 $ 4,003,196 $ 75,959 First Trust Institutional Preferred Securities and Income ETF 119,820 1,975,072 252,669 (167,486) (14,864) (22,829) 2,022,562 54,543 First Trust Limited Duration Investment Grade Corporate ETF 319,393 -- 6,874,764 (896,219) 38,682 3,331 6,020,558 86,987 First Trust Low Duration Opportunities ETF 125,375 9,708,679 334,389 (4,217,843) 451,487 (263,727) 6,012,985 124,586 First Trust Tactical High Yield ETF 150,866 8,077,865 335,743 (2,429,177) 395,943 (366,855) 6,013,519 204,395 First Trust TCW Opportunistic Fixed Income ETF 355,693 10,532,263 5,455,795 (600,323) 697,113 (411) 16,084,437 250,662 ------------ ----------- ----------- -------------- --------- ----------- ---------- Total Investments in Affiliates $ 34,228,600 $13,526,337 $(8,530,093) $ 1,582,793 $(650,380) $40,157,257 $ 797,132 ============ =========== =========== ============== ========= =========== ========== </TABLE> E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment income, if any, are declared and paid monthly by the Fund, or as the Board of Trustees may determine from time to time. Distributions of net realized capital gains earned by the Fund, if any, are distributed at least annually. The Fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes. Distributions from net investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on 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, 2022 was as follows: Distributions paid from: Ordinary income................................. $ 2,147,053 Capital gains................................... -- Return of capital............................... -- As of October 31, 2022, the components of distributable earnings on a tax basis for the Fund were as follows: Undistributed ordinary income................... $ -- Accumulated capital and other gain (loss)....... (8,004,465) Net unrealized appreciation (depreciation)...... (4,163,472) F. INCOME TAXES The Fund intends to continue to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, which includes distributing substantially all of its net investment income and net realized gains to shareholders. Accordingly, no provision has been made for federal and state income taxes. However, due to the timing and amount of distributions, the Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of the Fund's taxable income exceeds the distributions from such taxable income for the calendar year. Page 13
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST HIGH INCOME STRATEGIC FOCUS ETF (HISF) APRIL 30, 2023 (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 2019, 2020, 2021, and 2022 remain open to federal and state audit. As of April 30, 2023, 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, 2022, the Fund had non-expiring capital loss carryforwards available for federal income tax purposes of $8,004,465. 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, 2022, the Fund had no net late year ordinary or capital losses. As of April 30, 2023, the aggregate cost, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation/(depreciation) on investments (including short positions and derivatives, if any) for federal income tax purposes were as follows: <TABLE> <CAPTION> Gross Gross Net Unrealized Unrealized Unrealized Appreciation Tax Cost Appreciation (Depreciation) (Depreciation) --------------- --------------- --------------- --------------- <S> <C> <C> <C> <C> $ 42,436,443 $ 99,111 $ (2,378,297) $ (2,279,186) </TABLE> G. EXPENSES Expenses, other than the investment advisory fee and other excluded expenses, are paid by the Advisor (see Note 3). 3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS First Trust, the investment advisor to the Fund, is a limited partnership with one limited partner, Grace Partners of DuPage L.P., and one general partner, The Charger Corporation. The Charger Corporation is an Illinois corporation controlled by James A. Bowen, Chief Executive Officer of First Trust. First Trust is responsible for the selection and ongoing monitoring of the securities in the Fund's portfolio, managing the Fund's business affairs and providing certain administrative services necessary for the management of the Fund. Pursuant to the Investment Management Agreement between the Trust and the Advisor, First Trust manages the investment of the Fund's assets and is responsible for the Fund's expenses, including the cost of transfer agency, custody, fund administration, legal, audit and other services, but excluding fee payments under the Investment Management Agreement, interest, taxes, acquired fund fees and expenses, if any, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses. Effective November 1, 2022, the annual unitary management fee payable by the Fund to First Trust for these services will be reduced at a certain levels of the Fund's net assets ("breakpoints") and calculated pursuant to the schedule below: <TABLE> <CAPTION> Breakpoints ------------------------------------------------------------------------- <S> <C> Fund net assets up to and including $2.5 billion 0.200% Fund net assets greater than $2.5 billion up to and including $5 billion 0.195% Fund net assets greater than $5 billion up to and including $7.5 billion 0.190% Fund net assets greater than $7.5 billion up to and including $10 billion 0.185% Fund net assets greater than $10 billion up to and including $15 billion 0.180% Fund net assets greater than $15 billion 0.170% </TABLE> Prior to November 1, 2022 the Fund paid First Trust an annual unitary management fee equal to 0.20% of its average daily net assets. In addition, the Fund incurs acquired fund fees and expenses. The total of the unitary management fee and acquired fund fees and expenses represents the Fund's total annual operating expenses. Page 14
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST HIGH INCOME STRATEGIC FOCUS ETF (HISF) APRIL 30, 2023 (UNAUDITED) Pursuant to contractual agreement, First Trust has agreed to waive fees and/or reimburse Fund expenses to the extent that the operating expenses of the Fund (excluding interest expense, brokerage commissions and other trading expenses, taxes and extraordinary expenses but including acquired fund fees and expenses) exceed 0.87% of its average daily net assets (the "Expense Cap") at least through March 1, 2024. Expenses reimbursed and fees waived under such agreement are not subject to recovery by First Trust. 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 target outcome fund or an index fund. Additionally, the Lead Independent Trustee and the Chairs 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 Chairs 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 For the six months ended April 30, 2023, the cost of purchases and proceeds from sales of investments, excluding short-term investments and in-kind transactions, were $11,296,559 and $11,284,141, respectively. For the six months ended April 30, 2023, the cost of in-kind purchases and proceeds from in-kind sales were $2,229,779 and $2,193,274, respectively. 5. CREATIONS, REDEMPTIONS AND TRANSACTION FEES The Fund generally issues and redeems its shares in primary market transactions through a creation and redemption mechanism and does not sell or redeem individual shares. Instead, financial entities known as "Authorized Participants" have contractual arrangements with the Fund or one of the Fund's service providers to purchase and redeem Fund shares directly with the Fund in 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 15
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST HIGH INCOME STRATEGIC FOCUS ETF (HISF) APRIL 30, 2023 (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. 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, 2024. 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 was the following subsequent event: On May 23, 2023, the Advisor's Pricing Committee approved changes to the Advisor's Valuation Procedures for the First Trust Funds, including clarifications to certain pricing methodologies. These changes will be reflected in future reports' Notes to Financial Statements. Page 16
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION -------------------------------------------------------------------------------- FIRST TRUST HIGH INCOME STRATEGIC FOCUS ETF (HISF) APRIL 30, 2023 (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 significant 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 more broadly diversified. 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. DEFINED OUTCOME FUNDS RISK. To the extent a fund's investment strategy is designed to deliver returns tied to the price performance of an underlying ETF, an investor may not realize the returns the fund seeks to achieve if that investor does not hold shares for the entire target outcome period. In the event an investor purchases shares after the first day of the target outcome period or sells shares prior to the end of the target outcome period, the buffer that the fund seeks to provide against a decline in the value of the underlying ETF may not be available, the enhanced returns that the fund seeks to provide (if any) may not be available and the investor may not participate in a gain in the value of the underlying ETF up to the cap for the investor's investment period. Additionally, the fund will not participate in gains of the underlying ETF above the cap and a shareholder may lose their entire investment. If the fund seeks enhanced returns, there are certain time periods when the value of the fund may fall faster than the value of the underlying ETF, and it is very unlikely that, on any given day during which the underlying ETF share price increases in value, the fund's share price will increase at the same rate as the enhanced returns sought by the fund, which is designed for an entire target outcome period. Trading flexible exchange options involves risks different from, or possibly greater than, the risks associated with investing directly in securities, such as less liquidity and correlation and valuation risks. A fund may experience substantial downside from specific flexible exchange option positions and certain positions may expire worthless. Page 17
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST HIGH INCOME STRATEGIC FOCUS ETF (HISF) APRIL 30, 2023 (UNAUDITED) 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 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 OR MODEL CONSTITUENT RISK. Certain funds may be a constituent of one or more indices or ETF models. 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 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. In addition, index rebalances may potentially result in increased trading activity in a fund's shares. 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. Page 18
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST HIGH INCOME STRATEGIC FOCUS ETF (HISF) APRIL 30, 2023 (UNAUDITED) 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 has ceased making LIBOR available as a reference rate over a phase-out period that began December 31, 2021. There is no assurance that any alternative reference rate, including the Secured Overnight Financing Rate ("SOFR") will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the same volume or liquidity. 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. Market risk is the risk that a particular security, or shares of a fund in general, may fall in value. 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. In February 2022, Russia invaded Ukraine which has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain fund investments as well as fund performance. The COVID-19 global pandemic and the ensuing policies enacted by governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets. While the U.S. has resumed "reasonably" normal business activity, many countries continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective against emerging variants of the disease. These events also adversely affect the prices and liquidity of a Fund's portfolio securities or other instruments and could result in disruptions in the trading markets. Any of such circumstances could have a materially negative impact on the value of a Fund's shares and result in increased market volatility. During any such events, a Fund's shares may trade at increased premiums or discounts to their net asset value and the bid/ask spread on a Fund's shares may widen. 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; capital controls; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; the imposition of sanctions by foreign governments; 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. Each fund relies on third-parties for a range of services, including custody. Any delay or failure relating to engaging or maintaining such service providers may affect a fund's ability to meet its investment objective. Although the funds and the funds' investment 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. PREFERRED SECURITIES RISK. Preferred securities combine some of the characteristics of both common stocks and bonds. Preferred securities are typically subordinated to bonds and other debt securities in a company's capital structure in terms of priority to corporate income, subjecting them to greater credit risk than those debt securities. Generally, holders of preferred voting securities have no Page 19
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST HIGH INCOME STRATEGIC FOCUS ETF (HISF) APRIL 30, 2023 (UNAUDITED) rights with respect to the issuing company unless preferred dividends have been in arrears for a specified number of periods, at which time the preferred security holders may obtain limited rights. In certain circumstances, an issuer of preferred securities may defer payment on the securities and, in some cases, redeem the securities prior to a specified date. Preferred securities may also be substantially less liquid than other securities, including common stock. VALUATION RISK. The valuation of certain securities may carry more risk than that of common stock. Uncertainties in the conditions of the financial markets, unreliable reference data, lack of transparency and inconsistency of valuation models and processes may lead to inaccurate asset pricing. A fund may hold investments in sizes smaller than institutionally sized round lot positions (sometimes referred to as odd lots). However, third-party pricing services generally provide evaluations on the basis of institutionally-sized round lots. If a fund sells certain of its investments in an odd lot transaction, the sale price may be less than the value at which such securities have been held by the fund. Odd lots often trade at lower prices than institutional round lots. There is no assurance that the fund will be able to sell a portfolio security at the price established by the pricing service, which could result in a loss to the fund. 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 17, 2023 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 17, 2022 through the Liquidity Committee's annual meeting held on March 23, 2023 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 any highly liquid investment minimum. As stated in the written report, during the review period, two funds breached the 15% limitation on illiquid investments for one day each, as a result of an unscheduled week-long closure of the stock exchange in Istanbul following devastating earthquakes in February, causing all Turkish equities to be re-classified as "illiquid" for one day. Each fund filed a Form N-RN on the day after the breach occurred, and one day later after the breach was cured. No fund with a highly liquid investment minimum breached that minimum during the reporting period. 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 20
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 South Wacker Drive Chicago, IL 60606 LEGAL COUNSEL Chapman and Cutler LLP 320 South Canal Street Chicago, IL 60606
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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, 2023
-------------------------------------------------------------------------------- TABLE OF CONTENTS -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) SEMI-ANNUAL REPORT APRIL 30, 2023 Shareholder Letter........................................................... 1 Fund Performance Overview.................................................... 2 Portfolio Management ........................................................ 5 Understanding Your Fund Expenses............................................. 6 Portfolio of Investments..................................................... 7 Statement of Assets and Liabilities.......................................... 37 Statement of Operations...................................................... 38 Statements of Changes in Net Assets.......................................... 39 Financial Highlights......................................................... 40 Notes to Financial Statements................................................ 41 Additional Information....................................................... 51 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.
-------------------------------------------------------------------------------- SHAREHOLDER LETTER -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO APRIL 30, 2023 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, 2023. It pleases me to write that on May 5, 2023, the World Health Organization officially declared that the coronavirus ("COVID-19") pandemic no longer qualified as a global health emergency. While the virus officially no longer poses an immediate threat, its full impact on the world economy remains to be seen, in my opinion. Recall, if you will, those early days of the pandemic; companies sent workers home, consumers were afraid or unwilling to leave their homes, supply chains dried up, and grocery shelves were left bare. Hoping to provide relief to their constituents and to bolster economic activity, governments across the globe funneled trillions of dollars in stimulus directly into the hands of their citizens. Unfortunately, economist Milton Friedman's age-old economic adage "there's no such thing as a free lunch" still holds. As a result of the U.S. government stimulus, gross domestic product rebounded quickly, but so did inflation. As many investors are aware, the Federal Reserve (the "Fed") has been locked in a battle with stubbornly high inflation for several years now. Inflation, as measured by the trailing 12-month rate of change in the Consumer Price Index ("CPI"), surged from 1.4% on December 31, 2020, to 9.1% as of June 30, 2022. Since then, the trailing rate on the CPI has come down, but remains elevated. On April 30, 2023, the CPI stood at 4.9%, well above the Fed's goal of 2.0%. Surging prices have not been restricted to the U.S. Headline inflation rates in each of the countries that make up the so-called Group of Ten (G-10) stand above the targets set by their central banks, according to data from Bloomberg. From the Fed's perspective, monetary policy is the most efficient means to combat rising prices. From December 31, 2020 through May 3, 2023, the Fed increased the Federal Funds target rate (upper bound) a total of ten times, raising the rate from 0.25% to 5.25%. As mentioned, tighter monetary policy resulted in a decrease in the CPI, but there have been casualties in the Fed's battle with rising prices. The most recent banking turmoil is one example. Another is the spike in mortgage rates. According to Bankrate, the national average for a 30-year mortgage stood at just 2.87% on December 31, 2020. As of May 1, 2023, the average 30-year mortgage rate had surged to 6.88%. Not all the news is negative, however. Driven by a strong U.S. labor market, consumer spending remained robust in April 2023. Notably, American corporations added 253,000 jobs during the month, and the unemployment rate stood at a 53-year low. Bob Carey, Chief Market Strategist at First Trust, recently summed up the current situation, noting that "we're not out of the woods yet." That said, even the most difficult situations don't last forever. In my opinion, like the COVID-19 pandemic, inflation, and the tighter monetary policy it ushered in, will pass with time. 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
-------------------------------------------------------------------------------- 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, its agencies and instrumentalities, or U.S. government-sponsored entities (collectively, "Government Entities") 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 Government Entities. 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) 4/30/23 4/30/23 4/30/23 to 4/30/23 4/30/23 to 4/30/23 <S> <C> <C> <C> <C> <C> <C> FUND PERFORMANCE NAV 4.11% 1.34% 1.17% 2.14% 5.99% 19.71% Market Price 4.01% 1.09% 1.09% 2.10% 5.58% 19.33% INDEX PERFORMANCE ICE BofA 1-5 Year US Treasury & Agency Index 3.39% 0.87% 1.24% 0.97% 6.37% 8.55% ------------------------------------------------------------------------------------------------------------------------------------ </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 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
-------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) ----------------------------------------------------------- % OF NET FUND ALLOCATION ASSETS ----------------------------------------------------------- U.S. Government Agency Mortgage- Backed Securities 80.8% Mortgage-Backed Securities 14.4 U.S. Government Bonds and Notes 6.1 Asset-Backed Securities 3.2 Exchange-Traded Funds 0.0* U.S. Treasury Bills 1.3 Purchased Options 0.0* U.S. Government Agency Mortgage- Backed Securities Sold Short (2.9) Written Options (0.3) Net Other Assets and Liabilities(1) (2.6) ------- Total 100.0% ======= ----------------------------------------------------------- % OF TOTAL LONG FIXED-INCOME INVESTMENTS, CASH CREDIT QUALITY(3) & CASH EQUIVALENTS ----------------------------------------------------------- Government and Agency 74.4% AAA 2.8 AA+ 0.2 AA 0.3 AA- 0.2 A+ 0.0* A 0.1 BBB+ 0.2 BBB 0.1 BBB- 0.3 BB+ 0.2 B- 0.0* Not Rated 18.7 Cash and Cash Equivalents 2.5 ------- Total 100.0% ======= * Amount is less than 0.1%. ----------------------------------------------------------- % OF LONG-TERM TOP TEN HOLDINGS INVESTMENTS(2) ----------------------------------------------------------- Federal National Mortgage Association, Pool TBA, 5.00%, 6/15/38 2.7% Federal National Mortgage Association, Pool TBA, 3.00%, 6/15/53 2.1 Federal National Mortgage Association, Pool FM3003, 4.00%, 5/1/49 2.0 Federal National Mortgage Association, Pool TBA, 2.50%, 6/15/53 2.0 Federal National Mortgage Association, Pool FM2972, 4.00%, 12/1/44 1.7 U.S. Treasury Note, 2.88%, 11/30/23 1.5 U.S. Treasury Note, 4.00%, 2/15/26 1.4 U.S. Treasury Note, 2.75%, 11/15/23 1.3 Federal National Mortgage Association, Pool FS2044, 4.50%, 7/1/44 1.0 Federal National Mortgage Association, Series 2023-M1, Class 2A1, 4.05%, 12/25/37 1.0 ------- Total 16.7% ======= ----------------------------------------------------------- WEIGHTED AVERAGE EFFECTIVE NET DURATION ----------------------------------------------------------- April 30, 2023 2.12 Years High - February 28, 2023 2.46 Years Low - November 30, 2022 1.81 Years ----------------------------- (1) Includes variation margin on futures contracts. (2) Percentages are based on the long positions only. Money market funds and short positions are excluded. (3) The ratings are by S&P Global Ratings. A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO), of the creditworthiness of an issuer with respect to debt obligations. Ratings are measured highest to lowest on a scale that generally ranges from AAA to D for long-term ratings and A-1+ to C for short-term ratings. Investment grade is defined as those issuers that have a long-term credit rating of BBB- or higher or a short-term credit rating of A-3 or higher. The credit ratings shown relate to the credit worthiness of the issuers of the underlying securities in the Fund, and not to the Fund or its shares. U.S. Treasury and U.S. Agency mortgage-backed securities appear under "Government and Agency." Credit ratings are subject to change. Page 3
-------------------------------------------------------------------------------- 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, 2023 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 10/31/19 119,23 109867 4/30/20 11,990 11,290 10/31/20 12,101 11,314 4/30/21 12,146 11,290 10/31/21 12,099 11,232 4/30/22 11,813 10,762 10/31/22 11,499 10,499 4/30/23 11,971 10,855 </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. Performance in securitized product investment strategies can be impacted from the benefits of purchasing odd lot positions. The impact of these investments can be particularly meaningful when funds have limited assets under management and may not be a sustainable source of performance as a fund grows in size. 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
-------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) SEMI-ANNUAL REPORT APRIL 30, 2023 (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 JAMES SNYDER - SENIOR VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER JEREMIAH CHARLES - SENIOR VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER The portfolio managers are primarily and jointly responsible for the day-to-day management of the Fund. Each portfolio manager has served as part of the portfolio management team of the Fund since 2014. Page 5
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) UNDERSTANDING YOUR FUND EXPENSES APRIL 30, 2023 (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, 2023. 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, 2022 APRIL 30, 2023 PERIOD (a) PERIOD (a) (b) ---------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) Actual $1,000.00 $1,041.10 0.64% $3.24 Hypothetical (5% return before expenses) $1,000.00 $1,021.62 0.64% $3.21 </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, 2022 through April 30, 2023), multiplied by 181/365 (to reflect the six-month period). Page 6
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------ ------------ ---------------- <S> <C> <C> <C> <C> U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 80.8% COLLATERALIZED MORTGAGE OBLIGATIONS -- 31.7% Federal Home Loan Mortgage Corporation $ 271 Series 1993-1552, Class I, 10 Yr. Constant Maturity Treasury Rate - 0.65% (a).......................................... 2.81% 08/15/23 $ 270 3,364 Series 1993-1579, Class PM................................... 6.70% 09/15/23 3,357 5,910 Series 1993-1630, Class PK................................... 6.00% 11/15/23 5,898 18,170 Series 1994-1710, Class G, 1 Mo. LIBOR + 1.50% (a)........... 6.45% 04/15/24 18,251 852 Series 1998-2089, Class PJ, IO............................... 7.00% 10/15/28 67 3,252 Series 1998-2102, Class Z.................................... 6.00% 12/15/28 3,314 3,884 Series 2002-2405, Class BF................................... 7.00% 03/25/24 3,867 150,747 Series 2002-2410, Class OG................................... 6.38% 02/15/32 158,486 78,598 Series 2002-2427, Class GE................................... 6.00% 03/15/32 81,708 110,070 Series 2002-2437, Class SA, IO, 1 Mo. LIBOR (x) -1 + 7.90% (b)................................................. 2.95% 01/15/29 5,502 148,992 Series 2003-2557, Class HL................................... 5.30% 01/15/33 151,702 91,959 Series 2003-2564, Class AC................................... 5.50% 02/15/33 94,307 229,202 Series 2003-2574, Class PE................................... 5.50% 02/15/33 235,498 96,608 Series 2003-2577, Class LI, IO............................... 5.50% 02/15/33 12,077 789,000 Series 2003-2581, Class LL................................... 5.25% 03/15/33 809,538 21,006 Series 2003-2597, Class AE................................... 5.50% 04/15/33 21,056 1,085,000 Series 2003-2613, Class LL................................... 5.00% 05/15/33 1,097,373 269,017 Series 2003-2626, Class ZW................................... 5.00% 06/15/33 239,387 586,458 Series 2003-2626, Class ZX................................... 5.00% 06/15/33 549,055 360,182 Series 2004-2771, Class NL................................... 6.00% 03/15/34 376,556 266,204 Series 2004-2793, Class PE................................... 5.00% 05/15/34 269,678 659,954 Series 2004-2891, Class ZA................................... 6.50% 11/15/34 750,262 245,569 Series 2004-2907, Class DZ................................... 4.00% 12/15/34 236,406 785,000 Series 2005-2973, Class GE................................... 5.50% 05/15/35 821,626 99,282 Series 2005-3031, Class BI, IO, 1 Mo. LIBOR (x) -1 + 6.69% (b)................................................. 1.74% 08/15/35 9,487 2,027,796 Series 2005-3054, Class ZW................................... 6.00% 10/15/35 2,064,939 23,405 Series 2005-3074, Class ZH................................... 5.50% 11/15/35 24,920 172,372 Series 2006-243, Class 11, IO, STRIPS (c).................... 7.00% 08/15/36 27,102 72,097 Series 2006-3117, Class ZU................................... 6.00% 02/15/36 82,177 21,162 Series 2006-3150, Class DZ................................... 5.50% 05/15/36 21,824 2,945,887 Series 2006-3196, Class ZK................................... 6.50% 04/15/32 3,225,574 27,882 Series 2007-3274, Class B.................................... 6.00% 02/15/37 28,226 174,240 Series 2007-3322, Class NF, 1 Mo. LIBOR (x) 2,566.67 - 16,683.33%, 0.00% Floor (a)............................... 0.00% 05/15/37 155,410 33,124 Series 2007-3340, Class PF, 1 Mo. LIBOR + 0.30% (a).......... 5.25% 07/15/37 32,582 67,131 Series 2007-3360, Class CB................................... 5.50% 08/15/37 68,780 63,242 Series 2007-3380, Class FS, 1 Mo. LIBOR + 0.35% (a).......... 5.30% 11/15/36 60,629 150,931 Series 2008-3406, Class B.................................... 6.00% 01/15/38 158,526 95,618 Series 2008-3413, Class B.................................... 5.50% 04/15/37 98,164 169,084 Series 2008-3420, Class AZ................................... 5.50% 02/15/38 172,405 148,780 Series 2008-3448, Class SA, IO, 1 Mo. LIBOR (x) -1 + 6.05% (b)................................................. 1.10% 05/15/38 599 1,299,058 Series 2009-3542, Class ZP................................... 5.00% 06/15/39 1,311,743 177,000 Series 2009-3550, Class LL................................... 4.50% 07/15/39 179,156 791,063 Series 2009-3563, Class ZP................................... 5.00% 08/15/39 812,125 1,174,476 Series 2009-3572, Class JS, IO, 1 Mo. LIBOR (x) -1 + 6.80% (b)................................................. 1.85% 09/15/39 78,560 35,299 Series 2009-3585, Class QZ................................... 5.00% 08/15/39 32,072 103,163 Series 2009-3587, Class FX, 1 Mo. LIBOR + 0.00% (a).......... 4.95% 12/15/37 95,112 </TABLE> See Notes to Financial Statements Page 7
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (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) $ 382,651 Series 2009-3593, Class F, 1 Mo. LIBOR + 0.50% (a)........... 3.79% 03/15/36 $ 374,457 1,079,548 Series 2009-3605, Class NC................................... 5.50% 06/15/37 1,127,363 500,000 Series 2010-3622, Class PB................................... 5.00% 01/15/40 508,130 107,000 Series 2010-3645, Class WD................................... 4.50% 02/15/40 108,265 501,165 Series 2010-3667, Class PL................................... 5.00% 05/15/40 504,367 50,823 Series 2010-3699, Class FD, 1 Mo. LIBOR + 0.60% (a).......... 5.55% 07/15/40 50,687 321,819 Series 2010-3704, Class ED................................... 4.00% 12/15/36 316,744 400,000 Series 2010-3714, Class PB................................... 4.75% 08/15/40 411,807 253,129 Series 2010-3735, Class IK, IO............................... 3.50% 10/15/25 6,575 60,173 Series 2010-3735, Class JI, IO............................... 4.50% 10/15/30 5,548 193,352 Series 2010-3740, Class SC, IO, 1 Mo. LIBOR (x) -1 + 6.00% (b)................................................. 1.05% 10/15/40 20,507 156,612 Series 2010-3770, Class GZ................................... 4.50% 10/15/40 145,671 4,805 Series 2011-3795, Class ED................................... 3.00% 10/15/39 4,783 600,000 Series 2011-3796, Class PB................................... 5.00% 01/15/41 604,104 172,551 Series 2011-3819, Class ZQ................................... 6.00% 04/15/36 181,646 300,000 Series 2011-3820, Class NC................................... 4.50% 03/15/41 302,231 103,547 Series 2011-3842, Class BS, 1 Mo. LIBOR (x) -5 + 22.75% (b)................................................ 0.91% 04/15/41 98,203 1,387,000 Series 2011-3895, Class PW................................... 4.50% 07/15/41 1,401,861 1,921,054 Series 2011-3925, Class ZD................................... 4.50% 09/15/41 1,904,075 8,447,053 Series 2011-3954, Class GS, IO, 1 Mo. LIBOR (x) -1 + 6.00% (b)................................................. 1.05% 11/15/41 910,184 310,759 Series 2012-267, Class S5, IO, STRIPS, 1 Mo. LIBOR (x) -1 + 6.00% (b)............................................... 1.05% 08/15/42 25,864 6,557,657 Series 2012-276, Class S5, IO, STRIPS, 1 Mo. LIBOR (x) -1 + 6.00% (b)............................................... 1.05% 09/15/42 729,511 380,001 Series 2012-3999, Class WA (c)............................... 5.55% 08/15/40 391,483 1,878,000 Series 2012-4000, Class PY................................... 4.50% 02/15/42 1,848,290 30,149 Series 2012-4012, Class GC................................... 3.50% 06/15/40 29,433 22,579 Series 2012-4015, Class KB................................... 1.75% 05/15/41 20,666 221,173 Series 2012-4021, Class IP, IO............................... 3.00% 03/15/27 8,171 1,176,988 Series 2012-4026, Class GZ................................... 4.50% 04/15/42 1,146,005 370,157 Series 2012-4030, Class IL, IO............................... 3.50% 04/15/27 13,691 706,718 Series 2012-4054, Class AI, IO............................... 3.00% 04/15/27 22,867 686,881 Series 2012-4090, Class YZ................................... 4.50% 08/15/42 634,093 24,116 Series 2012-4097, Class ES, IO, 1 Mo. LIBOR (x) -1 + 6.10% (b)................................................. 1.15% 08/15/42 2,790 2,395,051 Series 2012-4097, Class SA, IO, 1 Mo. LIBOR (x) -1 + 6.05% (b)................................................. 1.10% 08/15/42 283,522 2,447,000 Series 2012-4098, Class PE................................... 4.00% 08/15/42 2,199,296 212,755 Series 2012-4103, Class HI, IO............................... 3.00% 09/15/27 9,001 29,113 Series 2012-4116, Class AS, IO, 1 Mo. LIBOR (x) -1 + 6.15% (b)................................................. 1.20% 10/15/42 3,512 769,136 Series 2012-4121, Class HI, IO............................... 3.50% 10/15/27 33,343 1,145,316 Series 2012-4132, Class AI, IO............................... 4.00% 10/15/42 184,545 281,825 Series 2012-4136, Class TU, IO, 1 Mo. LIBOR (x) -22.50 + 139.50%, 4.50% Cap (b).................................... 4.50% 08/15/42 47,241 271,275 Series 2012-4145, Class YI, IO............................... 3.00% 12/15/27 11,580 212,005 Series 2013-299, Class S1, IO, STRIPS, 1 Mo. LIBOR (x) -1 + 6.00% (b)............................................... 1.05% 01/15/43 22,071 235,646 Series 2013-303, Class C2, IO, STRIPS........................ 3.50% 01/15/28 10,995 </TABLE> Page 8 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------ ------------ ---------------- <S> <C> <C> <C> <C> U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED) COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED) Federal Home Loan Mortgage Corporation (Continued) $ 4,950,236 Series 2013-303, Class C12, IO, STRIPS....................... 4.00% 12/15/32 $ 482,856 158,849 Series 2013-304, Class C37, IO, STRIPS....................... 3.50% 12/15/27 6,273 689,416 Series 2013-304, Class C40, IO, STRIPS....................... 3.50% 09/15/26 23,295 755,105 Series 2013-4151, Class DI, IO............................... 3.50% 11/15/31 23,993 2,140,799 Series 2013-4154, Class IB, IO............................... 3.50% 01/15/28 96,553 7,421,472 Series 2013-4170, Class CO, PO............................... (d) 11/15/32 6,282,418 905,000 Series 2013-4176, Class HE................................... 4.00% 03/15/43 879,548 732,650 Series 2013-4177, Class GL................................... 3.00% 03/15/33 682,285 2,732,410 Series 2013-4193, Class AI, IO............................... 3.00% 04/15/28 133,386 826,035 Series 2013-4193, Class PB................................... 4.00% 04/15/43 769,622 14,142,200 Series 2013-4199, Class BZ................................... 3.50% 05/15/43 13,072,375 1,205,693 Series 2013-4203, Class US, 1 Mo. LIBOR (x) -1.50 + 6.00% (b)................................................. 0.19% 05/15/33 881,592 500,000 Series 2013-4211, Class PB................................... 3.00% 05/15/43 437,972 14,146,326 Series 2013-4218, Class ZK................................... 2.50% 02/15/43 11,386,706 5,388,000 Series 2013-4224, Class ME................................... 4.00% 07/15/43 5,140,820 11,838 Series 2013-4226, Class NS, 1 Mo. LIBOR (x) -3 + 10.50% (b)................................................ 1.12% 01/15/43 8,723 1,450,000 Series 2013-4247, Class AY................................... 4.50% 09/15/43 1,456,385 168,825 Series 2013-4265, Class IB, IO............................... 4.50% 12/15/24 3,256 2,609,067 Series 2014-4316, Class XZ................................... 4.50% 03/15/44 2,596,894 8,653,625 Series 2014-4329, Class VZ................................... 4.00% 04/15/44 8,344,560 2,332,270 Series 2014-4387, Class IE, IO............................... 2.50% 11/15/28 89,594 13,072,723 Series 2015-4499, Class CZ................................... 3.50% 08/15/45 11,509,620 465,907 Series 2015-4512, Class W (c) (e)............................ 5.38% 05/15/38 476,506 74,038 Series 2015-4520, Class AI, IO............................... 3.50% 10/15/35 7,578 100,894 Series 2015-4522, Class JZ................................... 2.00% 01/15/45 99,020 285,068 Series 2016-4546, Class PZ................................... 4.00% 12/15/45 235,893 482,549 Series 2016-4546, Class ZT................................... 4.00% 01/15/46 398,155 5,550,263 Series 2016-4559, Class LI, IO............................... 2.50% 03/15/31 343,803 148,122 Series 2016-4568, Class MZ................................... 4.00% 04/15/46 117,593 10,373,324 Series 2016-4570, Class ST, IO, 1 Mo. LIBOR (x) -1 + 6.00% (b)................................................. 1.05% 04/15/46 1,218,629 3,848,304 Series 2016-4572, Class LI, IO............................... 4.00% 08/15/45 580,518 19,067,898 Series 2016-4585, Class DS, IO, 1 Mo. LIBOR (x) -1 + 6.00% (b)................................................. 1.05% 05/15/46 2,167,110 7,259,730 Series 2016-4587, Class ZH................................... 4.00% 03/15/44 6,897,219 1,148,362 Series 2016-4591, Class GI, IO............................... 4.00% 12/15/44 156,179 771,702 Series 2016-4600, Class WT................................... 3.50% 07/15/36 720,093 136,619 Series 2016-4605, Class KS, 1 Mo. LIBOR (x) -1.57 + 4.71%, 0.00% Floor (b).................................... 0.00% 08/15/43 94,056 193,023 Series 2016-4609, Class YI, IO............................... 4.00% 04/15/54 9,266 813,028 Series 2016-4615, Class GT, 1 Mo. LIBOR (x) -4 + 16.00%, 4.00% Cap (b)............................................. 0.51% 10/15/42 583,320 10,302,417 Series 2017-4660, Class PO, PO............................... (d) 01/15/33 7,286,787 600,000 Series 2017-4681, Class JY................................... 2.50% 05/15/47 498,537 2,803,763 Series 2018-4774, Class SL, IO, 1 Mo. LIBOR (x) -1 + 6.20% (b)................................................. 1.25% 04/15/48 345,232 4,339,805 Series 2018-4826, Class ME................................... 3.50% 09/15/48 4,091,585 2,657,271 Series 2018-4833, Class PY................................... 4.00% 10/15/48 2,560,008 3,329,436 Series 2019-4872, Class BZ................................... 4.00% 04/15/49 2,988,974 </TABLE> See Notes to Financial Statements Page 9
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------ ------------ ---------------- <S> <C> <C> <C> <C> U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED) COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED) Federal Home Loan Mortgage Corporation (Continued) $ 6,398,347 Series 2019-4910, Class SA, IO, 1 Mo. LIBOR (x) -1 + 6.05% (b)................................................. 1.10% 06/15/49 $ 1,065,185 8,184,093 Series 2019-4938, Class BS, IO, 1 Mo. LIBOR (x) -1 + 6.00% (b)................................................. 0.98% 12/25/49 990,417 8,943,596 Series 2019-4943, Class NS, IO, 1 Mo. LIBOR (x) -1 + 6.00% (b)................................................. 0.98% 01/25/50 1,799,703 2,515,155 Series 2020-4974, Class IA, IO............................... 3.50% 12/25/49 665,743 40,067,628 Series 2020-5004, Class F, 1 Mo. LIBOR + 0.35% (a)........... 5.37% 07/25/50 38,852,369 14,069,281 Series 2020-5034, Class IO, IO (c)........................... 1.32% 10/15/45 650,907 18,646,248 Series 2020-5045, Class AF, 30 Day Average SOFR + 0.25% (a)................................................. 5.07% 11/25/50 17,748,901 18,485,965 Series 2020-5045, Class BF, 30 Day Average SOFR + 0.30% (a)................................................. 4.78% 11/25/50 17,752,289 8,815,818 Series 2021-5178, Class HL................................... 2.00% 01/25/52 6,098,000 18,034,128 Series 2022-5200, Class TZ................................... 2.50% 11/25/49 11,862,844 11,790,058 Series 2022-5208, Class HZ................................... 3.50% 03/25/52 10,225,673 13,802,677 Series 2022-5208, Class Z.................................... 3.00% 04/25/52 11,146,130 9,750,000 Series 2022-5210, Class LB................................... 3.00% 08/25/50 7,621,586 12,293,789 Series 2022-5220, Class KZ................................... 4.00% 02/25/51 11,569,180 6,828,840 Series 2022-5221, Class VE................................... 3.50% 07/25/33 6,537,861 33,673,000 Series 2022-5221, Class YC................................... 4.00% 05/25/52 31,631,803 5,044,193 Series 2022-5222, Class BZ................................... 3.50% 05/25/37 4,717,504 7,835,126 Series 2022-5222, Class DP................................... 3.25% 05/25/52 7,416,252 18,942,312 Series 2022-5223, Class GZ................................... 3.00% 08/25/51 13,668,662 13,276,753 Series 2022-5224, Class DZ................................... 4.00% 04/25/52 12,445,613 10,781,432 Series 2022-5225, Class HZ................................... 4.00% 08/25/51 9,652,280 14,355,145 Series 2022-5225, Class NZ................................... 4.00% 05/25/52 12,862,814 8,386,513 Series 2022-5228, Class DZ................................... 4.50% 06/25/52 8,048,275 8,917,916 Series 2022-5230, Class DL................................... 3.50% 09/25/44 8,003,955 9,012,242 Series 2022-5232, Class GO, PO............................... (d) 08/25/51 5,600,341 8,664,613 Series 2022-5255, Class KZ................................... 4.00% 09/25/52 7,915,994 7,871,994 Series 2022-5270, Class AL................................... 3.00% 11/25/48 6,219,849 Federal National Mortgage Association 4,477 Series 1993-169, Class L..................................... 6.50% 09/25/23 4,466 1,511 Series 1993-171, Class SB, 10 Yr. Constant Maturity Treasury Rate (x) -2.17 + 21.99% (b)............................... 14.50% 09/25/23 1,510 4,154 Series 1993-222, Class 2, IO, STRIPS (f)..................... 7.00% 06/25/23 15 1,466 Series 1993-230, Class FA, 1 Mo. LIBOR + 0.60% (a)........... 5.45% 12/25/23 1,467 14,254 Series 1994-61, Class FG, 1 Mo. LIBOR + 1.50% (a)............ 6.35% 04/25/24 14,301 15,242 Series 1996-51, Class AY, IO................................. 7.00% 12/18/26 989 6,057 Series 1998-37, Class VZ..................................... 6.00% 06/17/28 6,045 22,480 Series 2001-34, Class SR, IO, 1 Mo. LIBOR (x) -1 + 8.10% (b)................................................. 3.14% 08/18/31 693 1,559 Series 2001-42, Class SB, 1 Mo. LIBOR (x) -16 + 128.00%, 8.50% Cap (b)............................................. 8.50% 09/25/31 1,549 59,454 Series 2001-46, Class F, 1 Mo. LIBOR + 0.40% (a)............. 5.36% 09/18/31 59,422 5,420 Series 2002-22, Class G...................................... 6.50% 04/25/32 5,716 51,821 Series 2002-30, Class Z...................................... 6.00% 05/25/32 53,951 75,337 Series 2002-80, Class CZ..................................... 4.50% 09/25/32 73,433 64,282 Series 2002-320, Class 2, IO, STRIPS......................... 7.00% 04/25/32 12,474 57,281 Series 2002-323, Class 6, IO, STRIPS......................... 6.00% 01/25/32 7,761 156,252 Series 2002-324, Class 2, IO, STRIPS......................... 6.50% 07/25/32 21,231 </TABLE> Page 10 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (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) $ 12,583 Series 2003-14, Class AT..................................... 4.00% 03/25/33 $ 12,257 35,456 Series 2003-21, Class OA..................................... 4.00% 03/25/33 34,759 67,140 Series 2003-32, Class UI, IO................................. 6.00% 05/25/33 10,796 295,531 Series 2003-45, Class JB..................................... 5.50% 06/25/33 304,340 11,421 Series 2003-63, Class F1, 1 Mo. LIBOR + 0.30% (a)............ 5.32% 11/25/27 11,380 355,000 Series 2003-71, Class NH..................................... 4.29% 08/25/33 351,082 138,052 Series 2003-109, Class YB.................................... 6.00% 11/25/33 142,084 178,295 Series 2003-343, Class 2, IO, STRIPS......................... 4.50% 10/25/33 21,828 179,474 Series 2003-345, Class 14, IO, STRIPS........................ 6.00% 03/25/34 27,293 36,037 Series 2003-348, Class 17, IO, STRIPS........................ 7.50% 12/25/33 5,169 52,914 Series 2003-348, Class 18, IO, STRIPS (c).................... 7.50% 12/25/33 8,463 163,564 Series 2004-10, Class ZB..................................... 6.00% 02/25/34 169,032 492,719 Series 2004-18, Class EZ..................................... 6.00% 04/25/34 517,762 200,359 Series 2004-25, Class LC..................................... 5.50% 04/25/34 206,840 218,541 Series 2004-25, Class UC..................................... 5.50% 04/25/34 225,088 45,385 Series 2004-28, Class ZH..................................... 5.50% 05/25/34 46,574 610,039 Series 2004-60, Class AC..................................... 5.50% 04/25/34 608,411 1,337,938 Series 2005-2, Class S, IO, 1 Mo. LIBOR (x) -1 + 6.60% (b)... 1.58% 02/25/35 100,579 261,241 Series 2005-2, Class TB, IO, 1 Mo. LIBOR (x) -1 + 5.90%, 0.40% Cap (b)............................................. 0.40% 07/25/33 2,257 61,630 Series 2005-29, Class ZT..................................... 5.00% 04/25/35 61,323 61,517 Series 2005-40, Class SA, IO, 1 Mo. LIBOR (x) -1 + 6.70% (b)................................................. 1.68% 05/25/35 4,731 319,453 Series 2005-52, Class TZ..................................... 6.50% 06/25/35 364,479 1,150,834 Series 2005-57, Class KZ..................................... 6.00% 07/25/35 1,219,973 7,982 Series 2005-67, Class SC, 1 Mo. LIBOR (x) -2.15 + 14.41% (b)................................................ 3.61% 08/25/35 7,841 32,839 Series 2005-79, Class NS, IO, 1 Mo. LIBOR (x) -1 + 6.09% (b)................................................. 1.07% 09/25/35 2,322 3,329,103 Series 2005-86, Class WZ..................................... 5.50% 10/25/35 3,376,160 11,792 Series 2005-87, Class SC, 1 Mo. LIBOR (x) -1.67 + 13.83% (b)................................................ 5.47% 10/25/35 12,469 59,853 Series 2005-95, Class WZ..................................... 6.00% 11/25/35 67,945 18,318 Series 2005-102, Class DS, 1 Mo. LIBOR (x) -2.75 + 19.80% (b)................................................ 5.99% 11/25/35 16,885 91,293 Series 2005-359, Class 6, IO, STRIPS......................... 5.00% 11/25/35 13,396 79,033 Series 2005-362, Class 13, IO, STRIPS........................ 6.00% 08/25/35 13,508 37,949 Series 2006-5, Class 2A2 (a)................................. 4.05% 02/25/35 36,997 17,133,805 Series 2006-5, Class N2, IO (e).............................. 0.00% 02/25/35 10,709 39,824 Series 2006-15, Class IS, IO, 1 Mo. LIBOR (x) -1 + 6.58% (b)................................................. 1.56% 03/25/36 4,321 650,979 Series 2006-20, Class PI, IO, 1 Mo. LIBOR (x) -1 + 6.68% (b)................................................. 1.66% 11/25/30 19,925 27,661 Series 2006-31, Class PZ..................................... 6.00% 05/25/36 31,006 35,075 Series 2006-42, Class CF, 1 Mo. LIBOR + 0.45% (a)............ 5.47% 06/25/36 34,871 399,625 Series 2006-80, Class PH..................................... 6.00% 08/25/36 423,525 38,079 Series 2006-85, Class MZ..................................... 6.50% 09/25/36 40,327 171,087 Series 2006-117, Class GF, 1 Mo. LIBOR + 0.35% (a)........... 5.37% 12/25/36 168,396 1,477,116 Series 2006-118, Class A1, 1 Mo. LIBOR + 0.06% (a)........... 4.91% 12/25/36 1,430,613 313,274 Series 2007-7, Class KA...................................... 5.75% 08/25/36 326,868 19,554 Series 2007-25, Class FB, 1 Mo. LIBOR + 0.33% (a)............ 5.35% 04/25/37 19,113 517,172 Series 2007-28, Class ZA..................................... 6.00% 04/25/37 529,820 </TABLE> See Notes to Financial Statements Page 11
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (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) $ 886,106 Series 2007-57, Class ZG..................................... 4.75% 06/25/37 $ 885,449 576,126 Series 2007-60, Class ZS..................................... 4.75% 07/25/37 587,518 505,051 Series 2007-68, Class AE..................................... 6.50% 07/25/37 536,820 271,328 Series 2007-116, Class PB.................................... 5.50% 08/25/35 281,447 60,394 Series 2007-117, Class MD.................................... 5.50% 07/25/37 59,304 2,603,267 Series 2007-W10, Class 3A (e)................................ 2.99% 06/25/47 2,598,942 125,656 Series 2008-3, Class FZ, 1 Mo. LIBOR + 0.55% (a)............. 5.57% 02/25/38 118,136 21,402 Series 2008-8, Class ZA...................................... 5.00% 02/25/38 21,325 7,241 Series 2008-17, Class IP, IO................................. 6.50% 02/25/38 507 156 Series 2009-10, Class AB..................................... 5.00% 03/25/24 155 66 Series 2009-14, Class BS, IO, 1 Mo. Libor (x) -1 + 6.25% (b) (f)............................................. 1.23% 03/25/24 0 1,439,708 Series 2009-37, Class NZ..................................... 5.71% 02/25/37 1,497,840 4,400,000 Series 2009-50, Class GX..................................... 5.00% 07/25/39 4,536,599 2,550,753 Series 2009-85, Class J...................................... 4.50% 10/25/39 2,555,096 165,869 Series 2009-91, Class HL..................................... 5.00% 11/25/39 169,330 97,000 Series 2009-92, Class DB..................................... 5.00% 11/25/39 100,369 850,474 Series 2009-103, Class PZ.................................... 6.00% 12/25/39 955,903 162,006 Series 2009-106, Class SN, IO, 1 Mo. LIBOR (x) -1 + 6.25% (b)................................................. 1.23% 01/25/40 12,661 284,725 Series 2009-109, Class PZ.................................... 4.50% 01/25/40 275,039 47,368 Series 2009-115, Class HZ.................................... 5.00% 01/25/40 48,761 48,087 Series 2009-398, Class C13, IO, STRIPS....................... 4.00% 06/25/24 601 204,900 Series 2010-3, Class DZ...................................... 4.50% 02/25/40 197,062 124,480 Series 2010-21, Class KO, PO................................. (d) 03/25/40 107,044 500,000 Series 2010-35, Class EP..................................... 5.50% 04/25/40 522,109 288,635 Series 2010-38, Class KC..................................... 4.50% 04/25/40 288,071 295,897 Series 2010-45, Class WB..................................... 5.00% 05/25/40 309,038 337,989 Series 2010-68, Class BI, IO................................. 5.50% 07/25/50 63,476 30,968 Series 2010-75, Class MT (e)................................. 1.57% 12/25/39 29,521 10,751 Series 2010-110, Class KI, IO (f)............................ 5.50% 10/25/25 48 80,107 Series 2010-115, Class PO, PO................................ (d) 04/25/40 69,034 213,420 Series 2010-129, Class SM, IO, 1 Mo. LIBOR (x) -1 + 6.00% (b)................................................. 0.98% 11/25/40 5,718 2,821,000 Series 2010-142, Class DL.................................... 4.00% 12/25/40 2,752,616 151,010 Series 2011-9, Class AZ...................................... 5.00% 05/25/40 147,957 1,507,000 Series 2011-10, Class AY..................................... 6.00% 02/25/41 1,670,084 94,466 Series 2011-30, Class LS, IO (c)............................. 0.40% 04/25/41 4,948 137,057 Series 2011-30, Class ZB..................................... 5.00% 04/25/41 138,503 296,549 Series 2011-52, Class GB..................................... 5.00% 06/25/41 301,865 776,259 Series 2011-73, Class PI, IO................................. 4.50% 05/25/41 34,255 180,276 Series 2011-74, Class TQ, IO, 1 Mo. LIBOR (x) -6.43 + 55.93%, 4.50% Cap (b)............................................. 4.50% 12/25/33 21,092 1,373,036 Series 2011-101, Class EI, IO................................ 3.50% 10/25/26 36,804 750,000 Series 2011-105, Class MB.................................... 4.00% 10/25/41 695,076 1,837,120 Series 2011-111, Class PZ.................................... 4.50% 11/25/41 1,841,535 3,756,040 Series 2011-123, Class JS, IO, 1 Mo. LIBOR (x) -1 + 6.65% (b)................................................. 1.63% 03/25/41 198,329 1,170,838 Series 2012-28, Class PT..................................... 4.00% 03/25/42 1,117,114 776,952 Series 2012-39, Class PB..................................... 4.25% 04/25/42 772,544 358,413 Series 2012-52, Class BZ..................................... 4.00% 05/25/42 326,784 95,211 Series 2012-66, Class DI, IO................................. 3.50% 06/25/27 3,965 </TABLE> Page 12 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (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) $ 2,013,022 Series 2012-101, Class AI, IO................................ 3.00% 06/25/27 $ 50,903 2,287,821 Series 2012-103, Class HI, IO................................ 3.00% 09/25/27 84,391 207,919 Series 2012-111, Class B..................................... 7.00% 10/25/42 221,922 134,911 Series 2012-118, Class IB, IO................................ 3.50% 11/25/42 21,861 6,908,788 Series 2012-122, Class SD, IO, 1 Mo. LIBOR (x) -1 + 6.10% (b)................................................. 1.08% 11/25/42 768,107 435,138 Series 2012-133, Class KO, PO................................ (d) 12/25/42 224,752 483,103 Series 2012-138, Class MA.................................... 1.00% 12/25/42 409,698 793,054 Series 2012-146, Class QA.................................... 1.00% 01/25/43 675,943 274,251 Series 2012-409, Class 49, IO, STRIPS (c).................... 3.50% 11/25/41 41,317 302,229 Series 2012-409, Class 53, IO, STRIPS (c).................... 3.50% 04/25/42 45,429 690,000 Series 2013-10, Class HQ..................................... 2.50% 02/25/43 511,740 298,602 Series 2013-13, Class IK, IO................................. 2.50% 03/25/28 12,463 6,351,359 Series 2013-19, Class ZD..................................... 3.50% 03/25/43 5,722,643 51,532 Series 2013-23, Class ZB..................................... 3.00% 03/25/43 38,525 750,000 Series 2013-41, Class DB..................................... 3.00% 05/25/43 620,837 1,048,032 Series 2013-43, Class IX, IO................................. 4.00% 05/25/43 210,991 330,550 Series 2013-51, Class PI, IO................................. 3.00% 11/25/32 28,891 328,187 Series 2013-52, Class MD..................................... 1.25% 06/25/43 277,214 511,213 Series 2013-55, Class AI, IO................................. 3.00% 06/25/33 51,737 134,263 Series 2013-70, Class JZ..................................... 3.00% 07/25/43 119,837 83,610 Series 2013-75, Class FC, 1 Mo. LIBOR + 0.25% (a)............ 5.27% 07/25/42 83,103 11,925,441 Series 2013-75, Class ZG..................................... 3.25% 07/25/43 9,943,092 379,979 Series 2013-105, Class BN.................................... 4.00% 05/25/43 350,604 175,768 Series 2013-105, Class KO, PO................................ (d) 10/25/43 156,145 195,852 Series 2013-106, Class KN.................................... 3.00% 10/25/43 159,700 19,573,308 Series 2013-115, Class Z..................................... 3.00% 11/25/33 18,439,384 46,782,616 Series 2013-119, Class VZ.................................... 3.00% 10/25/33 44,038,236 37,470,107 Series 2013-119, Class ZB.................................... 3.00% 12/25/33 35,089,680 1,003,000 Series 2013-130, Class QY.................................... 4.50% 06/25/41 998,736 1,633,290 Series 2013-417, Class C21, IO, STRIPS....................... 4.00% 12/25/42 246,518 3,735,548 Series 2013-418, Class C1, IO, STRIPS........................ 3.50% 08/25/43 530,645 50,665 Series 2014-29, Class GI, IO................................. 3.00% 05/25/29 2,290 1,404,221 Series 2014-44, Class NI, IO................................. 4.50% 08/25/29 34,056 88,213 Series 2014-68, Class GI, IO................................. 4.50% 10/25/43 7,221 614,150 Series 2014-82, Class GZ..................................... 4.00% 12/25/44 532,291 449,474 Series 2014-84, Class LI, IO................................. 3.50% 12/25/26 12,662 875,000 Series 2015-16, Class MY..................................... 3.50% 04/25/45 774,503 543 Series 2015-38, Class GI, IO (f)............................. 3.00% 09/25/43 0 298,389 Series 2015-76, Class BI, IO................................. 4.00% 10/25/39 9,088 36,540 Series 2015-93, Class KI, IO................................. 3.00% 09/25/44 1,327 72,665 Series 2015-97, Class AI, IO (f)............................. 4.00% 09/25/41 50 4,908,690 Series 2016-2, Class EZ...................................... 2.50% 02/25/46 4,429,757 8,774,460 Series 2016-37, Class PY..................................... 3.00% 06/25/46 7,356,840 16,302,933 Series 2016-40, Class MS, IO, 1 Mo. LIBOR (x) -1 + 6.00% (b)................................................. 0.98% 07/25/46 2,361,385 11,510,000 Series 2016-50, Class GY..................................... 3.00% 08/25/46 9,651,324 6,649,176 Series 2016-62, Class SB, IO, 1 Mo. LIBOR (x) -1 + 6.10% (b)................................................. 1.08% 09/25/46 476,438 823,625 Series 2016-71, Class NI, IO................................. 3.50% 04/25/46 93,302 2,866,032 Series 2016-73, Class PI, IO................................. 3.00% 08/25/46 497,965 354,917 Series 2016-74, Class HI, IO................................. 3.50% 10/25/46 58,865 </TABLE> See Notes to Financial Statements Page 13
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (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) $ 278,441 Series 2016-84, Class DF, 1 Mo. LIBOR + 0.42% (a)............ 4.12% 11/25/46 $ 272,311 7,491,736 Series 2017-18, Class AS, IO, 1 Mo. LIBOR (x) -1 + 6.05% (b)................................................. 1.03% 03/25/47 1,102,455 597,364 Series 2017-46, Class BY..................................... 3.00% 06/25/47 468,975 12,447,502 Series 2017-50, Class BZ..................................... 3.00% 07/25/47 10,736,894 5,282,256 Series 2017-65, Class SA, IO, 1 Mo. LIBOR (x) -1 + 5.90%, 5.00% Cap (b)............................................. 0.88% 09/25/47 567,914 4,132,604 Series 2017-84, Class ZK..................................... 3.50% 10/25/57 3,607,078 3,181,265 Series 2017-87, Class GI, IO................................. 4.00% 06/25/44 489,563 2,207,735 Series 2017-87, Class ZA..................................... 4.00% 11/25/57 1,911,903 2,643,939 Series 2018-17, Class Z...................................... 3.50% 03/25/48 2,216,103 20,428,945 Series 2018-84, Class ZM..................................... 4.00% 11/25/48 19,877,088 4,377,857 Series 2018-86, Class DL..................................... 3.50% 12/25/48 4,152,280 2,484,822 Series 2018-92, Class DB..................................... 3.50% 01/25/49 2,351,437 6,286,839 Series 2018-94, Class AZ..................................... 4.00% 01/25/49 6,095,166 7,269,030 Series 2019-8, Class DY...................................... 3.50% 03/25/49 6,878,627 8,466,659 Series 2019-17, Class GZ..................................... 4.00% 11/25/56 7,734,489 9,990,568 Series 2019-26, Class GA..................................... 3.50% 06/25/49 9,515,691 3,906,164 Series 2019-27, Class HA..................................... 3.00% 06/25/49 3,550,537 6,675,694 Series 2019-29, Class HT..................................... 3.00% 06/25/49 6,120,766 5,622,717 Series 2019-34, Class JA..................................... 3.00% 07/25/49 5,142,944 13,526,068 Series 2019-34, Class LA..................................... 3.00% 07/25/49 12,475,505 3,621,425 Series 2019-37, Class A...................................... 3.00% 07/25/49 3,314,583 12,924,667 Series 2019-41, Class SN, IO, 1 Mo. LIBOR (x) -1 + 6.05% (b)................................................. 1.03% 08/25/49 1,435,414 9,895,882 Series 2019-57, Class JA..................................... 2.50% 10/25/49 8,865,761 4,056,285 Series 2019-59, Class PT..................................... 2.50% 10/25/49 3,590,450 9,290,415 Series 2019-66, Class C...................................... 3.00% 11/25/49 8,617,408 37,343,473 Series 2019-68, Class KP..................................... 2.50% 11/25/49 32,190,402 21,072,848 Series 2019-70, Class WA, PO................................. (d) 11/25/42 17,695,579 12,387,526 Series 2020-9, Class SJ, IO, 1 Mo. LIBOR (x) -1 + 6.00% (b).. 0.98% 02/25/50 2,091,673 11,969,763 Series 2020-20, Class KI, IO................................. 4.00% 03/25/50 3,932,024 19,023,099 Series 2020-34, Class FA, 1 Mo. LIBOR + 0.45% (a)............ 5.47% 06/25/50 18,498,010 7,001,474 Series 2020-38, Class NF, 1 Mo. LIBOR + 0.45% (a)............ 5.47% 06/25/50 6,733,454 13,606,695 Series 2020-93, Class NI, IO................................. 3.00% 01/25/51 1,376,040 10,329,920 Series 2022-15, Class ZH..................................... 3.00% 04/25/52 7,350,645 Federal National Mortgage Association Grantor Trust 8,438,933 Series 2022-18, Class Z...................................... 3.50% 04/25/52 6,893,929 16,948,238 Series 2022-23, Class EZ..................................... 3.00% 03/25/52 11,969,044 26,643,230 Series 2022-29, Class JZ..................................... 1.50% 06/25/42 19,115,412 1,828,527 Series 2005-T1, Class A1, 1 Mo. LIBOR + 0.40% (a)............ 5.41% 05/25/35 1,700,639 Government National Mortgage Association 17,408 Series 2001-60, Class PZ..................................... 6.00% 12/20/31 17,364 202,599 Series 2002-72, Class ZB..................................... 6.00% 10/20/32 200,894 145,866 Series 2003-4, Class MZ...................................... 5.50% 01/20/33 145,280 259,744 Series 2003-18, Class PG..................................... 5.50% 03/20/33 258,671 1,574,763 Series 2003-35, Class TZ..................................... 5.75% 04/16/33 1,571,016 133,010 Series 2003-62, Class MZ..................................... 5.50% 07/20/33 135,581 159,588 Series 2003-84, Class Z...................................... 5.50% 10/20/33 161,168 88,160 Series 2004-37, Class B...................................... 6.00% 04/17/34 90,394 513,031 Series 2004-49, Class MZ..................................... 6.00% 06/20/34 528,338 36,211 Series 2004-68, Class ZC..................................... 6.00% 08/20/34 37,205 </TABLE> Page 14 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (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) $ 42,979 Series 2004-71, Class ST, 1 Mo. LIBOR (x) -6.25 + 44.50%, 7.00% Cap (b)............................................. 7.00% 09/20/34 $ 43,790 287,643 Series 2004-88, Class SM, IO, 1 Mo. LIBOR (x) -1 + 6.10% (b)................................................. 1.15% 10/16/34 10,310 1,185,998 Series 2004-92, Class BZ..................................... 5.50% 11/16/34 1,207,319 249,618 Series 2004-105, Class JZ.................................... 5.00% 12/20/34 247,165 211,544 Series 2004-105, Class KA.................................... 5.00% 12/16/34 209,958 248,582 Series 2005-3, Class JZ...................................... 5.00% 01/16/35 237,448 248,582 Series 2005-3, Class KZ...................................... 5.00% 01/16/35 243,395 85,544 Series 2005-7, Class MA, 1 Mo. LIBOR (x) -2.81 + 18.95% (b)................................................ 5.06% 12/17/34 81,636 115,940 Series 2005-33, Class AY..................................... 5.50% 04/16/35 117,431 101,206 Series 2005-41, Class PA..................................... 4.00% 05/20/35 99,499 1,996,500 Series 2005-78, Class ZA..................................... 5.00% 10/16/35 2,006,303 177,482 Series 2005-93, Class PO, PO................................. (d) 06/20/35 160,800 500,000 Series 2006-38, Class OH..................................... 6.50% 08/20/36 506,184 199,630 Series 2006-61, Class ZA..................................... 5.00% 11/20/36 196,832 474,610 Series 2007-16, Class OZ..................................... 6.00% 04/20/37 491,911 114,668 Series 2007-27, Class SD, IO, 1 Mo. LIBOR (x) -1 + 6.20% (b)................................................. 1.25% 05/20/37 3,900 91,696 Series 2007-41, Class OL, PO................................. (d) 07/20/37 82,600 163,950 Series 2007-42, Class SB, IO, 1 Mo. LIBOR (x) -1 + 6.75% (b)................................................. 1.80% 07/20/37 7,984 502,697 Series 2007-71, Class ZD..................................... 6.00% 11/20/37 506,442 155,524 Series 2007-81, Class FZ, 1 Mo. LIBOR + 0.35% (a)............ 5.30% 12/20/37 155,123 77,178 Series 2008-33, Class XS, IO, 1 Mo. LIBOR (x) -1 + 7.70% (b)................................................. 2.75% 04/16/38 4,704 454,657 Series 2008-47, Class ML..................................... 5.25% 06/16/38 460,528 132,497 Series 2008-54, Class PE..................................... 5.00% 06/20/38 133,717 363,711 Series 2008-71, Class JI, IO................................. 6.00% 04/20/38 22,014 99,061 Series 2009-14, Class KI, IO................................. 6.50% 03/20/39 11,517 32,505 Series 2009-14, Class KS, IO, 1 Mo. LIBOR (x) -1 + 6.30% (b)................................................. 1.35% 03/20/39 955 75,659 Series 2009-25, Class SE, IO, 1 Mo. LIBOR (x) -1 + 7.60% (b)................................................. 2.65% 09/20/38 3,571 2,637,807 Series 2009-29, Class PC..................................... 7.00% 05/20/39 2,815,659 429,595 Series 2009-32, Class SZ..................................... 5.50% 05/16/39 443,409 3,732,435 Series 2009-57, Class VB..................................... 5.00% 06/16/39 3,733,186 294,166 Series 2009-61, Class PZ..................................... 7.50% 08/20/39 330,163 8,138,960 Series 2009-61, Class WQ, IO, 1 Mo. LIBOR (x) -1 + 6.25% (b)................................................. 1.30% 11/16/35 634,088 968,378 Series 2009-69, Class ZB..................................... 6.00% 08/20/39 969,700 455,000 Series 2009-75, Class JN..................................... 5.50% 09/16/39 467,918 644,814 Series 2009-78, Class KZ..................................... 5.50% 09/16/39 675,519 94,173 Series 2009-79, Class OK, PO................................. (d) 11/16/37 81,131 151,720 Series 2009-81, Class TZ..................................... 5.50% 09/20/39 157,036 69,000 Series 2009-94, Class AL..................................... 5.00% 10/20/39 69,860 306,943 Series 2009-106, Class DZ.................................... 5.50% 11/20/39 319,689 3,454,958 Series 2009-106, Class SL, IO, 1 Mo. LIBOR (x) -1 + 6.10% (b)................................................. 1.15% 04/20/36 150,117 52,201 Series 2009-106, Class WZ.................................... 5.50% 11/16/39 54,504 732,000 Series 2009-126, Class LB.................................... 5.00% 12/20/39 746,978 </TABLE> See Notes to Financial Statements Page 15
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (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) $ 19,348 Series 2010-4, Class WA...................................... 3.00% 01/16/40 $ 18,588 33,295 Series 2010-42, Class CO, PO................................. (d) 06/16/39 32,830 970,268 Series 2010-59, Class ZD..................................... 6.50% 05/20/40 1,097,321 1,064,374 Series 2010-85, Class SL, IO, 1 Mo. LIBOR (x) -1 + 6.60% (b)................................................. 1.65% 07/20/37 34,643 89,000 Series 2010-116, Class BM.................................... 4.50% 09/16/40 90,332 1,406,100 Series 2010-116, Class JB.................................... 5.00% 06/16/40 1,435,768 555,432 Series 2010-157, Class OP, PO................................ (d) 12/20/40 471,787 16,586 Series 2010-166, Class DI, IO (f)............................ 4.50% 02/20/39 107 160,314 Series 2011-4, Class PZ...................................... 5.00% 01/20/41 163,567 771,202 Series 2011-35, Class BP..................................... 4.50% 03/16/41 772,960 173,216 Series 2011-48, Class LI, IO................................. 5.50% 01/16/41 20,132 5,385,413 Series 2011-61, Class WS, IO, 1 Mo. LIBOR (x) -1 + 6.47% (b)................................................. 1.52% 02/20/38 206,447 40,077 Series 2011-63, Class BI, IO................................. 6.00% 02/20/38 2,318 532,668 Series 2011-71, Class ZC..................................... 5.50% 07/16/34 538,846 1,314,621 Series 2011-81, Class IC, IO, 1 Mo. LIBOR (x) -1 + 6.72%, 0.62% Cap (b)............................................. 0.62% 07/20/35 15,015 189,817 Series 2011-112, Class IP, IO................................ 0.50% 08/16/26 8 239,265 Series 2011-129, Class CL.................................... 5.00% 03/20/41 239,387 3,134 Series 2011-136, Class GB.................................... 2.50% 05/20/40 3,125 34,932 Series 2011-151, Class TB, IO, 1 Mo. LIBOR (x) -70 + 465.50%, 3.50% Cap (b).................................... 3.50% 04/20/41 2,766 31,654 Series 2012-10, Class LI, IO (f)............................. 3.50% 07/20/40 41 7,001,737 Series 2012-84, Class QS, IO, 1 Mo. LIBOR (x) -1 + 6.10% (b)................................................. 1.15% 07/16/42 400,428 6,711,842 Series 2012-84, Class SJ, 1 Mo. LIBOR (x) -0.57 + 2.51% (b)................................................. 0.04% 07/16/42 4,384,414 251,623 Series 2012-108, Class KB.................................... 2.75% 09/16/42 206,512 2,770,197 Series 2012-143, Class TI, IO................................ 3.00% 12/16/27 111,413 1,473,893 Series 2012-149, Class PC (c)................................ 6.33% 12/20/42 1,547,408 12,524,747 Series 2013-4, Class IC, IO.................................. 4.00% 09/20/42 2,100,955 70,530 Series 2013-5, Class IA, IO.................................. 3.50% 10/16/42 9,051 2,223,000 Series 2013-20, Class QM..................................... 2.63% 02/16/43 1,899,241 3,218,792 Series 2013-23, Class IP, IO................................. 3.50% 08/20/42 393,682 1,368,781 Series 2013-53, Class OI, IO................................. 3.50% 04/20/43 137,834 1,484,629 Series 2013-69, Class AI, IO................................. 3.50% 05/20/43 224,329 161,250 Series 2013-69, Class PI, IO................................. 5.00% 05/20/43 15,690 953,680 Series 2013-70, Class PM..................................... 2.50% 05/20/43 784,352 1,879,276 Series 2013-91, Class PB..................................... 3.50% 09/20/42 1,830,781 746,058 Series 2013-130, Class WS, IO, 1 Mo. LIBOR (x) -1 + 6.10% (b)................................................. 1.15% 09/20/43 92,149 688,000 Series 2013-183, Class PB.................................... 4.50% 12/20/43 697,394 1,804,129 Series 2014-44, Class IC, IO................................. 3.00% 04/20/28 78,563 5,381,042 Series 2014-44, Class ID, IO (c) (e)......................... 0.33% 03/16/44 49,618 18,831 Series 2014-91, Class JI, IO................................. 4.50% 01/20/40 1,099 605,531 Series 2014-94, Class Z...................................... 4.50% 01/20/44 596,549 2,449,926 Series 2014-99, Class HI, IO................................. 4.50% 06/20/44 356,557 1,757,667 Series 2014-115, Class QI, IO................................ 3.00% 03/20/29 39,410 2,605,206 Series 2014-116, Class SB, IO, 1 Mo. LIBOR (x) -1 + 5.60% (b)................................................. 0.65% 08/20/44 272,452 </TABLE> Page 16 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (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) $ 1,295,239 Series 2014-118, Class TV, IO, 1 Mo. LIBOR (x) -1 + 6.25% (b)................................................. 1.30% 05/20/44 $ 112,827 4,565,372 Series 2015-66, Class LI, IO................................. 5.00% 05/16/45 414,663 14,532 Series 2015-95, Class IK, IO (c) (f)......................... 0.00% 05/16/37 0 3,294,771 Series 2015-124, Class DI, IO................................ 3.50% 01/20/38 77,117 404,750 Series 2015-137, Class WA (c) (e)............................ 5.55% 01/20/38 421,373 308,262 Series 2015-138, Class MI, IO................................ 4.50% 08/20/44 31,626 64,178 Series 2015-151, Class KW (c)................................ 4.98% 04/20/34 63,664 19,860,446 Series 2015-164, Class MZ.................................... 3.00% 09/20/45 16,177,386 3,487,906 Series 2015-168, Class GI, IO................................ 5.50% 02/16/33 155,682 198,325 Series 2016-16, Class KZ..................................... 3.00% 02/16/46 163,763 6,355,135 Series 2016-37, Class AF, 1 Mo. LIBOR + 0.47% (a)............ 2.74% 11/20/43 6,114,479 60,927 Series 2016-55, Class PB (c)................................. 5.80% 03/20/31 60,973 858,181 Series 2016-69, Class WI, IO................................. 4.50% 05/20/46 207,516 2,492,110 Series 2016-75, Class SA, IO, 1 Mo. LIBOR (x) -1 + 6.00% (b)................................................. 1.05% 05/20/40 177,864 456,746 Series 2016-78, Class UI, IO................................. 4.00% 06/20/46 48,837 2,338,360 Series 2016-89, Class HI, IO................................. 3.50% 07/20/46 392,024 283,728 Series 2016-99, Class JA (c)................................. 5.52% 11/20/45 294,757 1,049,032 Series 2016-109, Class ZM.................................... 3.50% 08/20/36 957,115 5,947,684 Series 2016-111, Class PI, IO................................ 3.50% 06/20/45 548,621 7,149,337 Series 2016-120, Class AS, IO, 1 Mo. LIBOR (x) -1 + 6.10% (b)................................................. 1.15% 09/20/46 909,324 464,000 Series 2016-141, Class PC.................................... 5.00% 10/20/46 482,142 334,128 Series 2016-145, Class LZ.................................... 3.00% 10/20/46 258,026 7,593,176 Series 2016-156, Class ZM.................................... 3.50% 11/20/46 7,092,655 303,000 Series 2016-160, Class LE.................................... 2.50% 11/20/46 224,949 183,944 Series 2016-167, Class KI, IO................................ 6.00% 12/16/46 24,787 2,032,839 Series 2017-12, Class SD, IO, 1 Mo. LIBOR (x) -1 + 6.10% (b)................................................. 1.15% 01/20/47 251,025 981,973 Series 2017-17, Class KZ..................................... 4.50% 02/20/47 972,338 3,702,292 Series 2017-32, Class DI, IO................................. 5.50% 05/20/35 550,522 6,229,439 Series 2017-33, Class PZ..................................... 3.00% 02/20/47 5,359,559 4,043,490 Series 2017-56, Class BI, IO................................. 6.00% 04/16/47 612,598 3,502,466 Series 2017-123, Class IO, IO................................ 5.00% 08/16/47 742,809 4,549,356 Series 2017-130, Class LS, IO, 1 Mo. LIBOR (x) -1 + 6.20% (b)................................................. 1.25% 08/16/47 382,044 4,115,861 Series 2017-133, Class JI, IO................................ 7.00% 06/20/41 524,497 3,281,913 Series 2017-186, Class TI, IO, 1 Mo. LIBOR (x) -1 + 6.50%, 0.50% Cap (b)............................................. 0.50% 05/20/40 42,145 926,630 Series 2018-44, Class Z...................................... 2.50% 09/20/47 719,332 4,729,221 Series 2018-79, Class IO, IO................................. 5.00% 06/20/48 579,782 5,628,564 Series 2018-131, Class IA, IO................................ 5.00% 04/20/44 570,353 10,000,000 Series 2018-134, Class KB.................................... 3.50% 10/20/48 9,574,925 7,012,338 Series 2018-155, Class KD.................................... 4.00% 11/20/48 6,873,111 5,259,770 Series 2018-160, Class GY.................................... 4.50% 11/20/48 5,106,193 5,494,818 Series 2018-78I, Class EZ.................................... 3.00% 04/20/48 5,096,629 1,000,872 Series 2019-27, Class DI, IO................................. 5.50% 01/20/40 151,694 9,302,121 Series 2019-128, Class EF, 1 Mo. LIBOR + 0.57%, 4.00% Cap (a)................................................... 4.00% 10/20/49 8,719,041 3,000,000 Series 2020-62, Class IC, IO................................. 2.50% 01/20/50 682,982 14,014,801 Series 2020-62, Class WI, IO................................. 2.50% 08/20/49 3,004,560 </TABLE> See Notes to Financial Statements Page 17
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (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) $ 7,097,422 Series 2020-84, Class IM, IO................................. 2.50% 05/20/50 $ 1,672,177 19,759,118 Series 2020-84, Class IO, IO................................. 2.50% 04/20/50 4,835,333 17,691,549 Series 2021-8, Class DI, IO.................................. 3.50% 01/20/51 1,615,421 46,928,733 Series 2021-27, Class IO, IO................................. 2.50% 02/20/51 5,980,527 6,755,303 Series 2021-46, Class IL, IO................................. 3.00% 03/20/51 853,580 23,938,101 Series 2021-91, Class IB, IO................................. 3.00% 05/20/51 2,978,967 91,122,916 Series 2021-97, Class NI, IO................................. 2.50% 08/20/49 8,161,023 5,705,628 Series 2022-60, Class CZ..................................... 3.00% 03/20/52 3,950,826 32,848,853 Series 2022-63, Class AZ..................................... 3.00% 08/20/51 27,365,249 16,885,882 Series 2022-63, Class BZ..................................... 3.50% 11/20/46 14,792,235 19,649,754 Series 2022-63, Class HZ..................................... 2.50% 11/20/51 14,689,048 11,259,575 Series 2022-63, Class MZ..................................... 3.00% 05/20/51 9,002,167 15,809,376 Series 2022-65, Class BZ..................................... 3.50% 04/20/52 13,126,482 7,230,771 Series 2022-68, Class DZ..................................... 3.50% 04/20/52 5,934,287 12,602,850 Series 2022-68, Class MZ..................................... 3.50% 04/20/52 10,475,577 23,184,469 Series 2022-68, Class XA..................................... 3.50% 02/20/49 22,294,084 13,009,828 Series 2022-68, Class Z...................................... 3.50% 04/20/52 11,055,078 17,491,933 Series 2022-68, Class ZC..................................... 3.50% 04/20/52 14,477,095 12,991,946 Series 2022-69, Class QL..................................... 3.00% 04/20/52 11,370,300 16,795,173 Series 2022-76, Class PG..................................... 4.00% 04/20/52 16,456,356 10,917,513 Series 2022-78, Class AM..................................... 3.50% 04/20/52 9,132,193 14,238,755 Series 2022-90, Class KZ..................................... 3.00% 04/20/51 11,426,427 8,758,540 Series 2022-90, Class ZG..................................... 1.50% 02/20/52 4,615,756 22,341,349 Series 2022-124, Class EY.................................... 4.00% 07/20/52 20,487,971 9,898,297 Series 2022-154, Class EZ.................................... 3.50% 09/20/52 8,415,029 10,173,000 Series 2022-204, Class YC.................................... 4.00% 07/20/52 9,662,710 Seasoned Credit Risk Transfer Trust 6,036,840 Series 2018-1, Class HA...................................... 3.00% 05/25/57 5,677,457 9,012,565 Series 2018-2, Class MA...................................... 3.50% 11/25/57 8,667,400 7,134,563 Series 2018-3, Class MA...................................... 3.50% 08/25/57 6,865,127 28,887,386 Series 2018-4, Class MA...................................... 3.50% 03/25/58 27,774,323 20,531,072 Series 2019-1, Class MA...................................... 3.50% 07/25/58 19,673,060 5,280,632 Series 2019-3, Class MA...................................... 3.50% 10/25/58 5,062,773 25,998,162 Series 2020-2, Class MAU..................................... 2.50% 11/25/59 23,990,014 15,000,000 Series 2022-1, Class MBU..................................... 3.25% 11/25/61 11,977,895 Seasoned Loans Structured Transaction Trust 18,066,917 Series 2018-2, Class A1...................................... 3.50% 11/25/28 17,317,205 3,810,263 Series 2019-3, Class A1C..................................... 2.75% 11/25/29 3,544,168 10,000,000 Series 2022-1, Class A2...................................... 3.50% 05/25/32 9,117,966 Vendee Mortgage Trust 1,416,436 Series 2003-2, Class Z....................................... 5.00% 05/15/33 1,438,732 5,207,306 Series 2010-1, Class DZ...................................... 4.25% 04/15/40 5,065,237 8,709,498 Series 2011-1, Class DZ...................................... 3.75% 09/15/46 8,144,902 17,537,463 Series 2011-2, Class DZ...................................... 3.75% 10/15/41 16,619,812 ---------------- 1,410,737,034 ---------------- COMMERCIAL MORTGAGE-BACKED SECURITIES -- 16.1% Federal Home Loan Mortgage Corporation Multiclass Certificates 79,276,000 Series 2020-RR02, Class DX, IO (c)........................... 1.82% 09/27/28 6,395,199 50,000,000 Series 2020-RR06, Class BX, IO (c)........................... 1.84% 05/27/33 5,889,637 37,600,000 Series 2020-RR09, Class AX, IO (c)........................... 2.63% 11/27/28 4,324,000 47,500,000 Series 2020-RR09, Class BX, IO (c)........................... 2.20% 02/27/29 4,902,000 96,907,000 Series 2020-RR10, Class X, IO (c)............................ 2.01% 12/27/27 6,744,330 </TABLE> Page 18 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (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 Multiclass Certificates (Continued) $ 112,919,000 Series 2020-RR11, Class AX, IO (c)........................... 2.84% 01/27/29 $ 13,486,989 44,200,500 Series 2020-RR11, Class BX, IO (c)........................... 2.44% 12/27/28 3,736,074 37,413,125 Series 2021-P009, Class X, IO (e)............................ 1.52% 01/25/31 1,742,849 4,203,099 Series 2021-P011, Class X1, IO (e)........................... 1.79% 09/25/45 529,295 112,345,000 Series 2021-RR15, Class X, IO (e)............................ 1.56% 10/27/34 13,048,389 100,924,000 Series 2021-RR18, Class X, IO (e) (g) (h).................... 1.90% 10/27/28 8,124,382 32,013,000 Series 2021-RR19, Class X, IO (e)............................ 1.98% 04/27/29 2,141,747 55,000,000 Series 2021-RR20, Class X, IO (e)............................ 1.85% 04/25/33 7,713,497 Federal Home Loan Mortgage Corporation Multifamily Structured Pass Through Certificates 69,503,169 Series 2014-K036, Class X1, IO (e)........................... 0.82% 10/25/23 131,695 1,744,358 Series 2016-K054, Class A1................................... 2.30% 01/25/25 1,698,804 29,868,000 Series 2016-K152, Class A2................................... 3.08% 01/25/31 27,821,719 283,309,199 Series 2016-KIR1, Class X, IO (e)............................ 1.18% 03/25/26 7,168,006 5,900,000 Series 2018-K156, Class A3................................... 3.70% 06/25/33 5,665,461 30,175,200 Series 2018-K157, Class A2................................... 3.99% 05/25/33 29,826,142 1,900,000 Series 2018-K157, Class A3................................... 3.99% 08/25/33 1,857,613 8,000,000 Series 2018-K158, Class A3................................... 3.90% 10/25/33 7,776,985 9,101,000 Series 2018-K159, Class A3................................... 3.95% 11/25/33 8,866,950 3,000,000 Series 2019-1513, Class A2................................... 2.73% 12/25/31 2,693,054 73,968,098 Series 2019-K097, Class X1, IO (e)........................... 1.09% 07/25/29 4,105,644 57,532,231 Series 2019-K099, Class X1, IO (e)........................... 1.00% 09/25/29 2,626,519 57,790,000 Series 2019-K099, Class XAM, IO (e).......................... 1.26% 09/25/29 3,577,178 125,471,220 Series 2019-K100, Class X1, IO (e)........................... 0.77% 09/25/29 4,338,895 69,410,716 Series 2019-K101, Class X1, IO (c)........................... 0.95% 10/25/29 3,048,782 64,993,000 Series 2019-K102, Class XAM, IO (c).......................... 1.21% 10/25/29 3,865,735 59,029,000 Series 2019-K103, Class XAM, IO (e).......................... 1.01% 11/25/29 2,995,235 28,570,552 Series 2019-K1510, Class X1, IO (e).......................... 0.64% 01/25/34 1,055,645 15,810,619 Series 2019-K1511, Class X1, IO (e).......................... 0.93% 03/25/34 895,279 157,988,349 Series 2019-K1512, Class X1, IO (e).......................... 1.05% 04/25/34 10,401,131 56,866,095 Series 2019-K1513, Class X1, IO (e).......................... 0.99% 08/25/34 3,589,246 102,261,838 Series 2019-K734, Class X1, IO (e)........................... 0.78% 02/25/26 1,438,098 68,018,000 Series 2019-K734, Class XAM, IO (e).......................... 0.55% 02/25/26 806,948 41,835,614 Series 2019-K735, Class X1, IO (e)........................... 1.09% 05/25/26 980,133 54,095,562 Series 2019-K736, Class X1, IO (e)........................... 1.41% 07/25/26 1,813,045 7,100,000 Series 2020-K108, Class A2................................... 1.52% 03/25/30 6,031,529 8,471,000 Series 2020-K109, Class A2................................... 1.56% 04/25/30 7,182,314 35,529,637 Series 2020-K109, Class XAM, IO (e).......................... 1.92% 04/25/30 3,726,597 108,482,544 Series 2020-K110, Class X1, IO (e)........................... 1.81% 04/25/30 9,797,134 24,006,055 Series 2020-K110, Class XAM, IO (e).......................... 1.99% 04/25/30 2,547,931 29,273,633 Series 2020-K112, Class XAM, IO (e).......................... 1.77% 05/25/30 2,856,132 82,019,000 Series 2020-K113, Class XAM, IO (e).......................... 1.69% 06/25/30 7,623,978 53,269,611 Series 2020-K114, Class XAM, IO (e).......................... 1.44% 06/25/30 4,274,204 120,730,086 Series 2020-K115, Class X1, IO (e)........................... 1.43% 06/25/30 9,052,680 55,537,412 Series 2020-K115, Class XAM, IO (e).......................... 1.65% 07/25/30 5,126,186 16,416,339 Series 2020-K116, Class X1, IO (e)........................... 1.53% 07/25/30 1,289,691 55,652,865 Series 2020-K116, Class XAM, IO (e).......................... 1.70% 08/25/30 5,336,798 8,000,000 Series 2020-K117, Class A2................................... 1.41% 08/25/30 6,644,406 63,500,000 Series 2020-K117, Class XAM, IO (e).......................... 1.53% 09/25/30 5,482,857 10,000,000 Series 2020-K118, Class A2................................... 1.49% 09/25/30 8,345,911 77,382,880 Series 2020-K118, Class X1, IO (e)........................... 1.05% 09/25/30 4,295,237 </TABLE> See Notes to Financial Statements Page 19
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (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) $ 37,151,661 Series 2020-K118, Class XAM, IO (e).......................... 1.26% 09/25/30 $ 2,662,292 14,000,000 Series 2020-K119, Class A2................................... 1.57% 09/25/30 11,740,278 51,000,000 Series 2020-K119, Class XAM, IO (e).......................... 1.23% 10/25/30 3,568,312 7,000,000 Series 2020-K120, Class A2................................... 1.50% 10/25/30 5,828,563 77,535,017 Series 2020-K120, Class XAM, IO (e).......................... 1.31% 10/25/30 5,741,251 28,188,913 Series 2020-K121, Class X1, IO (e)........................... 1.12% 10/25/30 1,635,366 24,471,000 Series 2020-K121, Class XAM, IO (e).......................... 1.29% 11/25/30 1,800,390 78,128,725 Series 2020-K122, Class X1, IO (e)........................... 0.97% 11/25/30 4,008,269 35,410,560 Series 2020-K122, Class XAM, IO (e).......................... 1.17% 11/25/30 2,382,539 3,100,000 Series 2020-K1515, Class A2.................................. 1.94% 02/25/35 2,413,989 89,835,261 Series 2020-K1515, Class X1, IO (e).......................... 1.64% 02/25/35 10,638,849 44,677,991 Series 2020-K1516, Class X1, IO (e).......................... 1.63% 05/25/35 5,669,972 55,761,545 Series 2020-K1517, Class X1, IO (e).......................... 1.44% 07/25/35 6,154,413 89,822,363 Series 2020-KG04, Class X1, IO (e)........................... 0.94% 11/25/30 4,418,991 74,716,257 Series 2020-K737, Class X1, IO (c)........................... 0.75% 10/25/26 1,287,436 38,645,000 Series 2020-K738, Class XAM, IO (c).......................... 1.48% 03/25/27 1,824,500 130,180,231 Series 2020-K739, Class X1, IO (e)........................... 1.31% 09/25/27 5,254,816 46,072,531 Series 2020-K739, Class XAM, IO (e).......................... 1.67% 09/25/27 2,670,216 70,811,000 Series 2020-K740, Class XAM (e).............................. 1.19% 10/25/27 2,991,113 5,700,000 Series 2021-K123, Class A2................................... 1.62% 12/25/30 4,777,380 4,725,000 Series 2021-K124, Class A2................................... 1.66% 12/25/30 3,966,078 64,367,000 Series 2021-K128, Class XAM, IO (e).......................... 0.83% 03/25/31 3,103,616 27,836,000 Series 2021-K129, Class XAM, IO (e).......................... 1.33% 05/25/31 2,215,075 41,565,013 Series 2021-K130, Class XAM, IO (e).......................... 1.32% 07/25/31 3,406,993 48,086,863 Series 2021-K131, Class XAM, IO (e).......................... 1.04% 07/25/31 3,047,380 78,491,000 Series 2021-K132, Class XAM, IO (e).......................... 0.96% 09/25/31 4,555,987 7,675,000 Series 2021-K135, Class A2................................... 2.15% 10/25/31 6,594,652 9,860,542 Series 2021-K1522, Class A1.................................. 1.91% 11/25/35 8,241,206 2,900,000 Series 2021-K1521, Class A2.................................. 2.18% 08/25/36 2,262,081 16,900,000 Series 2021-K1522, Class A2.................................. 2.36% 10/25/36 13,479,200 143,990,000 Series 2021-KG05, Class X1, IO (e)........................... 0.40% 01/25/31 2,877,122 64,449,996 Series 2021-KG06, Class X1, IO (e)........................... 0.63% 10/25/31 2,273,196 107,703,000 Series 2021-K741, Class XAM, IO (e).......................... 1.03% 12/25/27 4,145,324 107,037,352 Series 2021-K744, Class X1, IO (e)........................... 0.96% 07/25/28 3,971,439 15,000,000 Series 2022-K145, Class A2................................... 2.58% 05/25/32 13,232,070 200,000,000 Series 2022-K148, Class XAM, IO (e).......................... 0.39% 08/25/32 4,517,340 Federal National Mortgage Association Alternative Credit Enhancement Securities 47,533,170 Series 2023-M1, Class 2A1 (e)................................ 4.05% 12/25/37 46,263,112 24,205,650 Series 2023-M1, Class Z (e).................................. 4.05% 01/25/53 20,383,373 FREMF Mortgage Trust 11,943,000 Series 2013-K32, Class B (e) (i)............................. 3.67% 10/25/46 11,877,113 4,505,000 Series 2015-K44, Class B (e) (i)............................. 3.85% 01/25/48 4,366,559 8,205,000 Series 2015-K45, Class B (e) (i)............................. 3.73% 04/25/48 7,966,378 Government National Mortgage Association 2,940,419 Series 2011-31, Class Z (c).................................. 3.53% 09/16/52 2,702,401 19,120,124 Series 2012-120, Class Z (c)................................. 2.46% 01/16/55 13,873,103 91,306 Series 2013-74, Class AG (e)................................. 2.53% 12/16/53 76,111 5,441 Series 2013-194, Class AE (c)................................ 2.75% 11/16/44 5,109 16,536,505 Series 2015-30, Class DZ..................................... 2.95% 05/16/55 14,717,241 </TABLE> Page 20 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (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) $ 6,624,070 Series 2015-70, Class IO, IO (c)............................. 0.57% 12/16/49 $ 120,469 4,097,199 Series 2015-125, Class VA (c)................................ 2.70% 05/16/35 3,908,782 15,868,595 Series 2016-11, Class IO, IO (c)............................. 0.78% 01/16/56 554,947 7,652,898 Series 2016-26, Class IO, IO (c)............................. 0.64% 02/16/58 186,800 10,411,958 Series 2016-52, Class IO, IO (c)............................. 0.77% 03/16/58 343,392 3,747,909 Series 2016-110, Class VA.................................... 2.10% 01/16/38 3,298,822 9,785,978 Series 2016-127, Class IO, IO (c)............................ 0.86% 05/16/58 396,670 3,225,535 Series 2017-23, Class Z...................................... 2.50% 05/16/59 2,198,740 4,196,891 Series 2017-35, Class Z (c).................................. 2.50% 05/16/59 2,942,778 6,590,151 Series 2017-76, Class B...................................... 2.60% 12/16/56 5,203,462 2,304,736 Series 2017-106, Class AE.................................... 2.60% 12/16/56 1,967,191 2,668,407 Series 2017-146, Class Z..................................... 2.60% 09/16/57 1,902,605 4,388,408 Series 2018-4, Class Z....................................... 2.50% 10/16/59 2,899,336 17,550,294 Series 2018-123, Class Z..................................... 2.50% 06/16/60 14,326,589 25,100,963 Series 2018-170, Class Z..................................... 2.50% 11/16/60 19,981,275 18,544,950 Series 2019-7, Class Z....................................... 2.50% 01/16/61 13,479,617 1,909,347 Series 2019-104, Class Z..................................... 2.80% 05/16/61 1,242,097 6,700,000 Series 2020-161, Class B..................................... 2.00% 08/16/62 3,947,041 8,881,701 Series 2020-169, Class Z..................................... 1.83% 06/16/62 4,015,431 22,825,062 Series 2022-43, Class Z...................................... 2.00% 09/16/61 14,024,218 19,462,623 Series 2022-106, Class Z..................................... 2.00% 05/16/63 12,795,211 5,449,093 Series 2022-109, Class Z (c)................................. 2.25% 08/16/64 2,452,309 4,849,856 Series 2022-166, Class Z (e)................................. 2.50% 04/16/65 2,674,346 ---------------- 713,886,237 ---------------- PASS-THROUGH SECURITIES -- 33.0% Federal Home Loan Mortgage Corporation 953,114 Pool 760043, 5 Yr. Constant Maturity Treasury Rate + 1.39% (a)................................................. 2.93% 12/01/48 945,698 3,794,174 Pool 840359, 12 Mo. LIBOR + 1.65% (a)........................ 3.75% 06/01/46 3,840,170 76,101 Pool A19763.................................................. 5.00% 04/01/34 76,708 331,384 Pool A47828.................................................. 3.50% 08/01/35 317,336 147,616 Pool A47937.................................................. 5.50% 08/01/35 153,197 59,692 Pool A48972.................................................. 5.50% 05/01/36 61,787 64,500 Pool A54675.................................................. 5.50% 01/01/36 66,944 135,672 Pool A65324.................................................. 5.50% 09/01/37 138,004 77,021 Pool A97294.................................................. 4.00% 02/01/41 75,473 682,999 Pool B70791.................................................. 4.00% 06/01/39 679,111 2,589 Pool C01310.................................................. 6.50% 03/01/32 2,698 9,470 Pool C03458.................................................. 5.00% 02/01/40 9,661 84,002 Pool C04269.................................................. 3.00% 10/01/42 77,496 15,002 Pool C91482.................................................. 3.50% 07/01/32 14,636 8,270 Pool E02883.................................................. 4.00% 04/01/26 8,213 12,558 Pool G01443.................................................. 6.50% 08/01/32 13,093 204,014 Pool G02017.................................................. 5.00% 12/01/35 208,500 96,884 Pool G04814.................................................. 5.50% 10/01/38 100,558 17,479 Pool G05173.................................................. 4.50% 11/01/31 17,361 213,011 Pool G05275.................................................. 5.50% 02/01/39 220,853 52,814 Pool G05449.................................................. 4.50% 05/01/39 53,092 162,364 Pool G06583.................................................. 5.00% 06/01/41 166,410 412,851 Pool G07100.................................................. 5.50% 07/01/40 428,505 39,445 Pool G07266.................................................. 4.00% 12/01/42 38,468 </TABLE> See Notes to Financial Statements Page 21
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (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) $ 308,628 Pool G07329.................................................. 4.00% 01/01/43 $ 302,515 304,374 Pool G07683.................................................. 4.00% 03/01/44 298,156 1,565 Pool G08113.................................................. 6.50% 02/01/36 1,641 821 Pool G13625.................................................. 5.50% 01/01/24 820 17,968 Pool G13733.................................................. 5.00% 11/01/24 18,061 17,646 Pool G14088.................................................. 4.00% 02/01/26 17,524 6,741 Pool G14106.................................................. 6.00% 10/01/24 6,717 757 Pool G14167.................................................. 5.50% 07/01/23 756 61 Pool G14233.................................................. 6.00% 01/01/24 61 186,596 Pool G14348.................................................. 4.00% 10/01/26 185,307 4,432 Pool G14376.................................................. 4.00% 09/01/25 4,407 2,585 Pool G14995.................................................. 5.50% 12/01/24 2,580 269 Pool G15821.................................................. 5.00% 07/01/25 270 40,445 Pool G15949.................................................. 4.00% 01/01/29 40,166 757 Pool G15957.................................................. 5.50% 12/01/24 755 3,817 Pool G18264.................................................. 5.00% 07/01/23 3,836 22,243 Pool G18287.................................................. 5.50% 12/01/23 22,196 8,267 Pool G60020.................................................. 4.50% 12/01/43 8,173 344,683 Pool G60114.................................................. 5.50% 06/01/41 357,738 498,691 Pool G60168.................................................. 4.50% 07/01/45 498,464 186,187 Pool G60194.................................................. 3.50% 08/01/45 176,384 179,604 Pool G60808.................................................. 3.00% 10/01/46 165,308 2,668 Pool H09034.................................................. 5.50% 05/01/37 2,703 22,972 Pool J09465.................................................. 4.00% 04/01/24 22,948 10,958 Pool J09504.................................................. 4.00% 04/01/24 10,947 3,322 Pool J09798.................................................. 4.00% 05/01/24 3,318 5,519 Pool J10623.................................................. 4.00% 09/01/24 5,539 125,234 Pool N70075.................................................. 5.00% 01/01/35 124,162 231,024 Pool N70081.................................................. 5.50% 07/01/38 231,733 49,297 Pool Q07189.................................................. 4.00% 04/01/42 48,320 17,618 Pool Q07479.................................................. 3.50% 04/01/42 16,838 71,095 Pool Q11791.................................................. 3.50% 10/01/42 67,941 49,354 Pool Q11836.................................................. 3.50% 10/01/42 47,159 344,626 Pool Q14034.................................................. 3.50% 12/01/42 329,375 317,324 Pool Q54651.................................................. 4.50% 03/01/48 318,035 662,167 Pool Q55037.................................................. 4.50% 04/01/48 668,716 1,806,859 Pool Q61217.................................................. 4.00% 01/01/49 1,758,833 7,876,403 Pool QK1195.................................................. 2.50% 11/01/41 6,976,082 2,549,368 Pool QO0748.................................................. 4.50% 08/01/37 2,540,373 2,927,466 Pool QO0750.................................................. 4.50% 08/01/37 2,919,728 992,232 Pool QO0773.................................................. 4.50% 08/01/37 989,219 4,962,340 Pool QO0807.................................................. 4.50% 09/01/37 4,947,256 8,110,487 Pool SC0190.................................................. 2.50% 09/01/41 7,253,478 10,802,227 Pool SC0252.................................................. 3.00% 01/01/42 9,955,396 6,885,408 Pool SC0277.................................................. 3.00% 05/01/42 6,396,716 10,384,979 Pool SD0887.................................................. 3.50% 09/01/49 9,850,708 16,107,443 Pool SD0948.................................................. 3.00% 05/01/47 14,844,023 23,171,403 Pool SD0949.................................................. 3.00% 09/01/48 21,354,649 17,528,780 Pool SD0954.................................................. 3.00% 02/01/47 16,154,845 11,258,880 Pool SD0961.................................................. 3.50% 11/01/48 10,665,535 19,869,407 Pool SD1170.................................................. 3.50% 09/01/49 18,785,631 5,386,382 Pool SD1289.................................................. 3.00% 10/01/50 4,950,259 </TABLE> Page 22 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (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) $ 7,497,397 Pool SD1361.................................................. 3.50% 02/01/50 $ 7,125,616 290,571 Pool U50165.................................................. 4.00% 05/01/32 281,659 1,923,587 Pool U59020.................................................. 4.00% 06/01/35 1,865,034 859,456 Pool U64762.................................................. 4.50% 10/01/45 862,923 84,232 Pool U80068.................................................. 3.50% 10/01/32 82,031 52,718 Pool U80212.................................................. 3.50% 02/01/33 51,107 70,001 Pool U90245.................................................. 3.50% 10/01/42 66,473 712,339 Pool U90690.................................................. 3.50% 06/01/42 676,292 10,709 Pool U90932.................................................. 3.00% 02/01/43 9,914 25,157 Pool U92272.................................................. 4.50% 12/01/43 25,138 80,593 Pool U99045.................................................. 3.50% 03/01/43 76,534 89,441 Pool U99084.................................................. 4.50% 02/01/44 90,057 43,361 Pool U99091.................................................. 4.50% 03/01/44 43,328 118,347 Pool U99096.................................................. 4.50% 05/01/44 118,259 11,082,433 Pool ZA4196.................................................. 3.00% 04/01/43 10,212,638 1,299,834 Pool ZS2492.................................................. 6.50% 04/01/35 1,380,065 49,431,474 Pool ZT0779.................................................. 3.00% 09/01/47 45,000,954 Federal National Mortgage Association 34,274 Pool 190371.................................................. 6.50% 07/01/36 36,008 20,384 Pool 255190.................................................. 5.50% 05/01/34 21,133 7,556 Pool 255984.................................................. 4.50% 11/01/25 7,532 73,419 Pool 256181.................................................. 5.50% 03/01/36 74,904 271,427 Pool 256576.................................................. 5.50% 01/01/37 278,046 6,419 Pool 256808.................................................. 5.50% 07/01/37 6,320 40,826 Pool 256936.................................................. 6.00% 10/01/37 42,185 42,711 Pool 545759.................................................. 6.50% 07/01/32 44,997 9,531 Pool 555851.................................................. 6.50% 01/01/33 9,870 276,484 Pool 735415.................................................. 6.50% 12/01/32 290,807 2,622 Pool 745875.................................................. 6.50% 09/01/36 2,755 36,201 Pool 747097.................................................. 6.00% 10/01/29 36,477 227,830 Pool 788149.................................................. 5.50% 05/01/33 232,651 220,498 Pool 850000.................................................. 5.50% 01/01/36 228,624 33,362 Pool 871039.................................................. 5.50% 02/01/37 33,600 76,652 Pool 888163.................................................. 7.00% 12/01/33 80,792 8,242 Pool 890149.................................................. 6.50% 10/01/38 8,791 8,894 Pool 890231.................................................. 5.00% 07/01/25 8,931 512 Pool 890378.................................................. 6.00% 05/01/24 509 672,854 Pool 890556.................................................. 4.50% 10/01/43 668,011 62,377 Pool 922386.................................................. 5.50% 01/01/37 61,753 8,535 Pool 930562.................................................. 5.00% 02/01/39 8,739 86,530 Pool 953115.................................................. 5.50% 11/01/38 87,301 33,597 Pool 976871.................................................. 6.50% 08/01/36 34,846 12,587 Pool 995097.................................................. 6.50% 10/01/37 13,428 63,119 Pool 995149.................................................. 6.50% 10/01/38 66,387 31,391 Pool 995228.................................................. 6.50% 11/01/38 33,676 1,852 Pool 995252.................................................. 5.00% 12/01/23 1,860 962 Pool 995259.................................................. 6.50% 11/01/23 958 91,864 Pool AA3303.................................................. 5.50% 06/01/38 92,467 384,551 Pool AB0460.................................................. 5.50% 02/01/37 393,703 7,751 Pool AB2133.................................................. 4.00% 01/01/26 7,682 842,101 Pool AB2506.................................................. 5.00% 03/01/41 858,162 911,197 Pool AB2959.................................................. 4.50% 07/01/40 894,794 </TABLE> See Notes to Financial Statements Page 23
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (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) $ 422,770 Pool AB8676.................................................. 3.50% 05/01/42 $ 392,944 5,681 Pool AC1232.................................................. 5.00% 07/01/24 5,705 11,072 Pool AD0889.................................................. 6.00% 09/01/24 11,013 7,052 Pool AD5222.................................................. 4.50% 05/01/30 7,038 158,118 Pool AE0137.................................................. 4.50% 03/01/36 158,412 2,640,803 Pool AE7733.................................................. 5.00% 11/01/40 2,703,855 386,408 Pool AE9959.................................................. 5.00% 03/01/41 389,303 201,537 Pool AH0979.................................................. 3.50% 01/01/41 187,232 81,123 Pool AH1141.................................................. 4.50% 12/01/40 81,463 118,583 Pool AI6093.................................................. 4.50% 06/01/31 118,114 19,929 Pool AI6581.................................................. 4.50% 07/01/41 20,013 282,375 Pool AI9114.................................................. 4.00% 06/01/42 276,404 1,179,154 Pool AI9124.................................................. 4.00% 08/01/42 1,154,217 905,352 Pool AI9158.................................................. 6.50% 01/01/41 980,788 61,505 Pool AL0212.................................................. 5.50% 02/01/38 63,764 585 Pool AL0399.................................................. 6.00% 08/01/24 582 186 Pool AL0446.................................................. 6.00% 05/01/24 185 477 Pool AL1195.................................................. 6.00% 09/01/23 475 61,974 Pool AL2142.................................................. 6.50% 09/01/38 65,195 515 Pool AL2589.................................................. 5.50% 05/01/25 514 64,474 Pool AL2892.................................................. 3.50% 12/01/42 61,541 385,565 Pool AL3093.................................................. 3.50% 02/01/43 367,979 647 Pool AL4962.................................................. 6.00% 05/01/24 645 469,435 Pool AL5890.................................................. 4.50% 03/01/43 471,406 187 Pool AL6057.................................................. 6.00% 08/01/24 186 17,106 Pool AL6948.................................................. 5.00% 09/01/25 17,179 419,538 Pool AL7637.................................................. 5.00% 01/01/42 420,331 1,072,665 Pool AL7905.................................................. 4.50% 03/01/34 1,066,191 13,407,270 Pool AL9401.................................................. 4.00% 02/01/46 13,108,787 6,946,584 Pool AL9566.................................................. 3.50% 06/01/46 6,595,315 686,820 Pool AL9777.................................................. 4.50% 01/01/47 685,455 9,460,725 Pool AN2973.................................................. 2.84% 10/01/36 8,105,903 181,767 Pool AP1197.................................................. 3.50% 09/01/42 173,537 109,242 Pool AP7963.................................................. 4.00% 09/01/42 107,405 1,479,364 Pool AQ0411.................................................. 3.50% 10/01/42 1,412,405 40,026 Pool AQ9715.................................................. 3.00% 01/01/43 37,015 233,243 Pool AQ9999.................................................. 3.00% 02/01/43 215,696 2,085,246 Pool AS1719.................................................. 5.00% 02/01/44 2,135,006 313,933 Pool AS5236.................................................. 4.00% 05/01/45 302,737 159,691 Pool AS7211.................................................. 3.00% 04/01/46 147,689 186,461 Pool AS9990.................................................. 4.50% 07/01/47 184,075 65,026 Pool AT0332.................................................. 3.00% 04/01/43 58,062 61,565 Pool AY0013.................................................. 4.50% 01/01/45 60,824 237,475 Pool BE3631.................................................. 4.50% 05/01/47 235,939 10,132 Pool BH9428.................................................. 4.50% 09/01/47 10,083 45,276 Pool BJ6232.................................................. 5.00% 04/01/48 45,457 579,477 Pool BJ9100.................................................. 4.50% 02/01/48 583,366 372,017 Pool BJ9111.................................................. 4.50% 03/01/48 372,453 998,459 Pool BJ9124.................................................. 4.50% 04/01/48 1,007,263 214,979 Pool BK4769.................................................. 5.00% 08/01/48 217,459 78,283 Pool BK4851.................................................. 5.00% 05/01/48 78,369 6,000,000 Pool BL0516.................................................. 4.09% 12/01/38 5,846,652 </TABLE> Page 24 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (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) $ 12,004,541 Pool BM3867.................................................. 4.00% 02/01/46 $ 11,750,795 4,382,405 Pool BM4785.................................................. 4.50% 10/01/38 4,454,789 5,361,226 Pool BM5671.................................................. 4.50% 01/01/49 5,352,226 903,898 Pool BN4059.................................................. 4.00% 12/01/48 863,590 5,981,462 Pool BT9397.................................................. 2.50% 11/01/41 5,297,716 4,681,180 Pool BV7981.................................................. 4.50% 08/01/37 4,661,418 2,611,065 Pool BV7982.................................................. 4.50% 08/01/37 2,601,874 4,412,441 Pool BV8046.................................................. 4.50% 09/01/52 4,391,851 3,723,152 Pool CA2947.................................................. 4.00% 12/01/48 3,616,733 13,659,394 Pool CB3540.................................................. 3.00% 05/01/42 12,486,479 1,730,086 Pool FM1284.................................................. 3.50% 02/01/46 1,651,298 1,594,162 Pool FM1285.................................................. 4.00% 10/01/43 1,560,481 4,928,061 Pool FM2450.................................................. 3.50% 12/01/39 4,741,588 28,333,264 Pool FM2863.................................................. 3.50% 09/01/48 26,769,152 81,635,566 Pool FM2972.................................................. 4.00% 12/01/44 79,909,771 94,940,221 Pool FM3003.................................................. 4.00% 05/01/49 92,888,945 6,709,201 Pool FM8218.................................................. 4.00% 04/01/48 6,557,472 4,708,272 Pool FM9408.................................................. 4.50% 06/01/46 4,693,356 13,658,441 Pool FS0045.................................................. 3.00% 09/01/47 12,575,870 14,817,602 Pool FS0074.................................................. 3.00% 01/01/47 13,750,782 49,384,104 Pool FS0697.................................................. 2.50% 02/01/42 43,927,788 38,391,171 Pool FS0742.................................................. 3.50% 05/01/44 36,639,032 15,290,207 Pool FS1540.................................................. 3.00% 04/01/42 14,053,545 28,510,949 Pool FS1541.................................................. 3.00% 04/01/42 26,133,126 38,299,428 Pool FS1797.................................................. 3.50% 07/01/46 36,566,547 9,455,015 Pool FS1884.................................................. 4.00% 05/01/42 9,196,405 46,900,277 Pool FS2044.................................................. 4.50% 07/01/44 47,115,758 37,418,863 Pool FS2045.................................................. 4.50% 12/01/43 37,446,314 27,698,640 Pool FS2127.................................................. 3.50% 06/01/48 26,239,025 8,760,039 Pool FS2787.................................................. 4.00% 10/01/48 8,574,986 17,029,540 Pool FS2796.................................................. 3.50% 08/01/47 16,148,192 13,539,367 Pool FS2871.................................................. 3.50% 07/01/42 12,893,203 13,619,376 Pool FS2872.................................................. 3.50% 08/01/42 12,931,676 18,199,241 Pool FS2925.................................................. 3.00% 08/01/48 16,772,360 1,878,283 Pool FS4013.................................................. 4.00% 04/01/42 1,838,667 27,428,280 Pool FS4014.................................................. 4.50% 09/01/37 27,367,097 1,808,847 Pool FS4015.................................................. 5.50% 03/01/49 1,875,495 65,948 Pool MA0096.................................................. 4.50% 06/01/29 65,816 1,624 Pool MA0293.................................................. 4.50% 01/01/30 1,621 26,588 Pool MA0295.................................................. 5.00% 01/01/30 26,975 22,402 Pool MA0353.................................................. 4.50% 03/01/30 22,357 2,810 Pool MA0777.................................................. 5.00% 06/01/31 2,852 26,661 Pool MA1222.................................................. 4.00% 10/01/32 26,034 46,171 Pool MA1228.................................................. 3.00% 09/01/42 42,699 1,896 Pool MA2509.................................................. 3.00% 01/01/46 1,713 157,823 Pool MA3101.................................................. 4.50% 08/01/47 157,070 95,155 Pool MA3123.................................................. 5.00% 08/01/47 96,261 15,000,000 Pool TBA..................................................... 2.50% 05/15/53 12,989,355 24,000,000 Pool TBA (j)................................................. 3.50% 05/15/53 22,301,250 40,000,000 Pool TBA..................................................... 4.50% 05/15/53 39,104,687 45,100,000 Pool TBA..................................................... 5.00% 05/15/53 44,844,550 123,000,000 Pool TBA (j)................................................. 5.00% 06/15/38 123,512,221 </TABLE> See Notes to Financial Statements Page 25
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (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) $ 105,000,000 Pool TBA (j)................................................. 2.50% 06/15/53 $ 91,056,738 110,000,000 Pool TBA (j)................................................. 3.00% 06/15/53 98,931,251 20,000,000 Pool TBA (j)................................................. 3.50% 06/15/53 18,603,125 37,000,000 Pool TBA (j)................................................. 4.50% 06/15/53 36,189,179 Government National Mortgage Association 48,368 Pool 3149.................................................... 6.00% 10/20/31 50,363 31,099 Pool 3172.................................................... 6.00% 12/20/31 32,816 33,963 Pool 3227.................................................... 6.00% 04/20/32 35,216 6,881 Pool 3474.................................................... 6.00% 11/20/33 7,199 17,735 Pool 4251.................................................... 5.50% 10/20/23 17,711 24,058 Pool 455986.................................................. 5.25% 07/15/25 23,858 63,915 Pool 487108.................................................. 6.00% 04/15/29 65,554 27,376 Pool 553144.................................................. 5.50% 04/15/33 28,048 88,773 Pool 604338.................................................. 5.00% 05/15/33 92,016 60,616 Pool 604897.................................................. 5.00% 12/15/33 62,823 83,594 Pool 605389.................................................. 5.00% 04/15/34 86,637 200,888 Pool 615403.................................................. 4.50% 08/15/33 202,039 7,304 Pool 627123.................................................. 5.50% 03/15/34 7,523 67,774 Pool 638704.................................................. 5.50% 11/15/36 69,579 142,083 Pool 653143.................................................. 4.90% 04/15/36 146,136 233,218 Pool 658324.................................................. 5.50% 03/15/37 238,159 108,037 Pool 677190.................................................. 5.00% 06/15/38 111,663 14,120 Pool 687833.................................................. 6.00% 08/15/38 14,768 40,389 Pool 706840.................................................. 4.50% 05/15/40 40,946 183,854 Pool 706855.................................................. 4.50% 09/15/40 186,387 223,647 Pool 711483.................................................. 4.00% 01/15/40 220,551 102,543 Pool 711543.................................................. 4.00% 11/15/40 101,129 701,433 Pool 711563.................................................. 4.50% 03/15/41 711,088 4,117,295 Pool 720225.................................................. 4.50% 07/15/39 4,135,861 199,028 Pool 723216.................................................. 4.50% 08/15/40 201,585 57,742 Pool 723248.................................................. 5.00% 10/15/39 59,497 220,380 Pool 724230.................................................. 5.00% 08/15/39 226,542 56,506 Pool 724267.................................................. 5.00% 09/15/39 58,086 135,124 Pool 724340.................................................. 4.50% 09/15/39 136,078 78,445 Pool 725272.................................................. 4.50% 11/15/39 79,163 35,511 Pool 726394.................................................. 4.50% 10/15/39 35,899 8,325 Pool 728921.................................................. 4.50% 12/15/24 8,271 183,439 Pool 733595.................................................. 4.50% 04/15/40 185,442 62,159 Pool 733733.................................................. 5.00% 06/15/40 63,877 466,108 Pool 736317.................................................. 4.25% 06/20/36 456,330 94,967 Pool 736617.................................................. 4.00% 12/15/35 93,537 646,420 Pool 737673.................................................. 4.50% 11/15/40 654,621 158,854 Pool 737996.................................................. 4.00% 02/15/41 155,870 234,394 Pool 739341.................................................. 3.50% 10/15/41 227,790 134,602 Pool 743673.................................................. 4.50% 07/15/40 136,456 226,977 Pool 745478.................................................. 5.00% 08/20/40 227,879 514,075 Pool 748939.................................................. 4.00% 09/20/40 500,900 71,400 Pool 754384.................................................. 4.50% 03/20/42 73,116 273,580 Pool 762905.................................................. 4.50% 04/15/41 276,589 916,354 Pool 769102.................................................. 4.50% 07/20/41 922,724 256,541 Pool 781623.................................................. 5.00% 06/15/33 261,973 40,573 Pool 781697.................................................. 6.00% 11/15/33 42,797 </TABLE> Page 26 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (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) $ 210,844 Pool 781824.................................................. 5.50% 11/15/34 $ 218,795 8,378 Pool 781862.................................................. 5.50% 01/15/35 8,635 20,376 Pool 782070.................................................. 7.00% 06/15/32 20,948 41,240 Pool 782810.................................................. 4.50% 11/15/39 41,801 66,418 Pool 783091.................................................. 5.50% 06/15/40 69,492 6,715 Pool 783220.................................................. 5.50% 09/15/24 6,710 114,130 Pool 783375.................................................. 5.00% 08/15/41 116,848 179,493 Pool 783760.................................................. 5.00% 02/15/42 185,986 2,639,796 Pool 784063.................................................. 5.00% 09/20/45 2,686,002 380,527 Pool 784343.................................................. 5.00% 02/15/41 393,896 3,561,180 Pool 784752.................................................. 4.00% 03/15/45 3,511,874 1,384,099 Pool 785020.................................................. 3.00% 05/20/50 1,229,574 1,862,041 Pool AC0197.................................................. 4.00% 12/20/42 1,837,312 358,832 Pool AD0026.................................................. 3.50% 06/20/33 346,857 69,374 Pool AD0856.................................................. 3.75% 08/20/33 68,185 35,080 Pool AG8899.................................................. 4.00% 12/20/43 34,268 537,399 Pool AI6317.................................................. 4.50% 06/20/44 533,210 397,929 Pool AK2389.................................................. 4.50% 11/20/44 394,152 104,313 Pool AN4469.................................................. 5.00% 12/15/40 106,549 180,320 Pool AR8421.................................................. 5.00% 10/20/41 180,830 858,458 Pool BB1216.................................................. 4.50% 06/20/47 853,355 419,924 Pool BB4731.................................................. 4.00% 07/20/47 408,241 285,570 Pool BB4757.................................................. 4.00% 08/20/47 281,210 162,924 Pool BB4769.................................................. 4.00% 08/20/47 158,640 285,408 Pool BD0483.................................................. 4.50% 11/20/47 282,830 387,640 Pool BF0415.................................................. 5.00% 06/20/35 388,659 270,436 Pool BL6909.................................................. 5.00% 03/20/49 271,475 724,029 Pool CB3161.................................................. 5.50% 03/20/50 733,873 117,432 Pool MA1017.................................................. 6.00% 05/20/43 123,922 82,574 Pool MA1162.................................................. 6.00% 07/20/43 87,113 10,771 Pool MA2215.................................................. 3.50% 09/20/44 10,043 73,788 Pool MA2683.................................................. 6.00% 03/20/45 77,818 76,611 Pool MA2759.................................................. 6.00% 01/20/45 80,839 36,407 Pool MA2897.................................................. 6.00% 03/20/45 38,421 155,766 Pool MA2966.................................................. 6.00% 09/20/39 164,356 157,686 Pool MA3249.................................................. 6.00% 04/20/40 166,389 322,573 Pool MA3459.................................................. 6.00% 08/20/39 340,196 247,235 Pool MA4076.................................................. 7.00% 01/20/39 261,931 2,255,146 Pool MA5714.................................................. 6.00% 01/20/49 2,378,963 ---------------- 1,470,597,065 ---------------- TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES..................................... 3,595,220,336 (Cost $3,757,535,597) ---------------- MORTGAGE-BACKED SECURITIES -- 14.4% COLLATERALIZED MORTGAGE OBLIGATIONS -- 8.4% Arroyo Mortgage Trust 9,000,000 Series 2019-2, Class M1 (i).................................. 4.76% 04/25/49 8,168,966 2,470,789 Series 2019-3, Class A3 (i).................................. 3.42% 10/25/48 2,292,528 2,605,677 Series 2021-1R, Class A2 (i)................................. 1.48% 10/25/48 2,163,593 3,597,397 Series 2021-1R, Class A3 (i)................................. 1.64% 10/25/48 2,984,664 </TABLE> See Notes to Financial Statements Page 27
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------ ------------ ---------------- <S> <C> <C> <C> <C> MORTGAGE-BACKED SECURITIES (CONTINUED) COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED) BRAVO Residential Funding Trust $ 1,706,493 Series 2021-NQM1, Class A2 (i)............................... 1.26% 02/25/49 $ 1,508,312 4,266,233 Series 2021-NQM1, Class A3 (i)............................... 1.33% 02/25/49 3,744,365 2,628,769 Series 2021-NQM2, Class A1 (i)............................... 0.97% 03/25/60 2,464,400 9,761,580 Series 2023-NQM1, Class A1, steps up to 6.76% on 01/01/27 (i) (k).......................................... 5.76% 01/25/63 9,755,212 Chase Home Lending Mortgage Trust 1,357,965 Series 2019-ATR2, Class A11, 1 Mo. LIBOR + 0.90% (a) (i)............................................. 5.75% 07/25/49 1,297,400 CHL Mortgage Pass-Through Trust 29,528 Series 2004-8, Class 2A1..................................... 4.50% 06/25/19 17,495 CIM Trust 1,924,451 Series 2018-J1, Class A22 (i)................................ 3.50% 03/25/48 1,763,963 1,527,302 Series 2019-INV1, Class A11 (i).............................. 4.00% 02/25/49 1,458,024 Citigroup Global Markets Mortgage Securities VII, Inc. 232 Series 2003-UP2, Class PO1, PO............................... (d) 12/25/18 204 Citigroup Mortgage Loan Trust 5,242,741 Series 2018-RP2, Class A1 (i)................................ 3.50% 02/25/58 5,052,689 COLT Mortgage Loan Trust 11,063,343 Series 2022-5, Class A1 (i).................................. 4.55% 04/25/67 10,869,164 Connecticut Avenue Securities Trust 10,074,000 Series 2019-R01, Class 2B1, 1 Mo. LIBOR + 4.35% (a) (i)...... 9.37% 07/25/31 10,543,763 2,231,872 Series 2019-R01, Class 2M2, 1 Mo. LIBOR + 2.45% (a) (i)...... 7.47% 07/25/31 2,237,915 547,376 Series 2019-R02, Class 1M2, 1 Mo. LIBOR + 2.30% (a) (i)...... 7.32% 08/25/31 547,414 CSMC Trust 4,049,690 Series 2018-RPL9, Class A1 (a) (i)........................... 3.85% 09/25/57 3,934,617 EFMT 9,778,575 Series 2023-1, Class A1, steps up to 6.73% on 01/01/27 (i) (k).......................................... 5.73% 02/25/68 9,786,609 Ellington Financial Mortgage Trust 5,793,648 Series 2022-2, Class A1 (i).................................. 4.30% 04/25/67 5,622,899 Federal Home Loan Mortgage Corporation STACR Debt Notes 10,757,594 Series 2020-HQA5, Class M2, 30 Day Average SOFR + 2.60% (a) (i)............................................. 7.42% 11/25/50 10,763,313 Federal Home Loan Mortgage Corporation STACR REMIC Trust 982,385 Series 2020-DNA1, Class M2, 1 Mo. LIBOR + 1.70% (a) (i)............................................. 6.72% 01/25/50 977,815 10,007,047 Series 2020-HQA2, Class M2, 1 Mo. LIBOR + 3.10% (a) (i)............................................. 8.12% 03/25/50 10,246,895 Federal Home Loan Mortgage Corporation STACR Trust 4,000,000 Series 2019-DNA3, Class B1, 1 Mo. LIBOR + 3.25% (a) (i)...... 8.27% 07/25/49 4,111,691 11,275,000 Series 2019-DNA4, Class B1, 1 Mo. LIBOR + 2.70% (a) (i)...... 7.72% 10/25/49 11,362,742 8,750,000 Series 2019-HQA1, Class B1, 1 Mo. LIBOR + 4.40% (a) (i)...... 9.42% 02/25/49 9,242,430 Flagstar Mortgage Trust 280,664 Series 2018-2, Class A4 (i).................................. 3.50% 04/25/48 273,875 3,760,092 Series 2018-4, Class B1 (e) (i).............................. 4.20% 07/25/48 3,471,189 1,548,475 Series 2019-2, Class A11 (i)................................. 3.50% 12/25/49 1,422,332 16,649,209 Series 2021-9INV, Class A1 (i)............................... 2.50% 09/25/41 14,692,781 GCAT Trust 6,480,594 Series 2021-NQM7, Class A1 (i)............................... 1.92% 08/25/66 5,680,662 GMACM Mortgage Loan Trust 723 Series 2003-J10, Class A1.................................... 4.75% 01/25/19 709 </TABLE> Page 28 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (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 Trust $ 656,245 Series 2019-PJ3, Class A1 (i)................................ 3.50% 03/25/50 $ 616,329 6,815,257 Series 2020-PJ5, Class A2 (c) (i)............................ 3.00% 03/27/51 5,950,543 3,498,570 Series 2021-PJ6, Class A8 (i)................................ 2.50% 11/25/51 3,067,080 Homeward Opportunities Fund Trust 3,239,355 Series 2022-1, Class A1, steps up to 6.08% on 06/01/26 (i) (k).......................................... 5.08% 07/25/67 3,181,708 JP Morgan Mortgage Trust 4,762 Series 2004-S2, Class 5A1.................................... 5.50% 12/25/19 4,342 1,108 Series 2014-IVR3, Class 2A1 (e) (i).......................... 4.31% 09/25/44 1,099 3,271,920 Series 2015-IVR2, Class A5 (e) (i)........................... 6.17% 01/25/45 3,234,302 1,732,850 Series 2018-5, Class A1 (i).................................. 3.50% 10/25/48 1,572,963 1,199,546 Series 2018-5, Class A13 (i)................................. 3.50% 10/25/48 1,060,889 1,335,526 Series 2018-8, Class A7 (i).................................. 4.00% 01/25/49 1,267,692 1,582,456 Series 2019-1, Class A5 (i).................................. 4.00% 05/25/49 1,502,858 678,422 Series 2019-8, Class A15 (i)................................. 3.50% 03/25/50 620,555 1,200,014 Series 2019-INV2, Class A15 (i).............................. 3.50% 02/25/50 1,099,102 1,238 Series 2019-LTV2, Class A11, 1 Mo. LIBOR + 0.90% (a) (i)............................................. 5.92% 12/25/49 1,238 6,587,456 Series 2020-4, Class A3 (i).................................. 3.00% 11/25/50 5,770,290 4,281,968 Series 2020-INV1, Class A15 (i).............................. 3.50% 08/25/50 3,852,366 JP Morgan Wealth Management 10,000,000 Series 2020-ATR1, Class A5 (i)............................... 3.00% 02/25/50 8,343,057 Mello Mortgage Capital Acceptance 4,032,931 Series 2018-MTG2, Class A9 (i)............................... 4.34% 10/25/48 3,893,058 MetLife Securitization Trust 3,723,124 Series 2018-1A, Class A (i).................................. 3.75% 03/25/57 3,545,855 MFA Trust 8,969,132 Series 2022-INV1, Class A1, steps up to 4.91% on 03/25/26 (i) (k).......................................... 3.91% 04/25/66 8,594,732 Mill City Mortgage Loan Trust 1,098,670 Series 2018-2, Class A1 (e) (i).............................. 3.50% 05/25/58 1,074,223 4,408,765 Series 2018-4, Class A1B (i)................................. 3.50% 04/25/66 4,259,664 New Residential Mortgage Loan Trust 5,109,872 Series 2015-2A, Class B1 (i)................................. 4.50% 08/25/55 4,900,121 3,851,067 Series 2016-1A, Class A1 (i)................................. 3.75% 03/25/56 3,622,586 9,128,949 Series 2018-3A, Class A1 (i)................................. 4.50% 05/25/58 8,924,229 2,223,959 Series 2018-4A, Class A1M, 1 Mo. LIBOR + 0.90% (a) (i)....... 5.92% 01/25/48 2,164,162 16,224,990 Series 2018-4A, Class A1S, 1 Mo. LIBOR + 0.75% (a) (i)....... 5.77% 01/25/48 15,764,744 4,616,270 Series 2019-NQM5, Class A1 (i)............................... 2.71% 11/25/59 4,294,688 OBX Trust 1,366,605 Series 2018-EXP1, Class 1A3 (i).............................. 4.00% 04/25/48 1,296,064 657,423 Series 2018-EXP1, Class 2A1, 1 Mo. LIBOR + 0.85% (a) (i)............................................. 5.87% 04/25/48 652,226 PRKCM Trust 7,964,307 Series 2021-AFC1, Class A1 (i)............................... 1.51% 08/25/56 6,415,543 Provident Funding Mortgage Trust 1,280,671 Series 2019-1, Class A5 (i).................................. 3.00% 12/25/49 1,120,800 2,706,846 Series 2020-1, Class A5 (i).................................. 3.00% 02/25/50 2,378,436 PSMC Trust 3,061,359 Series 2020-3, Class A1 (i).................................. 3.00% 11/25/50 2,693,587 RUN Trust 9,214,805 Series 2022-NQM1, Class A1 (i)............................... 4.00% 03/25/67 8,660,566 </TABLE> See Notes to Financial Statements Page 29
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------ ------------ ---------------- <S> <C> <C> <C> <C> MORTGAGE-BACKED SECURITIES (CONTINUED) COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED) Seasoned Credit Risk Transfer Trust $ 6,664,404 Series 2017-2, Class M1 (i).................................. 4.00% 08/25/56 $ 6,507,999 Sequoia Mortgage Trust 1,744,133 Series 2017-2, Class A19 (i)................................. 3.50% 02/25/47 1,588,567 435,048 Series 2017-CH1, Class A13 (i)............................... 4.00% 08/25/47 417,754 5,182,913 Series 2018-CH1, Class B1B (i)............................... 4.45% 03/25/48 4,839,067 3,394,657 Series 2020-1, Class A19 (i)................................. 3.50% 02/25/50 3,098,182 9,957,661 Series 2020-1, Class A7 (i).................................. 3.50% 02/25/50 9,088,001 Starwood Mortgage Residential Trust 2022-3 8,243,660 Series 2022-3, Class A1 (i).................................. 4.16% 03/25/67 7,942,998 TIAA Bank Mortgage Loan Trust 767,962 Series 2018-3, Class A1 (i).................................. 4.00% 11/25/48 729,731 Towd Point Mortgage Trust 4,877 Series 2015-3, Class A4B (i)................................. 3.50% 03/25/54 4,866 11,444,671 Series 2018-3, Class A1 (i).................................. 3.75% 05/25/58 11,000,264 12,459,939 Series 2019-1, Class A1 (i).................................. 3.75% 03/25/58 11,921,872 Verus Securitization Trust 2,303,791 Series 2019-INV3, Class A2 (i)............................... 2.95% 11/25/59 2,202,737 6,255,000 Series 2020-INV1, Class A3, steps up to 4.89% on 05/26/24 (i) (k).......................................... 3.89% 03/25/60 5,994,014 6,273,869 Series 2021-3, Class A1 (i).................................. 1.05% 06/25/66 5,303,301 11,337,430 Series 2022-5, Class A1, steps up to 4.80% on 06/25/26 (i) (k).......................................... 3.80% 04/25/67 10,605,153 Vista Point Securitization Trust 5,743,000 Series 2020-1, Class M1 (i).................................. 4.15% 03/25/65 5,258,711 Wells Fargo Mortgage Backed Securities Trust 326,091 Series 2019-1, Class A1 (i).................................. 3.94% 11/25/48 312,987 WinWater Mortgage Loan Trust 1,127,836 Series 2016-1, Class 1A18 (i)................................ 3.50% 01/20/46 1,029,747 1,544,950 Series 2016-1, Class 2A3 (i)................................. 3.00% 12/20/30 1,455,648 3,606,124 Series 2016-1, Class B1 (e) (i).............................. 3.77% 01/20/46 3,412,390 ---------------- 376,576,316 ---------------- COMMERCIAL MORTGAGE-BACKED SECURITIES -- 6.0% Austin Fairmont Hotel Trust 5,000,000 Series 2019-FAIR, Class A, 1 Mo. LIBOR + 1.05% (a) (i)....... 6.00% 09/15/32 4,927,840 BAMLL Commercial Mortgage Securities Trust 8,000,000 Series 2013-WBRK, Class A (e) (i)............................ 3.65% 03/10/37 7,383,426 BANK 5,000,000 Series 2021-BNK35, Class A5.................................. 2.29% 06/15/64 4,137,488 5,000,000 Series 2022-BNK43, Class A5.................................. 4.40% 08/15/55 4,826,984 BBCMS Mortgage Trust 7,000,000 Series 2017-DELC, Class A, 1 Mo. LIBOR + 0.98% (a) (i)....... 5.92% 08/15/36 6,976,356 9,394,000 Series 2018-TALL, Class A, 1 Mo. LIBOR + 0.87% (a) (i)....... 5.82% 03/15/37 8,414,064 Benchmark Mortgage Trust 4,647,000 Series 2021-B24, Class A5.................................... 2.58% 03/15/54 3,877,995 3,800,000 Series 2022-B36, Class A5.................................... 4.47% 07/15/55 3,669,710 BMO Mortgage Trust 10,000,000 Series 2022-C1, Class A5..................................... 3.37% 02/15/55 8,889,332 BPR Trust 4,721,277 Series 2021-WILL, Class A, 1 Mo. LIBOR + 1.75% (a) (i)....... 6.70% 06/15/38 4,561,553 10,000,000 Series 2022-OANA, Class A, 1 Mo. CME Term SOFR + 1.90% (a) (i)............................................. 6.79% 04/15/37 9,758,335 </TABLE> Page 30 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (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) BX Commercial Mortgage Trust $ 10,000,000 Series 2019-IMC, Class A, 1 Mo. LIBOR + 1.00% (a) (i)........ 5.95% 04/15/34 $ 9,841,425 CFCRE Commercial Mortgage Trust 68,273,710 Series 2017-C8, Class XA, IO (e)............................. 1.64% 06/15/50 3,087,760 Citigroup Commercial Mortgage Trust 2,915,000 Series 2014-GC23, Class B.................................... 4.18% 07/10/47 2,791,184 88,222,078 Series 2016-P4, Class XA, IO (e)............................. 2.05% 07/10/49 4,018,974 9,243,411 Series 2017-P7, Class A3..................................... 3.44% 04/14/50 8,701,887 COMM Mortgage Trust 3,846,053 Series 2012-CR3, Class AM (i)................................ 3.42% 10/15/45 3,471,737 10,000,000 Series 2013-CR13, Class AM................................... 4.45% 11/10/46 9,844,023 11,475,000 Series 2014-CR15, Class AM................................... 4.43% 02/10/47 11,230,693 6,850,000 Series 2014-CR21, Class AM................................... 3.99% 12/10/47 6,567,444 CSAIL Commercial Mortgage Trust 57,082,817 Series 2020-C19, Class XA, IO (e)............................ 1.23% 03/15/53 3,169,535 CSMC Trust 7,500,000 Series 2020-WEST, Class A (i)................................ 3.04% 02/15/35 5,716,380 DBWF Mortgage Trust 10,844,968 Series 2018-GLKS, Class A, 1 Mo. LIBOR + 1.13% (a) (i)....... 6.08% 12/19/30 10,667,073 FIVE Mortgage Trust 33,894,130 Series 2023-V1, Class XA, IO (a)............................. 1.04% 02/10/56 1,155,492 FREMF Mortgage Trust 725,913,865 Series 2020-1515, Class X2A, IO (i).......................... 0.10% 02/25/35 5,367,661 Hawaii Hotel Trust 9,290,000 Series 2019-MAUI, Class A, 1 Mo. LIBOR + 1.15% (a) (i)....... 6.10% 05/15/38 9,127,710 JP Morgan Chase Commercial Mortgage Securities Trust 4,060,488 Series 2017-JP5, Class A4.................................... 3.46% 03/15/50 3,897,396 10,466,125 Series 2018-PHH, Class A, 1 Mo. LIBOR + 1.21%, 2.41% Floor (a) (i)............................................. 6.16% 06/15/35 9,684,546 5,000,000 Series 2020-ACE, Class A (i)................................. 3.29% 01/10/37 4,736,731 MHC Commercial Mortgage Trust 6,335,000 Series 2021-MHC, Class A, 1 Mo. LIBOR + 0.92% (a) (i)........ 5.81% 04/15/38 6,192,622 Morgan Stanley Bank of America Merrill Lynch Trust 8,015,000 Series 2014-C15, Class AS.................................... 4.26% 04/15/47 7,830,871 6,504,860 Series 2016-C31, Class A4.................................... 2.84% 11/15/49 6,037,541 Morgan Stanley Capital I Trust 7,527,000 Series 2018-MP, Class A (e) (i).............................. 4.42% 07/11/40 6,282,293 6,648,000 Series 2019-H7, Class A4..................................... 3.26% 07/15/52 6,014,442 RBS Commercial Funding, Inc. Trust 7,045,000 Series 2013-GSP, Class A (e) (i)............................. 3.96% 01/15/32 6,835,878 Ready Capital Mortgage Financing LLC 8,547,529 Series 2021-FL6, Class A, 1 Mo. LIBOR + 0.95% (a) (i)........ 5.97% 07/25/36 8,323,096 RIAL 2022-FL8 Issuer Ltd. 4,428,000 Series 2022-FL8, Class A, 1 Mo. CME Term SOFR + 2.25% (a) (i)............................................. 7.14% 01/19/37 4,361,580 UBS Commercial Mortgage Trust 10,000,000 Series 2017-C3, Class A3..................................... 3.17% 08/15/50 9,345,041 VMC Finance LLC 2,983,500 Series 2021-HT1, Class A, 1 Mo. LIBOR + 1.65% (a) (i)........ 6.61% 01/18/37 2,880,942 Wells Fargo Commercial Mortgage Trust 3,036,499 Series 2015-LC22, Class ASB.................................. 3.57% 09/15/58 2,957,011 7,500,000 Series 2015-NXS2, Class B (e)................................ 4.42% 07/15/58 7,059,449 7,200,000 Series 2019-C52, Class A5.................................... 2.89% 08/15/52 6,366,819 </TABLE> See Notes to Financial Statements Page 31
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (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) Wells Fargo Commercial Mortgage Trust $ 5,450,000 Series 2020-SDAL, Class C, 1 Mo. LIBOR + 1.74% (a) (i)....... 6.69% 02/15/37 $ 5,251,085 ---------------- 266,239,404 ---------------- TOTAL MORTGAGE-BACKED SECURITIES............................................................ 642,815,720 (Cost $670,613,571) ---------------- U.S. GOVERNMENT BONDS AND NOTES -- 6.1% 3,222,725 U.S. Treasury Inflation Indexed Note (l)........................ 0.63% 01/15/24 3,178,596 60,000,000 U.S. Treasury Note (m).......................................... 2.75% 11/15/23 59,291,402 70,000,000 U.S. Treasury Note.............................................. 2.88% 11/30/23 69,211,733 46,000,000 U.S. Treasury Note.............................................. 2.63% 12/31/23 45,311,470 25,000,000 U.S. Treasury Note.............................................. 4.25% 10/15/25 25,211,426 67,000,000 U.S. Treasury Note.............................................. 4.00% 02/15/26 67,389,961 ---------------- TOTAL U.S. GOVERNMENT BONDS AND NOTES....................................................... 269,594,588 (Cost $268,045,069) ---------------- ASSET-BACKED SECURITIES -- 3.2% American Credit Acceptance Receivables Trust 104,557 Series 2022-1, Class A (i)................................... 0.99% 12/15/25 104,384 9,000,000 Series 2022-1, Class B (i)................................... 1.68% 09/14/26 8,896,212 1,129,800 Series 2022-2, Class A (i)................................... 2.66% 02/13/26 1,126,956 AMSR Trust 5,053,000 Series 2020-SFR4, Class A (i)................................ 1.36% 11/17/37 4,609,999 3,860,000 Series 2020-SFR5, Class A (i)................................ 1.38% 11/17/37 3,521,245 CFMT LLC 4,052,000 Series 2021-EBO1, Class M1 (i)............................... 1.65% 11/25/50 3,674,126 CIG Auto Receivables Trust 1,435,804 Series 2021-1A, Class A (i).................................. 0.69% 04/14/25 1,422,211 Corevest American Finance Trust 5,788,513 Series 2020-1, Class A1 (i).................................. 1.83% 03/15/50 5,495,213 9,499,378 Series 2020-3, Class A (i)................................... 1.36% 08/15/53 8,623,538 6,255,301 Series 2020-4, Class A (i)................................... 1.17% 12/15/52 5,670,024 CWABS, Inc. Asset-Backed Certificates Trust 2,122,536 Series 2004-5, Class M1, 1 Mo. LIBOR + 0.86% (a)............. 5.88% 08/25/34 2,098,031 Diamond Resorts Owner Trust 4,297,219 Series 2021-1A, Class A (i).................................. 1.51% 11/21/33 3,987,165 DT Auto Owner Trust 1,372,025 Series 2021-4A, Class A (i).................................. 0.56% 09/15/25 1,358,923 FCI Funding LLC 613,122 Series 2019-1A, Class A (i).................................. 3.63% 02/18/31 606,857 FirstKey Homes Trust 9,869,322 Series 2020-SFR2, Class A (i)................................ 1.27% 10/19/37 8,986,953 Flagship Credit Auto Trust 10,143,200 Series 2021-4, Class A (i)................................... 0.81% 07/17/26 9,859,576 7,130,732 Series 2022-1, Class A (i)................................... 1.79% 10/15/26 6,936,167 FNA VI LLC 6,680,040 Series 2021-1A, Class A (i).................................. 1.35% 01/10/32 6,087,778 GLS Auto Receivables Issuer Trust 5,131,246 Series 2021-4A, Class A (i).................................. 0.84% 07/15/25 5,081,897 GSAMP Trust 4,279,372 Series 2006-SEA1, Class M2, 1 Mo. LIBOR + 1.65% (a) (i)...... 6.67% 05/25/36 4,312,743 </TABLE> Page 32 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------ ------------ ---------------- <S> <C> <C> <C> <C> ASSET-BACKED SECURITIES (CONTINUED) M360 Ltd. $ 5,000,000 Series 2021-CRE3, Class A, 1 Mo. LIBOR + 1.50% (a) (i)....... 6.51% 11/22/38 $ 4,924,436 OSCAR US Funding XIV LLC 5,143,123 Series 2022-1A, Class A2 (i)................................. 1.60% 03/10/25 5,070,171 Santander Drive Auto Receivables Trust 12,384,122 Series 2022-1, Class A3...................................... 1.94% 11/17/25 12,284,528 4,925,381 Series 2022-5, Class A2...................................... 3.98% 01/15/25 4,913,135 Sierra Timeshare Receivables Funding LLC 1,551,084 Series 2019-1A, Class A (i).................................. 3.20% 01/20/36 1,490,717 3,442,279 Series 2020-2A, Class A (i).................................. 1.33% 07/20/37 3,209,608 Tricon American Homes 9,346,446 Series 2020-SFR1, Class A (i)................................ 1.50% 07/17/38 8,458,418 Verizon Master Trust 10,000,000 Series 2022-7, Class A1A, steps up to 5.98% on 11/20/24 (k).............................................. 5.23% 11/22/27 10,037,778 ---------------- TOTAL ASSET-BACKED SECURITIES............................................................... 142,848,789 (Cost $146,238,477) ---------------- </TABLE> <TABLE> <CAPTION> SHARES DESCRIPTION VALUE ---------------- -------------------------------------------------------------------------------------------- ---------------- <S> <C> <C> EXCHANGE-TRADED FUNDS -- 0.0% CAPITAL MARKETS -- 0.0% 74,159 First Trust Long Duration Opportunities ETF (n)............................................. 1,691,567 (Cost $1,796,670) ---------------- </TABLE> <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------ ------------ ---------------- <S> <C> <C> <C> <C> U.S. TREASURY BILLS -- 1.3% 20,000,000 U.S. Treasury Bill (m).......................................... (d) 06/20/23 19,866,250 40,000,000 U.S. Treasury Bill (m).......................................... (d) 07/20/23 39,564,889 ---------------- TOTAL U.S. TREASURY BILLS................................................................... 59,431,139 (Cost $59,422,499) ---------------- TOTAL INVESTMENTS -- 105.8%................................................................. 4,711,602,139 (Cost $4,903,651,883) ---------------- </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% 800 U.S. 2-Year Treasury Futures Call................ $ 82,465,624 $ 103.00 05/26/23 687,501 150 U.S. 2-Year Treasury Futures Call................ 15,462,305 103.75 05/26/23 51,562 50 U.S. 5-Year Treasury Futures Call................ 5,487,109 109.50 05/26/23 42,969 ---------------- TOTAL CALL OPTIONS PURCHASED................................................................ 782,032 (Cost $1,114,733) ---------------- PUT OPTIONS PURCHASED -- 0.0% 30 U.S. 10-Year Treasury Futures Put................ 3,456,094 112.50 05/26/23 4,219 100 U.S. Treasury Long Bond Futures Put.............. 13,165,625 129.00 05/26/23 68,750 200 U.S. Treasury Long Bond Futures Put.............. 26,331,250 130.00 05/26/23 200,000 100 U.S. Treasury Long Bond Futures Put.............. 13,165,625 131.00 05/26/23 140,625 ---------------- TOTAL PUT OPTIONS PURCHASED................................................................. 413,594 (Cost $1,261,439) ---------------- TOTAL PURCHASED OPTIONS..................................................................... 1,195,626 (Cost $2,376,172) ---------------- </TABLE> See Notes to Financial Statements Page 33
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------ ------------ ---------------- <S> <C> <C> <C> <C> U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES SOLD SHORT -- (2.9)% Federal National Mortgage Association $ (15,000,000) Pool TBA..................................................... 5.50% 06/15/53 $ (15,121,875) (118,500,000) Pool TBA (j)................................................. 4.00% 06/15/53 (113,389,686) (3,250,000) Pool TBA..................................................... 5.00% 06/15/53 (3,232,100) ---------------- TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES SOLD SHORT.......................... (131,743,661) (Proceeds $131,257,285) ---------------- </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)% (575) U.S. 2-Year Treasury Futures Call................ $ (59,272,167) $ 102.50 05/26/23 (835,548) (500) U.S. 2-Year Treasury Futures Call................ (51,541,015) 104.00 05/26/23 (125,000) (225) U.S. 5-Year Treasury Futures Call................ (24,691,991) 108.00 05/26/23 (421,875) (400) U.S. 5-Year Treasury Futures Call................ (43,896,872) 109.00 05/26/23 (456,250) (75) U.S. 5-Year Treasury Futures Call................ (8,230,664) 110.50 05/26/23 (34,570) (25) U.S. 5-Year Treasury Futures Call................ (2,758,398) 112.00 08/25/23 (21,680) (50) U.S. 10-Year Treasury Futures Call............... (5,760,156) 114.00 05/26/23 (82,812) (50) U.S. 10-Year Treasury Futures Call............... (5,760,156) 117.00 05/26/23 (18,750) (125) U.S. 10-Year Treasury Futures Call............... (14,400,390) 117.50 05/26/23 (35,156) (175) U.S. 10-Year Treasury Futures Call............... (20,302,730) 118.00 08/25/23 (218,750) (128) U.S. Treasury Long Bond Futures Call............. (16,852,000) 126.00 05/26/23 (748,000) (750) U.S. Treasury Long Bond Futures Call............. (98,742,188) 128.00 05/26/23 (3,082,031) (485) U.S. Treasury Long Bond Futures Call............. (63,853,281) 130.00 05/26/23 (1,288,281) (75) U.S. Treasury Long Bond Futures Call............. (9,874,219) 134.00 05/26/23 (63,281) (50) U.S. Treasury Long Bond Futures Call............. (6,582,813) 138.00 05/26/23 (10,938) (200) U.S. Treasury Long Bond Futures Call............. (26,381,260) 130.00 08/25/23 (918,750) (25) U.S. Treasury Long Bond Futures Call............. (3,297,658) 132.00 08/25/23 (89,063) (200) U.S. Treasury Long Bond Futures Call............. (26,381,260) 140.00 08/25/23 (228,125) (25) Ultra 10-Year U.S. Treasury Futures Call......... (3,036,328) 120.00 05/26/23 (53,906) (20) Ultra 10-Year U.S. Treasury Futures Call......... (2,429,062) 124.00 05/26/23 (9,375) (10) Ultra U.S. Treasury Long Bond Futures Call....... (1,414,063) 138.00 05/26/23 (42,657) ---------------- TOTAL CALL OPTIONS WRITTEN.................................................................. (8,784,798) (Premiums received $5,754,000) ---------------- PUT OPTIONS WRITTEN -- (0.1)% (50) U.S. 2-Year Treasury Futures Put................. (5,154,102) 101.00 05/26/23 (781) (1,041) U.S. 2-Year Treasury Futures Put................. (107,308,393) 103.00 05/26/23 (731,954) (400) U.S. 5-Year Treasury Futures Put................. (43,896,872) 105.00 05/26/23 (3,125) (350) U.S. 5-Year Treasury Futures Put................. (38,409,763) 106.00 05/26/23 (8,203) (100) U.S. 5-Year Treasury Futures Put................. (10,974,218) 108.00 05/26/23 (14,063) (750) U.S. 5-Year Treasury Futures Put................. (82,306,635) 108.50 05/26/23 (181,641) (910) U.S. 5-Year Treasury Futures Put................. (99,865,384) 109.00 05/26/23 (362,579) (340) U.S. 5-Year Treasury Futures Put................. (37,312,341) 109.50 05/26/23 (209,844) (455) U.S. 5-Year Treasury Futures Put................. (49,932,692) 113.50 05/26/23 (1,734,688) (666) U.S. 5-Year Treasury Futures Put................. (73,483,709) 108.00 08/25/23 (369,422) (50) U.S. 10-Year Treasury Futures Put................ (5,760,156) 109.00 05/26/23 (781) (50) U.S. 10-Year Treasury Futures Put................ (5,760,156) 112.00 05/26/23 (4,688) (100) U.S. Treasury Long Bond Futures Put.............. (13,165,625) 118.00 05/26/23 (3,125) (50) U.S. Treasury Long Bond Futures Put.............. (6,582,813) 120.00 05/26/23 (1,563) (60) U.S. Treasury Long Bond Futures Put.............. (8,484,375) 136.00 05/26/23 (28,125) (10) U.S. Treasury Long Bond Futures Put.............. (1,414,063) 138.00 05/26/23 (8,750) (125) U.S. Treasury Long Bond Futures Put.............. (16,488,288) 125.00 08/25/23 (144,531) (625) U.S. Treasury Long Bond Futures Put.............. (82,441,438) 128.00 08/25/23 (1,230,469) </TABLE> Page 34 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (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 (CONTINUED) (90) Ultra 10-Year U.S. Treasury Futures Put.......... $ (10,930,781) $ 114.00 05/26/23 $ (1,405) ---------------- TOTAL PUT OPTIONS WRITTEN................................................................... (5,039,737) (Premiums received $7,406,100) ---------------- TOTAL WRITTEN OPTIONS....................................................................... (13,824,535) (Premiums received $13,160,100) NET OTHER ASSETS AND LIABILITIES -- (2.6)%.................................................. (115,416,851) ---------------- NET ASSETS -- 100.0%........................................................................ $ 4,451,812,718 ================ </TABLE> FUTURES CONTRACTS AT APRIL 30, 2023 (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 25 Jun-2023 $ 5,154,102 $ 136 U.S. 5-Year Treasury Notes Long 455 Jun-2023 49,932,695 107,492 U.S. Treasury Long Bond Futures Short 3,493 Jun-2023 (459,875,281) (9,444,294) Ultra 10-Year U.S. Treasury Notes Short 5,872 Jun-2023 (713,172,750) (16,009,184) Ultra U.S. Treasury Bond Futures Short 1,038 Jun-2023 (146,779,687) (5,049,661) --------------- ---------------- $(1,264,740,921) $ (30,395,511) =============== ================ </TABLE> (a) Floating or variable rate security. (b) Inverse floating rate security. (c) 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. (d) Zero coupon security. (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) 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"). (g) This security's value was determined using significant unobservable inputs (see Note 2A - Portfolio Valuation in the Notes to Financial Statements). (h) This security is fair valued by the Advisor's Pricing Committee in accordance with procedures approved by the Trust's Board of Trustees, and in accordance with provisions of the Investment Company Act of 1940 and rules thereunder, as amended. At April 30, 2023, securities noted as such are valued at $8,124,382 or 0.2% of net assets. (i) 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, 2023, securities noted as such amounted to $655,041,266 or 14.7% of net assets. (j) 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). (k) Step-up security. A security where the coupon increases or steps up at a predetermined date. (l) Security whose principal value is adjusted in accordance with changes to the country's Consumer Price Index. Interest is calculated on the basis of the current adjusted principal value. (m) All or a portion of this security is segregated as collateral for open futures and options contracts. (n) Investment in an affiliated fund. See Notes to Financial Statements Page 35
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 2023 (UNAUDITED) IO - Interest-Only Security - Principal amount shown represents par value on which interest payments are based. LIBOR - London Interbank Offered Rate PO - Principal-Only Security REMIC - Real Estate Mortgage Investment Conduit SOFR - Secured Overnight Financing Rate 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, 2023 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 4/30/2023 PRICES INPUTS INPUTS --------------- --------------- --------------- --------------- <S> <C> <C> <C> <C> U.S. Government Agency Mortgage-Backed Securities..... $ 3,595,220,336 $ -- $ 3,587,095,954 $ 8,124,382 Mortgage-Backed Securities............................ 642,815,720 -- 642,815,720 -- U.S. Government Bonds and Notes....................... 269,594,588 -- 269,594,588 -- Asset-Backed Securities............................... 142,848,789 -- 142,848,789 -- Exchange-Traded Funds*................................ 1,691,567 1,691,567 -- -- U.S. Treasury Bills................................... 59,431,139 -- 59,431,139 -- --------------- --------------- --------------- --------------- Total Investments..................................... 4,711,602,139 1,691,567 4,701,786,190 8,124,382 Call Options Purchased................................ 782,032 782,032 -- -- Put Options Purchased................................. 413,594 413,594 -- -- Futures Contracts**................................... 107,628 107,628 -- -- --------------- --------------- --------------- --------------- Total................................................. $ 4,712,905,393 $ 2,994,821 $ 4,701,786,190 $ 8,124,382 =============== =============== =============== =============== LIABILITIES TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 4/30/2023 PRICES INPUTS INPUTS --------------- --------------- --------------- --------------- U.S. Government Agency Mortgage-Backed Securities Sold Short......................................... $ (131,743,661) $ -- $ (131,743,661) $ -- Call Options Written.................................. (8,784,798) (8,784,798) -- -- Put Options Written................................... (5,039,737) (5,039,737) -- -- Futures Contracts**................................... (30,503,139) (30,503,139) -- -- --------------- --------------- --------------- --------------- Total................................................. $ (176,071,335) $ (44,327,674) $ (131,743,661) $ -- =============== =============== =============== =============== </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 are fair valued by the Advisor's Pricing Committee and are footnoted in the Portfolio of Investments. Level 3 investments values are based on unobservable inputs. Page 36 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> ASSETS: <S> <C> Investments, at value - Unaffiliated............................................ $ 4,709,910,572 Investments, at value - Affiliated.............................................. 1,691,567 --------------- Total investments, at value..................................................... 4,711,602,139 Options contracts purchased, at value........................................... 1,195,626 Cash............................................................................ 122,539,816 Cash segregated as collateral for open futures and written options contracts.... 274,029 Receivables: Investment securities sold................................................... 2,106,221,854 Interest..................................................................... 20,560,001 --------------- Total Assets.............................................................. 6,962,393,465 --------------- LIABILITIES: Investments sold short, at value (proceeds $131,257,285)........................ 131,743,661 Options contracts written, at value............................................. 13,824,535 Payables: Investment securities purchased.............................................. 2,352,071,147 Variation margin............................................................. 10,574,657 Investment advisory fees..................................................... 2,366,747 --------------- Total Liabilities......................................................... 2,510,580,747 --------------- NET ASSETS...................................................................... $ 4,451,812,718 =============== NET ASSETS CONSIST OF: Paid-in capital................................................................. $ 4,787,289,740 Par value....................................................................... 925,500 Accumulated distributable earnings (loss)....................................... (336,402,522) --------------- NET ASSETS...................................................................... $ 4,451,812,718 --------------- NET ASSET VALUE, per share...................................................... $ 48.10 =============== Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share)................................................... 92,550,002 =============== Investments, at cost - Unaffiliated............................................. $ 4,901,855,213 =============== Investments, at cost - Affiliated............................................... $ 1,796,670 =============== Total investments, at cost...................................................... $ 4,903,651,883 =============== Premiums paid on options contracts purchased.................................... $ 2,376,172 =============== Premiums received on options contracts written.................................. $ 13,160,100 =============== </TABLE> See Notes to Financial Statements Page 37
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2023 (UNAUDITED) <TABLE> <CAPTION> INVESTMENT INCOME: <S> <C> Interest........................................................................ $ 92,014,096 Dividends - Affiliated.......................................................... 10,483 --------------- Total investment income...................................................... 92,024,579 --------------- EXPENSES: Investment advisory fees........................................................ 14,788,856 --------------- Total expenses............................................................... 14,788,856 --------------- NET INVESTMENT INCOME (LOSS).................................................... 77,235,723 --------------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments - Unaffiliated................................................... (50,694,504) Investments - Affiliated..................................................... -- Investments sold short....................................................... (8,784,606) Futures contracts............................................................ 46,961,079 Purchased options contracts.................................................. (1,616,764) Written options contracts.................................................... 12,761,821 --------------- Net realized gain (loss)........................................................ (1,372,974) --------------- Net change in unrealized appreciation (depreciation) on: Investments - Unaffiliated................................................... 238,040,755 Investments - Affiliated..................................................... 33,514 Investments sold short....................................................... (4,304,432) Futures contracts............................................................ (119,764,306) Purchased options contracts.................................................. (1,218,637) Written options contracts.................................................... 292,015 --------------- Net change in unrealized appreciation (depreciation)............................ 113,078,909 --------------- NET REALIZED AND UNREALIZED GAIN (LOSS)......................................... 111,705,935 --------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.............................................................. $ 188,941,658 =============== </TABLE> Page 38 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) STATEMENTS OF CHANGES IN NET ASSETS <TABLE> <CAPTION> SIX MONTHS ENDED YEAR 4/30/2023 ENDED (UNAUDITED) 10/31/2022 --------------- --------------- <S> <C> <C> OPERATIONS: Net investment income (loss).............................................. $ 77,235,723 $ 93,545,648 Net realized gain (loss).................................................. (1,372,974) (14,952,412) Net change in unrealized appreciation (depreciation)...................... 113,078,909 (363,022,517) --------------- --------------- Net increase (decrease) in net assets resulting from operations........... 188,941,658 (284,429,281) --------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations..................................................... (76,137,502) (108,879,377) --------------- --------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................................. 20,207,814 116,467,481 Cost of shares redeemed................................................... (544,446,314) (1,640,879,473) --------------- --------------- Net increase (decrease) in net assets resulting from shareholder transactions............................................... (524,238,500) (1,524,411,992) --------------- --------------- Total increase (decrease) in net assets................................... (411,434,344) (1,917,720,650) NET ASSETS: Beginning of period....................................................... 4,863,247,062 6,780,967,712 --------------- --------------- End of period............................................................. $ 4,451,812,718 $ 4,863,247,062 =============== =============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period................................... 103,550,002 134,550,002 Shares sold............................................................... 400,000 2,350,000 Shares redeemed........................................................... (11,400,000) (33,350,000) --------------- --------------- Shares outstanding, end of period......................................... 92,550,002 103,550,002 =============== =============== </TABLE> See Notes to Financial Statements Page 39
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, 4/30/2023 ------------------------------------------------------------------------ (UNAUDITED) 2022 2021 2020 2019 2018 ------------ ------------ ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> <C> Net asset value, beginning of period..... $ 46.97 $ 50.40 $ 51.45 $ 51.87 $ 50.78 $ 51.76 ---------- ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)............ 0.80 0.85 0.39 0.87 1.24 1.17 Net realized and unrealized gain (loss).. 1.12 (3.32) (0.40) (0.10) 1.21 (0.74) ---------- ---------- ---------- ---------- ---------- ---------- Total from investment operations......... 1.92 (2.47) (0.01) 0.77 2.45 0.43 ---------- ---------- ---------- ---------- ---------- ---------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income.................... (0.79) (0.69) (0.36) (0.99) (1.23) (1.13) Net realized gain........................ -- (0.27) -- -- (0.05) (0.28) Return of capital........................ -- -- (0.68) (0.20) (0.08) -- ---------- ---------- ---------- ---------- ---------- ---------- Total distributions...................... (0.79) (0.96) (1.04) (1.19) (1.36) (1.41) ---------- ---------- ---------- ---------- ---------- ---------- Net asset value, end of period........... $ 48.10 $ 46.97 $ 50.40 $ 51.45 $ 51.87 $ 50.78 ========== ========== ========== ========== ========== ========== TOTAL RETURN (a)......................... 4.11% (4.96)% (0.02)% 1.50% 4.88% 0.84% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)..... $4,451,813 $4,863,247 $6,780,968 $6,389,742 $3,765,469 $1,729,078 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets (b)............................ 0.64% (c) 0.65% 0.65% 0.65% 0.65% 0.65% Ratio of net investment income (loss) to average net assets.................... 3.36% (c) 1.66% 0.75% 1.57% 2.41% 2.32% Portfolio turnover rate (d) (e).......... 284% 831% 495% 434% 373% 331% </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 250% for the six months ended April 30, 2023, and 641%, 368%, 245%, 246% and 117% for the years ended October 31, 2022, 2021, 2020, 2019 and 2018, respectively. Page 40 See Notes to Financial Statements
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) APRIL 30, 2023 (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 fourteen 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 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 interests; 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 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 neither issued nor 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. ----------------------------- (1) "Government Entities" means the U.S. government, its agencies and instrumentalities, and U.S. government-sponsored entities. Page 41
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) APRIL 30, 2023 (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 readily available market quotations such as last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Advisor's Pricing Committee, in accordance with valuation procedures approved by the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act and rules thereunder. Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. The Fund's investments are valued as follows: U.S. government securities, mortgage-backed securities, asset-backed securities and other debt securities are fair valued on the basis of valuations provided by a third-party pricing service approved by the Advisor's Pricing Committee, which may use the following valuation inputs when available: 1) benchmark yields; 2) reported trades; 3) broker/dealer quotes; 4) issuer spreads; 5) benchmark securities; 6) bids and offers; and 7) reference data including market research publications. Pricing services generally value fixed-income securities assuming orderly transactions of an institutional round lot size, but a Fund may hold or transact in such securities in smaller, odd lot sizes. Odd lots may trade at lower prices than institutional round lots. Securities traded in an over-the-counter market are valued at the mean of their most recent bid and asked price, if available, and otherwise at their last trade price. Common stocks, ETFs 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 primary exchange for such securities. Shares of open-end funds are valued 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 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 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. Page 42
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) APRIL 30, 2023 (UNAUDITED) Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Advisor's Pricing Committee at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of the Fund's NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security's fair value. As a general principle, the current fair value of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities, including, but not limited to, the following: 1) the most recent price provided by a pricing service; 2) the fundamental business data relating to the issuer; 3) an evaluation of the forces which influence the market in which these securities are purchased and sold; 4) the type, size and cost of a security; 5) the financial statements of the borrower/issuer, or financial condition of the country of issue; 6) the credit quality and cash flow of the issuer, or country of issue, based on the Pricing Committee's, sub-advisor's or portfolio manager's analysis, as applicable, or external analysis; 7) the information as to any transactions in or offers for the security; 8) the price and extent of public trading in similar securities of the issuer/borrower, or comparable companies; 9) the coupon payments; 10) the quality, value and salability of collateral, if any, securing the security; 11) 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); 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. 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, 2023, 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 (the "FCA"), which regulates the London Interbank Offered Rates ("LIBOR") announced on March 5, 2021 that it intended to phase-out all LIBOR reference rates, beginning December 31, 2021. Since that announcement, the FCA has ceased publication of all non-USD LIBOR reference rates and the 1-week and 2-month USD LIBOR reference rates as of Page 43
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) APRIL 30, 2023 (UNAUDITED) December 31, 2021. The remaining USD LIBOR settings will cease to be published or no longer be representative immediately after June 30, 2023. The International Swaps and Derivatives Association, Inc. ("ISDA") confirmed that the FCA's March 5, 2021 announcement of its intention to cease providing LIBOR reference rates, 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. There is no assurance that any alternative reference rate, including SOFR, will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the same volume or liquidity. 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, 2023, the Fund did not hold when-issued or delayed-delivery securities. At April 30, 2023, the Fund held $228,289,532 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. Page 44
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) APRIL 30, 2023 (UNAUDITED) Upon entering into a futures contract, the Fund must deposit funds, called margin, with its custodian in the name of the clearing broker equal to a specified percentage of the current value of the contract. Open futures contracts are marked-to-market daily with the change in value recognized as a component of "Net change in unrealized appreciation (depreciation) on futures contracts" on the Statement of Operations. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are included in "Variation margin" receivable or payable on the Statement of Assets and Liabilities. If market conditions change unexpectedly, the Fund may not achieve the anticipated benefits of the futures contract and may realize a loss. The use of futures contracts involves the risk of imperfect correlation in movements in the price of the futures contracts, interest rates and the underlying instruments. E. OPTIONS CONTRACTS The Fund may invest in exchange-listed options on U.S. Treasury securities, exchange-listed options on U.S. Treasury futures contracts and exchange-listed U.S. Treasury futures contracts. The Fund may also invest up to 20% of its net assets in over-the-counter derivatives. The Fund uses derivative instruments primarily to hedge interest rate risk and actively manage interest rate exposure. The primary risk exposure is interest rate risk. The Fund may purchase (buy) or write (sell) put and call options on futures contracts and enter into closing transactions with respect to such options to terminate an existing position. A futures option gives the holder the right, in return for the premium paid, to assume a long position (call) or short position (put) in a futures contract at a specified exercise price prior to the 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. Page 45
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) APRIL 30, 2023 (UNAUDITED) F. INTEREST-ONLY SECURITIES An interest-only security ("IO Security") is the interest-only portion of a mortgage-backed security that receives some or all of the interest portion of the underlying mortgage-backed security and little or no principal. A reference principal value called a notional value is used to calculate the amount of interest due to the IO Security. IO Securities are sold at a deep discount to their notional principal amount. Generally speaking, when interest rates are falling and prepayment rates are increasing, the value of an IO Security will fall. Conversely, when interest rates are rising and prepayment rates are decreasing, generally the value of an IO Security will rise. These securities, if any, are identified on the Portfolio of Investments. G. PRINCIPAL-ONLY SECURITIES A principal-only security ("PO Security") is the principal-only portion of a mortgage-backed security that does not receive any interest, is priced at a deep discount to its redemption value and ultimately receives the redemption value. Generally speaking, when interest rates are falling and prepayment rates are increasing, the value of a PO Security will rise. Conversely, when interest rates are rising and prepayment rates are decreasing, generally the value of a PO Security will fall. These securities, if any, are identified on the Portfolio of Investments. H. STRIPPED MORTGAGE-BACKED SECURITIES Stripped mortgage-backed securities are created by segregating the cash flows from underlying mortgage loans or mortgage securities to create two or more new securities, each with a specified percentage of the underlying security's principal or interest payments. Mortgage-backed securities may be partially stripped so that each investor class receives some interest and some principal. When securities are completely stripped, however, all of the interest is distributed to holders of one type of security known as an IO Security and all of the principal is distributed to holders of another type of security known as a PO Security. These securities, if any, are identified on the Portfolio of Investments. I. MORTGAGE DOLLAR ROLLS AND TBA TRANSACTIONS The Fund may invest, without limitation, in mortgage dollar rolls. The Fund intends to enter into mortgage dollar rolls only with high quality securities dealers and banks, as determined by the Fund's investment advisor. In a mortgage dollar roll, the Fund will sell (or buy) mortgage-backed securities for delivery on a specified date and simultaneously contract to repurchase (or sell) substantially similar (same type, coupon and maturity) securities on a future date. Mortgage dollar rolls are recorded as separate 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, 2023 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 4/30/2023 0/31/2022 PURCHASES SALES (DEPRECIATION) (LOSS) 4/30/2023 INCOME ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> <C> <C> <C> First Trust Long Duration Opportunities ETF 74,159 $ 523,731 $ 1,134,322 $ -- $ 33,514 $ -- $ 1,691,567 $ 10,483 </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. The Fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes. Distributions in cash may be reinvested automatically in additional whole shares only if the broker through whom the shares were purchased makes such option available. Such shares will generally be reinvested by the broker based upon the market price of those shares and investors may be subject to customary brokerage commissions charged by the broker. Page 46
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) APRIL 30, 2023 (UNAUDITED) Distributions from net investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on portfolio securities held by the Fund and have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will reverse at some time in the future. The tax character of distributions paid during the fiscal year ended October 31, 2022 was as follows: Distributions paid from: Ordinary income................................. $ 77,623,014 Capital gains................................... 30,590,238 Return of capital............................... -- As of October 31, 2022, the components of distributable earnings on a tax basis for the Fund were as follows: Undistributed ordinary income................... $ (8,428,878) Accumulated capital and other gain (loss)....... -- Net unrealized appreciation (depreciation)...... (440,777,800) 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 2019, 2020, 2021, and 2022 remain open to federal and state audit. As of April 30, 2023, 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, 2022, the Fund had no non-expiring capital loss carryforwards available for federal income tax purposes. During the taxable year ended October 31, 2022, the Fund utilized non-expiring capital loss carryforwards in the amount of $72,543,076. 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, 2022, the Fund had no net late year ordinary or capital losses. As of April 30, 2023, the aggregate cost, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation/(depreciation) on investments (including short positions and derivatives, if any) for federal income tax purposes were as follows: <TABLE> <CAPTION> Gross Gross Net Unrealized Unrealized Unrealized Appreciation Tax Cost Appreciation (Depreciation) (Depreciation) ---------------- ---------------- ---------------- ---------------- <S> <C> <C> <C> <C> $ 4,761,610,670 $ 53,162,818 $ (277,939,430) $ (224,776,612) </TABLE> M. EXPENSES Expenses, other than the investment advisory fee and other excluded expenses, are paid by the Advisor (see Note 3). Page 47
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) APRIL 30, 2023 (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, 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. Effective November 1, 2022, the annual unitary management fee payable by the Fund to First Trust for these services will be reduced at certain levels of the Fund's net assets ("breakpoints") and calculated pursuant to the schedule below: <TABLE> <CAPTION> Breakpoints ------------------------------------------------------------------------- <S> <C> Fund net assets up to and including $2.5 billion 0.65000% Fund net assets greater than $2.5 billion up to and including $5 billion 0.63375% Fund net assets greater than $5 billion up to and including $7.5 billion 0.61750% Fund net assets greater than $7.5 billion up to and including $10 billion 0.60125% Fund net assets greater than $10 billion 0.58500% </TABLE> Prior to November 1, 2022, the Fund paid 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. Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, a target outcome fund or an index fund. Additionally, the Lead Independent Trustee and the Chairs 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 Chairs 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, 2023, were $7,849,627,383 and $241,814,715, 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, 2023, were $8,153,065,486 and $337,859,711, respectively. The cost of purchases to cover investments sold short and the proceeds of investments sold short were $5,946,902,962 and $5,501,103,735, respectively. For the six months ended April 30, 2023, the Fund had no in-kind transactions. Page 48
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) APRIL 30, 2023 (UNAUDITED) 5. DERIVATIVE TRANSACTIONS The following table presents the types of derivatives held by the Fund at April 30, 2023, 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* $ 107,628 futures contracts* $30,503,139 Options Interest Options contracts purchased, Options contracts written, rate risk at value 1,195,626 at value 13,824,535 </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, 2023, 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 $ 46,961,079 Purchased options contracts (1,616,764) Written options contracts 12,761,821 Net change in unrealized appreciation (depreciation) on: Futures contracts (119,764,306) Purchased options contracts (1,218,637) Written options contracts 292,015 </TABLE> For the six months ended April 30, 2023, the notional value of futures contracts opened and closed were $6,446,465,610 and $7,068,457,972, respectively. During the six months ended April 30, 2023, the premiums for purchased options contracts opened were $3,782,462 and the premiums for purchased options contracts closed, exercised and expired were $1,839,293. During the six months ended April 30, 2023, the premiums for written options contracts opened were $32,436,076 and the premiums for written options contracts closed, exercised and expired were $21,865,214. 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 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. Page 49
-------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) APRIL 30, 2023 (UNAUDITED) 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, 2024. 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 was the following subsequent event: On May 23, 2023, the Advisor's Pricing Committee approved changes to the Advisor's Valuation Procedures for the First Trust Funds, including clarifications to certain pricing methodologies. These changes will be reflected in future reports' Notes to Financial Statements. Page 50
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) APRIL 30, 2023 (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 significant 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 more broadly diversified. 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. DEFINED OUTCOME FUNDS RISK. To the extent a fund's investment strategy is designed to deliver returns tied to the price performance of an underlying ETF, an investor may not realize the returns the fund seeks to achieve if that investor does not hold shares for the entire target outcome period. In the event an investor purchases shares after the first day of the target outcome period or sells shares prior to the end of the target outcome period, the buffer that the fund seeks to provide against a decline in the value of the underlying ETF may not be available, the enhanced returns that the fund seeks to provide (if any) may not be available and the investor may not participate in a gain in the value of the underlying ETF up to the cap for the investor's investment period. Additionally, the fund will not participate in gains of the underlying ETF above the cap and a shareholder may lose their entire investment. If the fund seeks enhanced returns, there are certain time periods when the value of the fund may fall faster than the value of the underlying ETF, and it is very unlikely that, on any given day during which the underlying ETF share price increases in value, the fund's share price will increase at the same rate as the enhanced returns sought by the fund, which is designed for an entire target outcome period. Trading flexible exchange options involves risks different from, or possibly greater than, the risks associated with investing directly in securities, such as less liquidity and correlation and valuation risks. A fund may experience substantial downside from specific flexible exchange option positions and certain positions may expire worthless. Page 51
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) APRIL 30, 2023 (UNAUDITED) 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 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 OR MODEL CONSTITUENT RISK. Certain funds may be a constituent of one or more indices or ETF models. 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 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. In addition, index rebalances may potentially result in increased trading activity in a fund's shares. 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 has ceased making LIBOR available as a reference rate over a phase-out period that began December 31, 2021. There is no assurance that any alternative reference rate, including the Secured Overnight Financing Rate ("SOFR") will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the same volume or liquidity. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in Page 52
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) APRIL 30, 2023 (UNAUDITED) 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. Market risk is the risk that a particular security, or shares of a fund in general, may fall in value. 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. In February 2022, Russia invaded Ukraine which has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain fund investments as well as fund performance. The COVID-19 global pandemic and the ensuing policies enacted by governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets. While the U.S. has resumed "reasonably" normal business activity, many countries continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective against emerging variants of the disease. These events also adversely affect the prices and liquidity of a Fund's portfolio securities or other instruments and could result in disruptions in the trading markets. Any of such circumstances could have a materially negative impact on the value of a Fund's shares and result in increased market volatility. During any such events, a Fund's shares may trade at increased premiums or discounts to their net asset value and the bid/ask spread on a Fund's shares may widen. 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; capital controls; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; the imposition of sanctions by foreign governments; 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. Each fund relies on third-parties for a range of services, including custody. Any delay or failure relating to engaging or maintaining such service providers may affect a fund's ability to meet its investment objective. Although the funds and the funds' investment 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. PREFERRED SECURITIES RISK. Preferred securities combine some of the characteristics of both common stocks and bonds. Preferred securities are typically subordinated to bonds and other debt securities in a company's capital structure in terms of priority to corporate income, subjecting them to greater credit risk than those debt securities. Generally, holders of preferred securities have no voting rights with respect to the issuing company unless preferred dividends have been in arrears for a specified number of periods, at which time the preferred security holders may obtain limited rights. In certain circumstances, an issuer of preferred securities may defer payment on the securities and, in some cases, redeem the securities prior to a specified date. Preferred securities may also be substantially less liquid than other securities, including common stock. VALUATION RISK. The valuation of certain securities may carry more risk than that of common stock. Uncertainties in the conditions of the financial markets, unreliable reference data, lack of transparency and inconsistency of valuation models and processes may lead to inaccurate asset pricing. A fund may hold investments in sizes smaller than institutionally sized round lot positions (sometimes referred to as odd lots). However, third-party pricing services Page 53
-------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) APRIL 30, 2023 (UNAUDITED) generally provide evaluations on the basis of institutionally-sized round lots. If a fund sells certain of its investments in an odd lot transaction, the sale price may be less than the value at which such securities have been held by the fund. Odd lots often trade at lower prices than institutional round lots. There is no assurance that the fund will be able to sell a portfolio security at the price established by the pricing service, which could result in a loss to the fund. 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 17, 2023 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 17, 2022 through the Liquidity Committee's annual meeting held on March 23, 2023 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 any highly liquid investment minimum. As stated in the written report, during the review period, two funds breached the 15% limitation on illiquid investments for one day each, as a result of an unscheduled week-long closure of the stock exchange in Istanbul following devastating earthquakes in February, causing all Turkish equities to be re-classified as "illiquid" for one day. Each fund filed a Form N-RN on the day after the breach occurred, and one day later after the breach was cured. No fund with a highly liquid investment minimum breached that minimum during the reporting period. 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 54
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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 South Wacker Drive Chicago, IL 60606 LEGAL COUNSEL Chapman and Cutler LLP 320 South Canal Street Chicago, IL 60606
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| Performance | |||||||
| Average Annual Total Returns | Cumulative Total Returns | ||||||
| 6 Months Ended 4/30/23 | 1 Year Ended 4/30/23 | 5 Years Ended 4/30/23 | Inception (11/3/15) to 4/30/23 | 5 Years Ended 4/30/23 | Inception (11/3/15) to 4/30/23 | ||
| Fund Performance | |||||||
| NAV | -1.42% | -9.40% | 7.86% | 8.02% | 45.96% | 78.13% | |
| Market Price | -1.45% | -9.58% | 7.68% | 7.96% | 44.75% | 77.42% | |
| Index Performance | |||||||
| ICE BofA All US Convertible Index | 0.65% | -5.37% | 9.31% | 9.16% | 56.06% | 92.72% | |
| Sector Allocation | % of Total Investments |
| Information Technology | 24.3% |
| Health Care | 21.1 |
| Consumer Discretionary | 12.0 |
| Industrials | 9.7 |
| Communication Services | 9.5 |
| Financials | 8.2 |
| Energy | 5.0 |
| Utilities | 3.9 |
| Real Estate | 2.4 |
| Materials | 2.3 |
| Consumer Staples | 1.6 |
| Total | 100.0% |
| Top Ten Holdings | % of Total Investments |
| DexCom, Inc., 11/15/25 | 3.5% |
| Palo Alto Networks, Inc., 6/1/25 | 3.0 |
| Snap, Inc., 3/1/28 | 2.2 |
| Wells Fargo & Co., Series L | 2.1 |
| Sarepta Therapeutics, Inc., 9/15/27 | 1.8 |
| Etsy, Inc., 9/1/27 | 1.8 |
| 2020 Cash Mandatory Exchangeable Trust, 6/1/23 | 1.6 |
| ON Semiconductor Corp., 3/1/29 | 1.6 |
| NextEra Energy, Inc., 9/1/25 | 1.6 |
| Splunk, Inc., 9/15/25 | 1.5 |
| Total | 20.7% |
| Beginning Account Value November 1, 2022 | Ending Account Value April 30, 2023 | 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 | $985.80 | 0.95% | $4.68 |
| 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, 2022 through April 30, 2023), multiplied by 181/365 (to reflect the six-month period). |
| Principal Value | Description | Stated Coupon | Stated Maturity | Value | ||||
| CONVERTIBLE CORPORATE BONDS – 87.6% | ||||||||
| Aerospace & Defense – 1.4% | ||||||||
| $789,000 | Axon Enterprise, Inc. (a) | 0.50% | 12/15/27 | $891,570 | ||||
| 560,000 | Parsons Corp. | 0.25% | 08/15/25 | 608,160 | ||||
| 1,499,730 | ||||||||
| Air Freight & Logistics – 1.1% | ||||||||
| 437,000 | Air Transport Services Group, Inc. | 1.13% | 10/15/24 | 418,515 | ||||
| 730,000 | ZTO Express Cayman, Inc. (a) | 1.50% | 09/01/27 | 766,500 | ||||
| 1,185,015 | ||||||||
| Automobiles – 0.7% | ||||||||
| 700,000 | Ford Motor Co. | (b) | 03/15/26 | 686,350 | ||||
| Banks – 1.6% | ||||||||
| 480,000 | Barclays Bank PLC | (b) | 02/04/25 | 753,756 | ||||
| 173,000 | BofA Finance LLC | 0.60% | 05/25/27 | 199,363 | ||||
| 593,000 | JPMorgan Chase Financial Co. LLC | 0.50% | 06/15/27 | 721,385 | ||||
| 1,674,504 | ||||||||
| Biotechnology – 7.9% | ||||||||
| 545,000 | Alnylam Pharmaceuticals, Inc. (a) | 1.00% | 09/15/27 | 543,529 | ||||
| 678,000 | Ascendis Pharma A/S | 2.25% | 04/01/28 | 565,283 | ||||
| 1,120,000 | BioMarin Pharmaceutical, Inc. | 0.60% | 08/01/24 | 1,156,179 | ||||
| 565,000 | Cytokinetics, Inc. (a) | 3.50% | 07/01/27 | 569,238 | ||||
| 577,000 | Exact Sciences Corp. (a) | 2.00% | 03/01/30 | 623,448 | ||||
| 1,220,000 | Halozyme Therapeutics, Inc. (a) | 1.00% | 08/15/28 | 1,071,312 | ||||
| 745,000 | Insmed, Inc. | 0.75% | 06/01/28 | 618,395 | ||||
| 660,000 | Ionis Pharmaceuticals, Inc. | (b) | 04/01/26 | 606,375 | ||||
| 427,000 | Neurocrine Biosciences, Inc. | 2.25% | 05/15/24 | 575,596 | ||||
| 1,667,000 | Sarepta Therapeutics, Inc. (a) | 1.25% | 09/15/27 | 1,883,719 | ||||
| 8,213,074 | ||||||||
| Broadline Retail – 2.5% | ||||||||
| 2,100,000 | Etsy, Inc. | 0.13% | 09/01/27 | 1,851,820 | ||||
| 245,000 | MercadoLibre, Inc. | 2.00% | 08/15/28 | 719,198 | ||||
| 2,571,018 | ||||||||
| Capital Markets – 1.7% | ||||||||
| 925,000 | Morgan Stanley Finance LLC | 1.00% | 11/23/27 | 936,318 | ||||
| 780,000 | Morgan Stanley Finance LLC | 0.13% | 02/07/28 | 831,355 | ||||
| 1,767,673 | ||||||||
| Consumer Finance – 1.2% | ||||||||
| 817,000 | LendingTree, Inc. | 0.50% | 07/15/25 | 613,976 | ||||
| 810,000 | SoFi Technologies, Inc. (a) | (b) | 10/15/26 | 581,985 | ||||
| 1,195,961 | ||||||||
| Consumer Staples Distribution & Retail – 0.5% | ||||||||
| 554,000 | Chefs’ (The) Warehouse, Inc. (a) | 2.38% | 12/15/28 | 560,232 | ||||
| Diversified Consumer Services – 0.5% | ||||||||
| 525,000 | Stride, Inc. | 1.13% | 09/01/27 | 551,247 | ||||
| Electric Utilities – 0.6% | ||||||||
| 570,000 | Duke Energy Corp. (a) | 4.13% | 04/15/26 | 582,825 | ||||
| Electrical Equipment – 0.7% | ||||||||
| 670,000 | Array Technologies, Inc. | 1.00% | 12/01/28 | 704,170 | ||||
| Principal Value | Description | Stated Coupon | Stated Maturity | Value | ||||
| CONVERTIBLE CORPORATE BONDS (Continued) | ||||||||
| Electronic Equipment, Instruments & Components – 0.4% | ||||||||
| $550,000 | Itron, Inc. | (b) | 03/15/26 | $463,375 | ||||
| Energy Equipment & Services – 1.7% | ||||||||
| 578,000 | Helix Energy Solutions Group, Inc. | 6.75% | 02/15/26 | 762,636 | ||||
| 705,000 | Transocean, Inc. | 4.00% | 12/15/25 | 1,001,918 | ||||
| 1,764,554 | ||||||||
| Entertainment – 2.4% | ||||||||
| 580,000 | IMAX Corp. | 0.50% | 04/01/26 | 583,834 | ||||
| 930,000 | Liberty Media Corp.-Liberty Formula One (a) | 2.25% | 08/15/27 | 989,985 | ||||
| 770,000 | Sea Ltd. | 2.38% | 12/01/25 | 883,190 | ||||
| 2,457,009 | ||||||||
| Food Products – 0.6% | ||||||||
| 635,000 | Post Holdings, Inc. (a) | 2.50% | 08/15/27 | 668,211 | ||||
| Ground Transportation – 1.3% | ||||||||
| 1,550,000 | Uber Technologies, Inc. | (b) | 12/15/25 | 1,355,867 | ||||
| Health Care Equipment & Supplies – 7.7% | ||||||||
| 819,000 | CONMED Corp. (a) | 2.25% | 06/15/27 | 889,844 | ||||
| 3,235,000 | DexCom, Inc. | 0.25% | 11/15/25 | 3,546,298 | ||||
| 745,000 | Haemonetics Corp. | (b) | 03/01/26 | 638,389 | ||||
| 731,000 | Insulet Corp. | 0.38% | 09/01/26 | 1,094,672 | ||||
| 720,000 | Integer Holdings Corp. (a) | 2.13% | 02/15/28 | 820,800 | ||||
| 728,000 | Lantheus Holdings, Inc. (a) | 2.63% | 12/15/27 | 967,914 | ||||
| 7,957,917 | ||||||||
| Health Care Technology – 0.7% | ||||||||
| 603,000 | Evolent Health, Inc. | 1.50% | 10/15/25 | 773,216 | ||||
| Hotel & Resort REITs – 1.3% | ||||||||
| 890,000 | Pebblebrook Hotel Trust | 1.75% | 12/15/26 | 769,638 | ||||
| 745,000 | Summit Hotel Properties, Inc. | 1.50% | 02/15/26 | 626,169 | ||||
| 1,395,807 | ||||||||
| Hotels, Restaurants & Leisure – 6.5% | ||||||||
| 664,000 | Airbnb, Inc. | (b) | 03/15/26 | 580,668 | ||||
| 775,000 | Booking Holdings, Inc. | 0.75% | 05/01/25 | 1,159,006 | ||||
| 630,000 | Cheesecake (The) Factory, Inc. | 0.38% | 06/15/26 | 527,625 | ||||
| 793,000 | DraftKings Holdings, Inc. | (b) | 03/15/28 | 575,718 | ||||
| 880,000 | H World Group Ltd. | 3.00% | 05/01/26 | 1,137,400 | ||||
| 540,000 | Marriott Vacations Worldwide Corp. | (b) | 01/15/26 | 525,150 | ||||
| 804,000 | Royal Caribbean Cruises Ltd. (a) | 6.00% | 08/15/25 | 1,230,522 | ||||
| 1,075,000 | Vail Resorts, Inc. | (b) | 01/01/26 | 977,578 | ||||
| 6,713,667 | ||||||||
| Interactive Media & Services – 4.0% | ||||||||
| 1,665,000 | Liberty TripAdvisor Holdings, Inc. (a) | 0.50% | 06/30/51 | 1,298,700 | ||||
| 682,000 | Match Group Financeco 3, Inc. (a) | 2.00% | 01/15/30 | 583,579 | ||||
| 3,270,000 | Snap, Inc. (a) | 0.13% | 03/01/28 | 2,264,475 | ||||
| 4,146,754 | ||||||||
| IT Services – 1.8% | ||||||||
| 1,100,000 | DigitalOcean Holdings, Inc. | (b) | 12/01/26 | 865,296 | ||||
| 225,000 | MongoDB, Inc. | 0.25% | 01/15/26 | 296,966 | ||||
| Principal Value | Description | Stated Coupon | Stated Maturity | Value | ||||
| CONVERTIBLE CORPORATE BONDS (Continued) | ||||||||
| IT Services (Continued) | ||||||||
| $845,000 | Perficient, Inc. | 0.13% | 11/15/26 | $669,292 | ||||
| 1,831,554 | ||||||||
| Machinery – 0.8% | ||||||||
| 355,000 | Chart Industries, Inc. | 1.00% | 11/15/24 | 828,748 | ||||
| Media – 1.4% | ||||||||
| 1,155,000 | Cable One, Inc. | 1.13% | 03/15/28 | 891,082 | ||||
| 530,000 | Liberty Broadband Corp. (a) | 3.13% | 03/31/53 | 526,290 | ||||
| 1,417,372 | ||||||||
| Metals & Mining – 2.3% | ||||||||
| 265,000 | ATI, Inc. | 3.50% | 06/15/25 | 673,895 | ||||
| 1,000,000 | Glencore Funding LLC, Series GLEN (c) | (b) | 03/27/25 | 1,084,530 | ||||
| 738,000 | MP Materials Corp. (a) | 0.25% | 04/01/26 | 630,983 | ||||
| 2,389,408 | ||||||||
| Oil, Gas & Consumable Fuels – 3.2% | ||||||||
| 264,000 | EQT Corp. | 1.75% | 05/01/26 | 631,208 | ||||
| 1,145,000 | Northern Oil and Gas, Inc. (a) | 3.63% | 04/15/29 | 1,297,588 | ||||
| 167,000 | Permian Resources Operating LLC | 3.25% | 04/01/28 | 308,616 | ||||
| 477,000 | Pioneer Natural Resources Co. | 0.25% | 05/15/25 | 1,088,752 | ||||
| 3,326,164 | ||||||||
| Passenger Airlines – 1.1% | ||||||||
| 1,050,000 | Southwest Airlines Co. | 1.25% | 05/01/25 | 1,127,963 | ||||
| Personal Care Products – 0.4% | ||||||||
| 470,000 | Beauty Health Co. (The) (a) | 1.25% | 10/01/26 | 386,575 | ||||
| Pharmaceuticals – 2.9% | ||||||||
| 1,339,000 | Jazz Investments I Ltd. | 2.00% | 06/15/26 | 1,461,184 | ||||
| 565,000 | Pacira BioSciences, Inc. | 0.75% | 08/01/25 | 534,631 | ||||
| 847,000 | Revance Therapeutics, Inc. | 1.75% | 02/15/27 | 1,033,340 | ||||
| 3,029,155 | ||||||||
| Professional Services – 3.1% | ||||||||
| 1,288,000 | Block, Inc. | 0.13% | 03/01/25 | 1,206,212 | ||||
| 277,000 | KBR, Inc. | 2.50% | 11/01/23 | 620,757 | ||||
| 1,225,000 | Shift4 Payments, Inc. | (b) | 12/15/25 | 1,341,987 | ||||
| 3,168,956 | ||||||||
| Real Estate Management & Development – 1.0% | ||||||||
| 979,000 | Zillow Group, Inc. | 2.75% | 05/15/25 | 998,580 | ||||
| Semiconductors & Semiconductor Equipment – 5.9% | ||||||||
| 916,000 | Enphase Energy, Inc. | (b) | 03/01/28 | 861,790 | ||||
| 475,000 | Impinj, Inc. | 1.13% | 05/15/27 | 513,732 | ||||
| 645,000 | MACOM Technology Solutions Holdings, Inc. | 0.25% | 03/15/26 | 622,410 | ||||
| 1,060,000 | Microchip Technology, Inc. | 0.13% | 11/15/24 | 1,128,237 | ||||
| 1,710,000 | ON Semiconductor Corp. (a) | 0.50% | 03/01/29 | 1,655,440 | ||||
| 255,000 | Silicon Laboratories, Inc. | 0.63% | 06/15/25 | 306,979 | ||||
| 345,000 | SolarEdge Technologies, Inc. | (b) | 09/15/25 | 429,698 | ||||
| 816,000 | Wolfspeed, Inc. (a) | 1.88% | 12/01/29 | 606,696 | ||||
| 6,124,982 | ||||||||
| Principal Value | Description | Stated Coupon | Stated Maturity | Value | ||||
| CONVERTIBLE CORPORATE BONDS (Continued) | ||||||||
| Software – 15.7% | ||||||||
| $655,000 | Alteryx, Inc. | 1.00% | 08/01/26 | $548,153 | ||||
| 1,015,000 | Bentley Systems, Inc. | 0.13% | 01/15/26 | 959,930 | ||||
| 1,078,000 | Bill.com Holdings, Inc. | (b) | 12/01/25 | 989,604 | ||||
| 643,000 | Box, Inc. | (b) | 01/15/26 | 751,345 | ||||
| 838,000 | Confluent, Inc. | (b) | 01/15/27 | 667,760 | ||||
| 985,000 | CyberArk Software Ltd. | (b) | 11/15/24 | 1,028,426 | ||||
| 765,000 | Datadog, Inc. | 0.13% | 06/15/25 | 800,955 | ||||
| 915,000 | Dropbox, Inc. | (b) | 03/01/28 | 785,527 | ||||
| 729,000 | Envestnet, Inc. (a) | 2.63% | 12/01/27 | 798,984 | ||||
| 441,000 | HubSpot, Inc. | 0.38% | 06/01/25 | 685,976 | ||||
| 733,000 | PagerDuty, Inc. | 1.25% | 07/01/25 | 778,638 | ||||
| 1,625,000 | Palo Alto Networks, Inc. | 0.38% | 06/01/25 | 3,009,500 | ||||
| 1,575,000 | Splunk, Inc. | 1.13% | 09/15/25 | 1,489,950 | ||||
| 500,000 | Tyler Technologies, Inc. | 0.25% | 03/15/26 | 504,373 | ||||
| 895,000 | Verint Systems, Inc. | 0.25% | 04/15/26 | 795,991 | ||||
| 723,000 | Workiva, Inc. | 1.13% | 08/15/26 | 958,454 | ||||
| 750,000 | Zscaler, Inc. | 0.13% | 07/01/25 | 728,250 | ||||
| 16,281,816 | ||||||||
| Specialty Retail – 1.0% | ||||||||
| 880,000 | Burlington Stores, Inc. | 2.25% | 04/15/25 | 995,500 | ||||
Total Convertible Corporate Bonds | 90,794,949 | |||||||
| (Cost $88,987,735) | ||||||||
| Shares | Description | Stated Rate | Stated Maturity | Value | ||||
| CONVERTIBLE PREFERRED SECURITIES – 10.6% | ||||||||
| Auto Components – 0.6% | ||||||||
| 5,975 | Aptiv PLC, Series A | 5.50% | 06/15/23 | 676,310 | ||||
| Banks – 2.7% | ||||||||
| 490 | Bank of America Corp., Series L | 7.25% | (d) | 580,126 | ||||
| 1,865 | Wells Fargo & Co., Series L | 7.50% | (d) | 2,178,376 | ||||
| 2,758,502 | ||||||||
| Capital Markets – 1.0% | ||||||||
| 15,715 | KKR & Co., Inc., Series C | 6.00% | 09/15/23 | 1,003,717 | ||||
| Electric Utilities – 2.9% | ||||||||
| 7,875 | American Electric Power Co., Inc. | 6.13% | 08/15/23 | 400,365 | ||||
| 34,035 | NextEra Energy, Inc. | 6.93% | 09/01/25 | 1,611,217 | ||||
| 6,950 | PG&E Corp. | 5.50% | 08/16/23 | 1,041,735 | ||||
| 3,053,317 | ||||||||
| Health Care Equipment & Supplies – 1.4% | ||||||||
| 14,915 | Becton Dickinson & Co., Series B | 6.00% | 06/01/23 | 754,103 | ||||
| 5,855 | Boston Scientific Corp., Series A | 5.50% | 06/01/23 | 736,149 | ||||
| 1,490,252 | ||||||||
| Independent Power & Renewable Electricity Producers – 0.4% | ||||||||
| 4,155 | AES (The) Corp. | 6.88% | 02/15/24 | 373,992 | ||||
| Shares | Description | Stated Rate | Stated Maturity | Value | ||||
| CONVERTIBLE PREFERRED SECURITIES (Continued) | ||||||||
| Wireless Telecommunication Services – 1.6% | ||||||||
| 1,435 | 2020 Cash Mandatory Exchangeable Trust (a) | 5.25% | 06/01/23 | $1,674,731 | ||||
Total Convertible Preferred Securities | 11,030,821 | |||||||
| (Cost $10,690,233) | ||||||||
Total Investments – 98.2% | 101,825,770 | |||||||
| (Cost $99,677,968) | ||||||||
Net Other Assets and Liabilities – 1.8% |
1,883,281 | ||
Net Assets – 100.0% |
$103,709,051 |
| (a) | This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A of the Securities Act of 1933, as amended (the “1933 Act”), and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Pursuant to procedures adopted by the Trust’s Board of Trustees, this security has been determined to be liquid by First Trust Advisors L.P. (the “Advisor”). Although market instability can result in periods of increased overall market illiquidity, liquidity for each security is determined based on security specific factors and assumptions, which require subjective judgment. At April 30, 2023, securities noted as such amounted to $25,365,675 or 24.5% of net assets. |
| (b) | Zero coupon security. |
| (c) | This security may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the 1933 Act. |
| (d) | Perpetual maturity. |
| Total Value at 4/30/2023 | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | |
Convertible Corporate Bonds* | $ 90,794,949 | $ — | $ 90,794,949 | $ — |
| Convertible Preferred Securities: | ||||
Wireless Telecommunication Services | 1,674,731 | — | 1,674,731 | — |
Other Industry Categories* | 9,356,090 | 9,356,090 | — | — |
Total Investments | $ 101,825,770 | $ 9,356,090 | $ 92,469,680 | $— |
| * | See Portfolio of Investments for industry breakout. |
| ASSETS: | |
Investments, at value (Cost $99,677,968) | $ 101,825,770 |
Cash | 463,619 |
| Receivables: | |
Investment securities sold | 1,996,803 |
Interest | 232,008 |
Total Assets | 104,518,200 |
| LIABILITIES: | |
| Payables: | |
Investment securities purchased | 720,185 |
Investment advisory fees | 88,964 |
Total Liabilities | 809,149 |
NET ASSETS | $103,709,051 |
| NET ASSETS consist of: | |
Paid-in capital | $ 130,781,324 |
Par value | 33,000 |
Accumulated distributable earnings (loss) | (27,105,273) |
NET ASSETS | $103,709,051 |
NET ASSET VALUE, per share | $31.43 |
Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share) | 3,300,002 |
| INVESTMENT INCOME: | ||
Dividends | $ 421,189 | |
Interest | (975,849) | |
Total investment income | (554,660) | |
| EXPENSES: | ||
Investment advisory fees | 637,996 | |
Total expenses | 637,996 | |
NET INVESTMENT INCOME (LOSS) | (1,192,656) | |
| NET REALIZED AND UNREALIZED GAIN (LOSS): | ||
| Net realized gain (loss) on: | ||
Investments | (3,298,284) | |
In-kind redemptions | (312,823) | |
Foreign currency transactions | 18,032 | |
Net realized gain (loss) | (3,593,075) | |
| Net change in unrealized appreciation (depreciation) on: | ||
Investments | 3,395,650 | |
Foreign currency translation | 114 | |
Net change in unrealized appreciation (depreciation) | 3,395,764 | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | (197,311) | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $(1,389,967) | |
| Six Months Ended 4/30/2023 (Unaudited) | Year Ended 10/31/2022 | ||
| OPERATIONS: | |||
Net investment income (loss) | $ (1,192,656) | $ (7,119,395) | |
Net realized gain (loss) | (3,593,075) | 16,463,008 | |
Net change in unrealized appreciation (depreciation) | 3,395,764 | (67,343,746) | |
Net increase (decrease) in net assets resulting from operations | (1,389,967) | (58,000,133) | |
| DISTRIBUTIONS TO SHAREHOLDERS FROM: | |||
Investment operations | (1,046,250) | (51,468,060) | |
| SHAREHOLDER TRANSACTIONS: | |||
Proceeds from shares sold | — | 141,338,091 | |
Cost of shares redeemed | (67,308,748) | (163,876,174) | |
Net increase (decrease) in net assets resulting from shareholder transactions | (67,308,748) | (22,538,083) | |
Total increase (decrease) in net assets | (69,744,965) | (132,006,276) | |
| NET ASSETS: | |||
Beginning of period | 173,454,016 | 305,460,292 | |
End of period | $103,709,051 | $173,454,016 | |
| CHANGES IN SHARES OUTSTANDING: | |||
Shares outstanding, beginning of period | 5,400,002 | 5,850,002 | |
Shares sold | — | 3,500,000 | |
Shares redeemed | (2,100,000) | (3,950,000) | |
Shares outstanding, end of period | 3,300,002 | 5,400,002 |
| Six Months Ended 4/30/2023 (Unaudited) | Year Ended October 31, | |||||||||||
| 2022 | 2021 | 2020 | 2019 | 2018 | ||||||||
Net asset value, beginning of period | $ 32.12 | $ 52.22 | $ 40.14 | $ 31.57 | $ 28.72 | $ 29.01 | ||||||
| Income from investment operations: | ||||||||||||
Net investment income (loss) | (0.28) (a) | (1.39) | (1.33) | (0.55) | (0.24) | (0.09) | ||||||
Net realized and unrealized gain (loss) | (0.16) | (8.63) | 14.42 | 9.65 | 3.58 | 0.52 | ||||||
Total from investment operations | (0.44) | (10.02) | 13.09 | 9.10 | 3.34 | 0.43 | ||||||
| Distributions paid to shareholders from: | ||||||||||||
Net investment income | (0.25) | (1.39) | (0.62) | (0.53) | (0.49) | (0.67) | ||||||
Net realized gain | — | (8.69) | (0.39) | — | — | (0.05) | ||||||
Total distributions | (0.25) | (10.08) | (1.01) | (0.53) | (0.49) | (0.72) | ||||||
Net asset value, end of period | $31.43 | $32.12 | $52.22 | $40.14 | $31.57 | $28.72 | ||||||
Total return (b) | (1.42)% | (22.76)% | 32.74% | 29.10% | 11.72% | 1.46% | ||||||
| Ratios to average net assets/supplemental data: | ||||||||||||
Net assets, end of period (in 000’s) | $ 103,709 | $ 173,454 | $ 305,460 | $ 236,802 | $ 194,158 | $ 202,467 | ||||||
Ratio of total expenses to average net assets | 0.95% (c) | 0.95% | 0.95% | 0.95% | 0.95% | 0.95% | ||||||
Ratio of net investment income (loss) to average net assets | (1.78)% (c) | (3.44)% | (2.60)% | (1.36)% | (0.63)% | (2.16)% | ||||||
Portfolio turnover rate (d) | 40% | 94% | 135% | 119% | 64% | 71% | ||||||
| (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) | 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. |
| 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. |
| 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. |
| 1) | the most recent price provided by the Pricing Service Provider(s); |
| 2) | the fundamental business data relating to the issuer; |
| 3) | an evaluation of the forces which influence the market in which these securities are purchased and sold; |
| 4) | the type, size and cost of the security; |
| 5) | the financial statements of the issuer; |
| 6) | the credit quality and cash flow of the issuer, based on the sub-advisor’s or external analysis; |
| 7) | the information as to any transactions in or offers for the security; |
| 8) | the price and extent of public trading in similar securities (or equity securities) of the issuer/borrower, or comparable companies; |
| 9) | the coupon payments; |
| 10) | the quality, value and salability of collateral, if any, securing the security; |
| 11) | 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; |
| 12) | the prospects for the issuer’s industry, and multiples (of earnings and/or cash flows) being paid for similar businesses in that industry; and |
| 13) | other relevant factors. |
| 1) | the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price; |
| 2) | the type of security; |
| 3) | the size of the holding; |
| 4) | the initial cost of the security; |
| 5) | transactions in comparable securities; |
| 6) | price quotes from dealers and/or third-party pricing services; |
| 7) | relationships among various securities; |
| 8) | information obtained by contacting the issuer, analysts, or the appropriate stock exchange; |
| 9) | an analysis of the issuer’s financial statements; |
| 10) | the existence of merger proposals or tender offers that might affect the value of the security; and |
| 11) | other relevant factors. |
| • | 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. |
| Distributions paid from: | |
Ordinary income | $18,082,403 |
Capital gains | 33,385,657 |
Return of capital | — |
Undistributed ordinary income | $314,378 |
Accumulated capital and other gain (loss) | (18,296,727) |
Net unrealized appreciation (depreciation) | (6,686,707) |
| Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation (Depreciation) | |||
| $99,677,968 | $6,738,113 | $(4,590,311) | $2,147,802 |
| 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% |
| NOT FDIC INSURED | NOT BANK GUARANTEED | MAY LOSE VALUE |
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, 2023
----------------------------
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
SEMI-ANNUAL REPORT
APRIL 30, 2023
Shareholder Letter........................................................... 1
Fund Performance Overview.................................................... 2
Portfolio Management......................................................... 5
Understanding Your Fund Expenses............................................. 6
Portfolio of Investments..................................................... 7
Statement of Assets and Liabilities.......................................... 11
Statement of Operations...................................................... 12
Statements of Changes in Net Assets.......................................... 13
Financial Highlights......................................................... 14
Notes to Financial Statements................................................ 15
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 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.
--------------------------------------------------------------------------------
SHAREHOLDER LETTER
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
APRIL 30, 2023
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, 2023.
It pleases me to write that on May 5, 2023, the World Health Organization
officially declared that the coronavirus ("COVID-19") pandemic no longer
qualified as a global health emergency. While the virus officially no longer
poses an immediate threat, its full impact on the world economy remains to be
seen, in my opinion. Recall, if you will, those early days of the pandemic;
companies sent workers home, consumers were afraid or unwilling to leave their
homes, supply chains dried up, and grocery shelves were left bare. Hoping to
provide relief to their constituents and to bolster economic activity,
governments across the globe funneled trillions of dollars in stimulus directly
into the hands of their citizens. Unfortunately, economist Milton Friedman's
age-old economic adage "there's no such thing as a free lunch" still holds. As a
result of the U.S. government stimulus, gross domestic product rebounded
quickly, but so did inflation.
As many investors are aware, the Federal Reserve (the "Fed") has been locked in
a battle with stubbornly high inflation for several years now. Inflation, as
measured by the trailing 12-month rate of change in the Consumer Price Index
("CPI"), surged from 1.4% on December 31, 2020, to 9.1% as of June 30, 2022.
Since then, the trailing rate on the CPI has come down, but remains elevated. On
April 30, 2023, the CPI stood at 4.9%, well above the Fed's goal of 2.0%.
Surging prices have not been restricted to the U.S. Headline inflation rates in
each of the countries that make up the so-called Group of Ten (G-10) stand above
the targets set by their central banks, according to data from Bloomberg.
From the Fed's perspective, monetary policy is the most efficient means to
combat rising prices. From December 31, 2020 through May 3, 2023, the Fed
increased the Federal Funds target rate (upper bound) a total of ten times,
raising the rate from 0.25% to 5.25%. As mentioned, tighter monetary policy
resulted in a decrease in the CPI, but there have been casualties in the Fed's
battle with rising prices. The most recent banking turmoil is one example.
Another is the spike in mortgage rates. According to Bankrate, the national
average for a 30-year mortgage stood at just 2.87% on December 31, 2020. As of
May 1, 2023, the average 30-year mortgage rate had surged to 6.88%. Not all the
news is negative, however. Driven by a strong U.S. labor market, consumer
spending remained robust in April 2023. Notably, American corporations added
253,000 jobs during the month, and the unemployment rate stood at a 53-year low.
Bob Carey, Chief Market Strategist at First Trust, recently summed up the
current situation, noting that "we're not out of the woods yet." That said, even
the most difficult situations don't last forever. In my opinion, like the
COVID-19 pandemic, inflation, and the tighter monetary policy it ushered in,
will pass with time.
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
--------------------------------------------------------------------------------
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)
4/30/23 4/30/23 to 4/30/23 to 4/30/23
<S> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 8.20% -4.39% 0.75% 3.22%
Market Price 8.06% -4.24% 0.72% 3.09%
INDEX PERFORMANCE
ICE BofA 5+ Year US Treasury Index 9.06% -3.50% 0.19% 0.82%
------------------------------------------------------------------------------------------------------------------------------------
</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 at 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
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
---------------------------------------------------------------
% OF NET
FUND ALLOCATION ASSETS
---------------------------------------------------------------
U.S. Government Agency Mortgage-Backed
Securities 53.9%
U.S. Government Bonds and Notes 13.5
U.S. Government Agency Securities 5.3
U.S. Treasury Bills 34.8
Money Market Funds 2.5
Call Options Purchased 0.1
Put Options Purchased 0.0*
Call Options Written (0.0)*
Put Options Written (0.0)*
Net Other Assets and Liabilities(1) (10.1)
-------
Total 100.0%
=======
* Amount is less than 0.1%.
---------------------------------------------------------------
% OF TOTAL LONG
FIXED-INCOME
INVESTMENTS, CASH
CREDIT QUALITY(2) & CASH EQUIVALENTS
---------------------------------------------------------------
Government and Agency 97.7%
Cash & Cash Equivalents 2.3
-------
Total 100.0%
=======
---------------------------------------------------------------
% OF LONG-TERM
TOP TEN HOLDINGS INVESTMENTS(3)
---------------------------------------------------------------
U.S. Treasury Bond, 3.88%, 02/15/43 5.9%
Federal Home Loan Mortgage Corporation
Multifamily Structured Pass Through
Certificates, Series 2018-K155, Class A3,
3.75%, 04/25/33 5.2
Federal Home Loan Mortgage Corporation
Multifamily Structured Pass Through
Certificates, Series 2019-K1511, Class A3,
3.54%, 03/25/34 4.5
Government National Mortgage Association,
Series 2022-30, Class AL, 3.00%, 02/20/52 4.0
Tennessee Valley Authority, 5.25%, 09/15/39 3.2
Federal National Mortgage Association,
Series 2018-84, Class ZM, 4.00%, 11/25/48 3.0
U.S. Treasury Bond, 4.00%, 11/15/42 3.0
Federal National Mortgage Association, Pool
TBA, 4.50%, 06/15/53 2.9
Federal Home Loan Mortgage Corporation
Multifamily Structured Pass Through
Certificates, Series 2020-K1515, Class A2,
1.94%, 02/25/35 2.9
Federal Home Loan Mortgage Corporation
Multifamily Structured Pass Through
Certificates, Series 2019-K1510, Class A3,
3.79%, 01/25/34 2.8
-------
Total 37.4%
=======
---------------------------------------------------------------
WEIGHTED AVERAGE EFFECTIVE NET DURATION
---------------------------------------------------------------
April 30, 2023 10.75 Years
High - February 28, 2023 10.76 Years
Low - January 31, 2023 10.36 Years
-----------------------------
(1) Includes variation margin on futures.
(2) The ratings are by S&P Global Ratings. 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
--------------------------------------------------------------------------------
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, 2023
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
10/31/21 12,133 11,951
4/30/22 10,797 10,448
10/31/22 9,540 9,245
4/30/23 10,322 10,082
</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.
Performance in securitized product investment strategies can be impacted from
the benefits of purchasing odd lot positions. The impact of these investments
can be particularly meaningful when funds have limited assets under management
and may not be a sustainable source of performance as a fund grows in size.
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
--------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
SEMI-ANNUAL REPORT
APRIL 30, 2023 (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 GOVERNMENT & SECURITIZED PRODUCTS GROUP
JEREMIAH CHARLES - SENIOR VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER, FIRST
TRUST GOVERNMENT & SECURITIZED PRODUCTS GROUP
The portfolio managers are primarily and jointly responsible for the day-to-day
management of the Fund. Each portfolio manager has served as part of the
portfolio management team of the Fund since 2019.
Page 5
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
UNDERSTANDING YOUR FUND EXPENSES
APRIL 30, 2023 (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, 2023.
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, 2022 APRIL 30, 2023 PERIOD (a) PERIOD (a) (b)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
Actual $1,000.00 $1,082.00 0.66% $3.41
Hypothetical (5% return before expenses) $1,000.00 $1,021.52 0.66% $3.31
</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,
2022 through April 30, 2023), multiplied by 181/365 (to reflect the
six-month period).
Page 6
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2023 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 53.9%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 11.4%
Federal Home Loan Mortgage Corporation
$ 1,920,627 Series 2021-5179, Class GZ................................... 2.00% 01/25/52 $ 1,130,216
Federal National Mortgage Association
971,624 Series 2005-74, Class NZ..................................... 6.00% 09/25/35 1,094,142
1,426,631 Series 2013-19, Class ZD..................................... 3.50% 03/25/43 1,285,409
2,124,425 Series 2018-84, Class ZM..................................... 4.00% 11/25/48 2,067,037
Government National Mortgage Association
1,292,000 Series 2010-61, Class KE..................................... 5.00% 05/16/40 1,340,798
1,248,849 Series 2015-164, Class MZ.................................... 3.00% 09/20/45 1,017,254
374,800 Series 2015-168, Class GI, IO................................ 5.50% 02/16/33 16,729
3,510,000 Series 2022-30, Class AL..................................... 3.00% 02/20/52 2,699,262
----------------
10,650,847
----------------
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 31.8%
Federal Home Loan Mortgage Corporation Multifamily Structured
Pass Through Certificates
6,950,317 Series 2014-K036, Class X1, IO (a)........................... 0.82% 10/25/23 13,169
1,620,000 Series 2018-K154, Class A3................................... 3.46% 11/25/32 1,525,988
650,000 Series 2018-K155, Class A2................................... 3.75% 11/25/32 633,052
3,687,000 Series 2018-K155, Class A3................................... 3.75% 04/25/33 3,556,168
1,000,000 Series 2018-K156, Class A3................................... 3.70% 06/25/33 960,248
570,000 Series 2018-K157, Class A3................................... 3.99% 08/25/33 557,284
298,000 Series 2018-K159, Class A2................................... 3.95% 11/25/30 293,036
1,500,000 Series 2018-K159, Class A3................................... 3.95% 11/25/33 1,461,425
1,936,000 Series 2019-K095, Class XAM, IO (a).......................... 1.37% 06/25/29 126,138
2,000,000 Series 2019-K1510, Class A3.................................. 3.79% 01/25/34 1,928,967
3,245,000 Series 2019-K1511, Class A3.................................. 3.54% 03/25/34 3,036,534
17,391,681 Series 2019-K1511, Class X1, IO (a).......................... 0.93% 03/25/34 984,807
485,000 Series 2019-K1512, Class A3.................................. 3.06% 04/25/34 431,616
1,800,000 Series 2019-K1514, Class A2.................................. 2.86% 10/25/34 1,569,354
9,960,382 Series 2020-K111, Class XAM, IO (a).......................... 1.91% 05/25/30 1,045,540
7,550,000 Series 2020-K120, Class XAM, IO (a).......................... 1.31% 10/25/30 559,056
2,500,000 Series 2020-K1515, Class A2.................................. 1.94% 02/25/35 1,946,765
1,988,936 Series 2020-K1515, Class X1, IO (a).......................... 1.64% 02/25/35 235,542
2,142,000 Series 2020-K1517, Class A2.................................. 1.72% 07/25/35 1,630,936
1,700,000 Series 2020-K1518, Class A2.................................. 1.86% 10/25/35 1,301,555
2,000,000 Series 2021-K1519, Class A2.................................. 2.01% 12/25/35 1,553,139
700,000 Series 2021-K1520, Class A2.................................. 2.44% 02/25/36 567,270
1,650,000 Series 2021-K1521, Class A2.................................. 2.18% 08/25/36 1,287,046
2,000,000 Series 2021-K1522, Class A2.................................. 2.36% 10/25/36 1,595,172
Government National Mortgage Association
883,907 Series 2020-159, Class Z (b)................................. 2.50% 10/16/62 412,565
488,314 Series 2020-197, Class Z (a)................................. 2.25% 10/16/62 200,985
211,536 Series 2021-4, Class Z (a)................................... 2.00% 09/16/62 75,731
909,970 Series 2021-28, Class Z (a).................................. 2.00% 10/16/62 356,206
----------------
29,845,294
----------------
PASS-THROUGH SECURITIES -- 10.7%
Federal National Mortgage Association
1,000,000 Pool TBA..................................................... 2.50% 05/15/53 865,957
2,000,000 Pool TBA..................................................... 3.00% 05/15/53 1,792,806
2,000,000 Pool TBA..................................................... 2.50% 06/15/53 1,734,414
2,000,000 Pool TBA..................................................... 3.00% 06/15/53 1,798,750
</TABLE>
See Notes to Financial Statements Page 7
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2023 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Federal National Mortgage Association (Continued)
$ 2,000,000 Pool TBA..................................................... 3.50% 06/15/53 $ 1,860,312
2,000,000 Pool TBA..................................................... 4.50% 06/15/53 1,956,172
----------------
10,008,411
----------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES..................................... 50,504,552
(Cost $52,183,713) ----------------
U.S. GOVERNMENT BONDS AND NOTES -- 13.5%
2,000,000 U.S. Treasury Bond.............................................. 3.25% 05/15/42 1,852,578
2,000,000 U.S. Treasury Bond.............................................. 3.38% 08/15/42 1,884,063
2,000,000 U.S. Treasury Bond.............................................. 4.00% 11/15/42 2,060,625
4,000,000 U.S. Treasury Bond.............................................. 3.88% 02/15/43 4,043,438
2,000,000 U.S. Treasury Bond.............................................. 3.00% 02/15/48 1,746,875
1,000,000 U.S. Treasury Bond.............................................. 4.00% 11/15/52 1,062,030
----------------
TOTAL U.S. GOVERNMENT BONDS AND NOTES....................................................... 12,649,609
(Cost $12,463,436) ----------------
U.S. GOVERNMENT AGENCY SECURITIES -- 5.3%
1,000,000 Tennessee Valley Authority...................................... 5.50% 06/15/38 1,099,173
2,000,000 Tennessee Valley Authority...................................... 5.25% 09/15/39 2,157,688
2,000,000 Tennessee Valley Authority...................................... 3.50% 12/15/42 1,710,410
----------------
TOTAL U.S. GOVERNMENT AGENCY SECURITIES..................................................... 4,967,271
(Cost $4,935,041) ----------------
U.S. TREASURY BILLS -- 34.8%
5,000,000 U.S. Treasury Bill.............................................. (c) 06/13/23 4,970,885
6,000,000 U.S. Treasury Bill (d).......................................... (c) 06/20/23 5,959,875
2,000,000 U.S. Treasury Bill.............................................. (c) 07/13/23 1,980,001
6,000,000 U.S. Treasury Bill.............................................. (c) 07/20/23 5,934,733
5,000,000 U.S. Treasury Bill.............................................. (c) 07/27/23 4,940,308
2,000,000 U.S. Treasury Bill.............................................. (c) 08/15/23 1,970,821
7,000,000 U.S. Treasury Bill.............................................. (c) 08/22/23 6,890,771
----------------
TOTAL U.S. TREASURY BILLS................................................................... 32,647,394
(Cost $32,643,797) ----------------
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- -------------------------------------------------------------------------------------------- ----------------
<S> <C> <C>
MONEY MARKET FUNDS -- 2.5%
2,336,611 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio -
Institutional Class - 4.71% (e).......................................................... 2,336,611
(Cost $2,336,611) ----------------
TOTAL INVESTMENTS -- 110.0%................................................................. 103,105,437
(Cost $104,562,598) ----------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
---------------- -------------------------------------------------- ------------ ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
PURCHASED OPTIONS -- 0.1%
CALL OPTIONS PURCHASED -- 0.1%
5 U.S. Treasury Long Bond Futures Call.............. $ 659,531 $ 133.00 08/25/23 15,547
10 CME 3-Month SOFR Futures Call..................... 2,378,875 94.50 09/15/23 17,875
10 CME 3-Month SOFR Futures Call..................... 2,378,875 95.50 09/15/23 6,562
----------------
TOTAL CALL OPTIONS PURCHASED................................................................ 39,984
(Cost $41,269) ----------------
</TABLE>
Page 8 See Notes to Financial Statements
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2023 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
---------------- -------------------------------------------------- ------------ ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
PURCHASED OPTIONS (CONTINUED)
PUT OPTIONS PURCHASED -- 0.0%
15 U.S. 5-Year Treasury Futures Put.................. $ 1,646,133 $ 108.75 05/26/23 $ 4,687
15 U.S. 5-Year Treasury Futures Put.................. 1,655,039 110.00 08/25/23 19,688
20 CME 3-Month SOFR Futures Put...................... 4,777,500 93.94 12/15/23 2,500
20 CME 3-Month SOFR Futures Put...................... 4,777,500 94.94 12/15/23 10,750
----------------
TOTAL PUT OPTIONS PURCHASED................................................................. 37,625
(Cost $49,810) ----------------
TOTAL PURCHASED OPTIONS..................................................................... 77,609
(Cost $91,079) ----------------
WRITTEN OPTIONS -- (0.0)%
CALL OPTIONS WRITTEN -- (0.0)%
(20) CME 3-Month SOFR Futures Call..................... (4,757,750) 95.00 09/15/23 (19,750)
(Premiums received $21,697) ----------------
PUT OPTIONS WRITTEN -- (0.0)%
(40) CME 3-Month SOFR Futures Put...................... (9,555,000) 94.44 12/15/23 (10,000)
(Premiums received $16,393) ----------------
TOTAL WRITTEN OPTIONS....................................................................... (29,750)
(Premiums received $38,090) ----------------
NET OTHER ASSETS AND LIABILITIES -- (10.1)%................................................. (9,407,169)
----------------
NET ASSETS -- 100.0%........................................................................ $ 93,746,127
================
</TABLE>
FUTURES CONTRACTS AT APRIL 30, 2023 (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-2023 $ 1,030,820 $ (520)
U.S. Treasury Long Bond Futures Long 72 Jun-2023 9,479,250 36,216
Ultra U.S. Treasury Bond Futures Long 78 Jun-2023 11,029,688 13,849
-------------- ----------------
$ 21,539,758 $ 49,545
============== ================
</TABLE>
(a) Collateral Strip Rate security. Coupon is based on the weighted net
interest rate of the investment's underlying collateral. The interest rate
resets periodically.
(b) 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.
(c) Zero coupon security.
(d) All or a portion of this security is segregated as collateral for open
futures and options contracts.
(e) Rate shown reflects yield as of April 30, 2023.
IO - Interest-Only Security - Principal amount shown represents par value on
which interest payments are based.
SOFR - Secured Overnight Financing Rate
TBA - To-Be-Announced Security
See Notes to Financial Statements Page 9
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2023 (UNAUDITED)
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2023 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
4/30/2023 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
U.S. Government Agency Mortgage-Backed Securities..... $ 50,504,552 $ -- $ 50,504,552 $ --
U.S. Government Bonds and Notes....................... 12,649,609 -- 12,649,609 --
U.S. Government Agency Securities..................... 4,967,271 -- 4,967,271 --
U.S. Treasury Bills................................... 32,647,394 -- 32,647,394 --
Money Market Funds.................................... 2,336,611 2,336,611 -- --
--------------- --------------- --------------- ---------------
Total Investments..................................... 103,105,437 2,336,611 100,768,826 --
Call Options Purchased................................ 39,984 39,984 -- --
Put Options Purchased................................. 37,625 37,625 -- --
Futures Contracts*.................................... 50,065 50,065 -- --
--------------- --------------- --------------- ---------------
Total................................................. $ 103,233,111 $ 2,464,285 $ 100,768,826 $ --
=============== =============== =============== ===============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
4/30/2023 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
Call Options Written.................................. $ (19,750) $ (19,750) $ -- $ --
Put Options Written................................... (10,000) (10,000) -- --
Futures Contracts*.................................... (520) (520) -- --
--------------- --------------- --------------- ---------------
Total................................................. $ (30,270) $ (30,270) $ -- $ --
=============== =============== =============== ===============
</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 Statements of Assets and Liabilities.
Page 10 See Notes to Financial Statements
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2023 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value.................................................. $ 103,105,437
Options contracts purchased, at value ................................. 77,609
Cash segregated as collateral for open futures and written options
contracts........................................................... 54,728
Receivables:
Investment securities sold.......................................... 4,437,231
Interest............................................................ 377,636
Variation margin.................................................... 232,123
Dividends........................................................... 19,162
--------------
Total Assets........................................................ 108,303,926
--------------
LIABILITIES:
Options contracts written, at value.................................... 29,750
Payables:
Investment securities purchased..................................... 14,488,826
Investment advisory fees............................................ 39,223
--------------
Total Liabilities................................................... 14,557,799
--------------
NET ASSETS............................................................. $ 93,746,127
==============
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $ 98,654,676
Par value.............................................................. 41,000
Accumulated distributable earnings (loss).............................. (4,949,549)
--------------
NET ASSETS............................................................. $ 93,746,127
==============
NET ASSET VALUE, per share............................................. $ 22.86
==============
Number of shares outstanding (unlimited number of shares authorized,
par value $0.01 per share).......................................... 4,100,002
==============
Investments, at cost................................................... $ 104,562,598
==============
Premiums paid on options contracts purchased........................... $ 91,079
==============
Premiums received on options contracts written......................... $ 38,090
==============
</TABLE>
See Notes to Financial Statements Page 11
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2023 (UNAUDITED)
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Interest............................................................... $ 641,511
Dividends.............................................................. 169,140
--------------
Total investment income............................................. 810,651
--------------
EXPENSES:
Investment advisory fees............................................... 124,970
Excise tax............................................................. 2,000
--------------
Total expenses...................................................... 126,970
--------------
NET INVESTMENT INCOME (LOSS)........................................... 683,681
--------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments......................................................... (308,190)
Futures contracts................................................... 847,306
Purchased options contracts......................................... 323,452
Written options contracts........................................... (137,361)
--------------
Net realized gain (loss)............................................... 725,207
--------------
Net change in unrealized appreciation (depreciation) on:
Investments......................................................... 1,280,442
Futures contracts................................................... 60,464
Purchased options contracts......................................... (19,057)
Written options contracts........................................... 3,197
--------------
Net change in unrealized appreciation (depreciation)................... 1,325,046
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ 2,050,253
--------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ 2,733,934
==============
</TABLE>
Page 12 See Notes to Financial Statements
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
4/30/2023 ENDED
(UNAUDITED) 10/31/2022
------------------ ------------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss)........................................... $ 683,681 $ 543,470
Net realized gain (loss)............................................... 725,207 (4,082,029)
Net change in unrealized appreciation (depreciation)................... 1,325,046 (2,904,001)
-------------- --------------
Net increase (decrease) in net assets resulting from operations........ 2,733,934 (6,442,560)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations.................................................. (634,750) (459,443)
Return of capital...................................................... -- (36,043)
-------------- --------------
Total distributions to shareholders.................................... (634,750) (495,486)
-------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold.............................................. 73,433,319 7,339,085
Cost of shares redeemed................................................ -- (15,438,060)
-------------- --------------
Net increase (decrease) in net assets resulting from
shareholder transactions............................................ 73,433,319 (8,098,975)
-------------- --------------
Total increase (decrease) in net assets................................ 75,532,503 (15,037,021)
NET ASSETS:
Beginning of period.................................................... 18,213,624 33,250,645
-------------- --------------
End of period.......................................................... $ 93,746,127 $ 18,213,624
============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................................ 850,002 1,200,002
Shares sold............................................................ 3,250,000 300,000
Shares redeemed........................................................ -- (650,000)
-------------- --------------
Shares outstanding, end of period...................................... 4,100,002 850,002
============== ==============
</TABLE>
See Notes to Financial Statements Page 13
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31, PERIOD
4/30/2023 ------------------------------------------ ENDED
(UNAUDITED) 2022 2021 2020 10/31/2019 (a)
-------------- ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.43 $ 27.71 $ 28.97 $ 28.04 $ 25.00
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.37 0.49 0.47 0.82 0.55
Net realized and unrealized gain (loss) 1.38 (6.36) (0.77) 1.24 2.95
---------- ---------- ---------- ---------- ----------
Total from investment operations 1.75 (5.87) (0.30) 2.06 3.50
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.32) (0.38) (0.47) (1.13) (0.46)
Net realized gains -- -- (0.45) -- --
Return of capital -- (0.03) (0.04) -- --
---------- ---------- ---------- ---------- ----------
Total distributions (0.32) (0.41) (0.96) (1.13) (0.46)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 22.86 $ 21.43 $ 27.71 $ 28.97 $ 28.04
========== ========== ========== ========== ==========
TOTAL RETURN (b) 8.20% (21.37)% (1.02)% 7.46% 14.08%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 93,746 $ 18,214 $ 35,251 $ 21,725 $ 11,215
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets (c) 0.66% (d) (e) 0.65% 0.69% (e) 0.69% (e) 0.65% (d)
Ratio of net investment income (loss) to
average net assets 3.56% (d) 1.79% 1.61% 1.89% 2.64% (d)
Portfolio turnover rate (f) 88% 98% (g) 142% (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 69%,
69%, 118% and 104% for the periods ended October 31, 2022, October 31,
2021, October 31, 2020 and October 31, 2019, respectively.
Page 14 See Notes to Financial Statements
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2023 (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 fourteen funds that are offering shares. This
report covers the First Trust Long Duration Opportunities ETF (the "Fund"),
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 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 portfolio managers. 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 portfolio managers to be of comparable quality to rated investment
grade securities. In the case of a split rating between one or more of the
nationally recognized statistical rating organizations, the Fund will consider
the highest rating. Under normal market conditions, the portfolio managers will
manage the Fund's portfolio to have 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 readily available market quotations such as last sale or
official closing prices from a national or foreign exchange (i.e., a regulated
market) and are primarily obtained from third-party pricing services. Fair value
prices represent any prices not considered market value prices and are either
obtained from a third-party pricing service or are determined by the Pricing
Committee of the Fund's investment advisor, First Trust Advisors L.P. ("First
Trust" or the "Advisor"), in accordance with valuation procedures approved by
Page 15
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FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2023 (UNAUDITED)
the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act
and rules thereunder. Investments valued by the Advisor's Pricing Committee, if
any, are footnoted as such in the footnotes to the Portfolio of Investments. The
Fund's investments are valued as follows:
U.S. government securities, mortgage-backed securities, asset-backed
securities and other debt securities are fair valued on the basis of
valuations provided by a third-party pricing service approved by the
Advisor's Pricing Committee, which may use the following valuation inputs
when available:
1) benchmark yields;
2) reported trades;
3) broker/dealer quotes;
4) issuer spreads;
5) benchmark securities;
6) bids and offers; and
7) reference data including market research publications.
Pricing services generally value fixed-income securities assuming orderly
transactions of an institutional round lot size, but a Fund may hold or
transact in such securities in smaller, odd lot sizes. Odd lots may trade
at lower prices than institutional round lots.
Securities traded in an over-the-counter market are valued at the mean of
their most recent bid and asked price, if available, and otherwise at
their last trade price.
Shares of open-end funds are valued 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 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 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 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
Page 16
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FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2023 (UNAUDITED)
might reasonably expect to receive for the security upon its current sale. When
fair value prices are used, generally they will differ from market quotations or
official closing prices on the applicable exchanges. A variety of factors may be
considered in determining the fair value of such securities, including, but not
limited to, the following:
1) the most recent price provided by a pricing service;
2) the fundamental business data relating to the issuer;
3) an evaluation of the forces which influence the market in
which these securities are purchased and sold;
4) the type, size and cost of a security;
5) the financial statements of the issuer, or the financial
condition of the country of issue;
6) the credit quality and cash flow of the issuer, or country of
issue, based on the Pricing Committee's, sub-adviser's or
portfolio manager's analysis, as applicable, or external
analysis;
7) the information as to any transactions in or offers for the
security;
8) the price and extent of public trading in similar securities
of the issuer/borrower, or comparable companies;
9) the coupon payments;
10) the quality, value and salability of collateral, if any,
securing the security;
11) 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);
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.
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, 2023, 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 (the "FCA"), which regulates
the London Interbank Offered Rates ("LIBOR") announced on March 5, 2021 that it
intended to phase-out all LIBOR reference rates, beginning December 31, 2021.
Since that announcement, the FCA has ceased publication of all non-USD LIBOR
reference rates and the 1-week and 2-month USD LIBOR reference rates as of
December 31, 2021. The remaining USD LIBOR settings will cease to be published
or no longer be representative immediately after June 30, 2023. The
International Swaps and Derivatives Association, Inc. ("ISDA") confirmed that
the FCA's March 5, 2021 announcement of its intention to cease providing LIBOR
reference rates, 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
Page 17
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FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2023 (UNAUDITED)
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. There is no assurance that
any alternative reference rate, including SOFR, will be similar to or produce
the same value or economic equivalence as LIBOR or that instruments using an
alternative rate will have the same volume or liquidity.
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, 2023, the Fund had no when-issued,
delayed-delivery securities, or 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.
Page 18
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2023 (UNAUDITED)
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,
exchange-listed U.S. Treasury futures contracts and exchange-listed options on
secured overnight financing rate futures contracts. The Fund uses derivative
instruments primarily to hedge interest rate risk and actively manage interest
rate exposure. The primary risk exposure is interest rate risk.
The Fund may purchase (buy) or write (sell) put and call options on futures
contracts and enter into closing transactions with respect to such options to
terminate an existing position. A futures option gives the holder the right, in
return for the premium paid, to assume a long position (call) or short position
(put) in a futures contract at a specified exercise price prior to the
expiration of the option. Upon exercise of a call option, the holder acquires a
long position in the futures contract and the writer is assigned the opposite
short position. In the case of a put option, the opposite is true. Prior to
exercise or expiration, a futures option contract may be closed out by an
offsetting purchase or sale of a futures option of the same series. When the
Fund writes (sells) an option, an amount equal to the premium received by the
Fund is included in "Options contracts written, at value" on the Statement of
Assets and Liabilities. When the Fund purchases (buys) an option, the premium
paid represents the cost of the option, which is included in "Premiums paid on
options contracts purchased" on the Statement of Assets and Liabilities. Options
are marked-to-market daily and their value is affected by changes in the value
of the underlying security, changes in interest rates, changes in the actual or
perceived volatility of the securities markets and the underlying securities,
and the remaining time to the option's expiration. The value of options may also
be adversely affected if the market for the options becomes less liquid or the
trading volume diminishes.
The Fund uses options on futures contracts in connection with hedging
strategies. Generally, these strategies are applied under the same market and
market sector conditions in which the Fund uses put and call options on
securities. The purchase of put options on futures contracts is analogous to the
purchase of puts on securities so as to hedge the Fund's securities holdings
against the risk of declining market prices. The writing of a call option or the
purchasing of a put option on a futures contract constitutes a partial hedge
against declining prices of securities which are deliverable upon exercise of
the futures contract. If the price at expiration of a written call option is
below the exercise price, the Fund will retain the full amount of the option
premium which provides a partial hedge against any decline that may have
occurred in the Fund's holdings of securities. If the price when the option is
exercised is above the exercise price, however, the Fund will incur a loss,
which may be offset, in whole or in part, by the increase in the value of the
securities held by the Fund that were being hedged. Writing a put option or
purchasing a call option on a futures contract serves as a partial hedge against
an increase in the value of the securities the Fund intends to acquire. Realized
gains and losses on written options are included in "Net realized gain (loss) on
written options contracts" on the Statement of Operations. Realized gains and
losses on purchased options are included in "Net realized gain (loss) on
purchased options contracts" on the Statement of Operations.
The Fund is required to deposit and maintain margin with respect to put and call
options on futures contracts written by it. Such margin deposits will vary
depending on the nature of the underlying futures contract (and the related
initial margin requirements), the current market value of the option and other
futures positions held by the Fund. The Fund will pledge in a segregated account
at the Fund's custodian, liquid assets, such as cash, U.S. government securities
or other high-grade liquid debt obligations equal in value to the amount due on
the underlying obligation. Such segregated assets will be marked-to-market
daily, and additional assets will be pledged in the segregated account whenever
the total value of the pledged assets falls below the amount due on the
underlying obligation.
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.
Page 19
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FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2023 (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. 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. The Fund may also designate a portion of the amount paid to
redeeming shareholders as a distribution for tax purposes.
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,
2022 was as follows:
Distributions paid from:
Ordinary income................................. $ 459,443
Capital gains................................... --
Return of capital............................... 36,043
As of October 31, 2022, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income................... $ --
Accumulated capital and other gain (loss)....... (4,265,975)
Net unrealized appreciation (depreciation)...... (2,782,758)
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
Page 20
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FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2023 (UNAUDITED)
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,
2020, 2021, and 2022 remain open to federal and state audit. As of April 30,
2023, 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, 2022, the
Fund had non-expiring capital loss carryforwards available for federal income
tax purposes of $4,265,975.
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, 2022, the Fund had no
net late year ordinary or capital losses.
As of April 30, 2023, the aggregate cost, gross unrealized appreciation, gross
unrealized depreciation, and net unrealized appreciation/(depreciation) on
investments (including short positions and derivatives, if any) for federal
income tax purposes were as follows:
<TABLE>
<CAPTION>
Gross Gross Net Unrealized
Unrealized Unrealized Appreciation
Tax Cost Appreciation (Depreciation) (Depreciation)
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
$ 104,615,587 $ 679,093 $ (2,091,839) $ (1,412,746)
</TABLE>
L. 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. Effective November 1, 2022, the annual unitary
management fee payable by the Fund to First Trust for these services will be
reduced at certain levels of the Fund's net assets ("breakpoints") and
calculated pursuant to the schedule below:
<TABLE>
<CAPTION>
Breakpoints
-------------------------------------------------------------------------
<S> <C>
Fund net assets up to and including $2.5 billion 0.65000%
Fund net assets greater than $2.5 billion up to and including $5 billion 0.63375%
Fund net assets greater than $5 billion up to and including $7.5 billion 0.61750%
Fund net assets greater than $7.5 billion up to and including $10 billion 0.60125%
Fund net assets greater than $10 billion 0.58500%
</TABLE>
Prior to November 1, 2022, the Fund paid First Trust an annual unitary
management fee equal to 0.65% of its average daily net assets.
Page 21
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2023 (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 target outcome fund or an index fund.
Additionally, the Lead Independent Trustee and the Chairs 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 Chairs
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,
2023, were $79,973,283 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, 2023, were
$23,160,992 and $0, respectively. The cost of purchases to cover investments
sold short and the proceeds of investments sold short were $2,699,141 and
$2,699,141, respectively.
For the six months ended April 30, 2023, 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, 2023, 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* $ 50,065 futures contracts* $ 520
Options Interest Options contracts purchased, Options contracts written,
rate risk at value 77,609 at value 29,750
</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, 2023, 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 $ 847,306
Purchased options contracts 323,452
Written options contracts (137,361)
Net change in unrealized appreciation (depreciation) on:
Futures contracts 60,464
Purchased options contracts (19,057)
Written options contracts 3,197
</TABLE>
Page 22
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2023 (UNAUDITED)
For the six months ended April 30, 2023, the notional value of futures contracts
opened and closed were $198,249,113 and $181,050,616, respectively.
During the six months ended April 30, 2023, the premiums for purchased options
contracts opened were $2,014,527 and the premiums for purchased options
contracts closed, exercised and expired were $2,103,408.
During the six months ended April 30, 2023, the premiums for written options
contracts opened were $377,220 and the premiums for written options contracts
closed, exercised and expired were $354,742.
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 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.
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, 2024.
Page 23
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2023 (UNAUDITED)
8. INDEMNIFICATION
The Trust, on behalf of the Fund, has a variety of indemnification obligations
under contracts with its service providers. The Trust's maximum exposure under
these arrangements is unknown. However, the Trust has not had prior claims or
losses pursuant to these contracts and expects the risk of loss to be remote.
9. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Fund through
the date the financial statements were issued, and has determined that there was
the following subsequent event:
On May 23, 2023, the Advisor's Pricing Committee approved changes to the
Advisor's Valuation Procedures for the First Trust Funds, including
clarifications to certain pricing methodologies. These changes will be reflected
in future reports' Notes to Financial Statements.
Page 24
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2023 (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 significant
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
more broadly diversified.
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.
DEFINED OUTCOME FUNDS RISK. To the extent a fund's investment strategy is
designed to deliver returns tied to the price performance of an underlying ETF,
an investor may not realize the returns the fund seeks to achieve if that
investor does not hold shares for the entire target outcome period. In the event
an investor purchases shares after the first day of the target outcome period or
sells shares prior to the end of the target outcome period, the buffer that the
fund seeks to provide against a decline in the value of the underlying ETF may
not be available, the enhanced returns that the fund seeks to provide (if any)
may not be available and the investor may not participate in a gain in the value
of the underlying ETF up to the cap for the investor's investment period.
Additionally, the fund will not participate in gains of the underlying ETF above
the cap and a shareholder may lose their entire investment. If the fund seeks
enhanced returns, there are certain time periods when the value of the fund may
fall faster than the value of the underlying ETF, and it is very unlikely that,
on any given day during which the underlying ETF share price increases in value,
the fund's share price will increase at the same rate as the enhanced returns
sought by the fund, which is designed for an entire target outcome period.
Trading flexible exchange options involves risks different from, or possibly
greater than, the risks associated with investing directly in securities, such
as less liquidity and correlation and valuation risks. A fund may experience
substantial downside from specific flexible exchange option positions and
certain positions may expire worthless.
Page 25
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2023 (UNAUDITED)
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
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 OR MODEL CONSTITUENT RISK. Certain funds may be a constituent of one or
more indices or ETF models. 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 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. In addition, index rebalances may potentially result in increased
trading activity in a fund's shares.
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 has ceased making LIBOR available as a
reference rate over a phase-out period that began December 31, 2021. There is no
assurance that any alternative reference rate, including the Secured Overnight
Financing Rate ("SOFR") will be similar to or produce the same value or economic
equivalence as LIBOR or that instruments using an alternative rate will have the
same volume or liquidity. The unavailability or replacement of LIBOR may affect
the value, liquidity or return on certain fund investments and may result in
Page 26
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2023 (UNAUDITED)
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. Market risk is the risk that a particular security, or shares of a
fund in general, may fall in value. 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. In February
2022, Russia invaded Ukraine which has caused and could continue to cause
significant market disruptions and volatility within the markets in Russia,
Europe, and the United States. The hostilities and sanctions resulting from
those hostilities could have a significant impact on certain fund investments as
well as fund performance. The COVID-19 global pandemic and the ensuing policies
enacted by governments and central banks have caused and may continue to cause
significant volatility and uncertainty in global financial markets. While the
U.S. has resumed "reasonably" normal business activity, many countries continue
to impose lockdown measures. Additionally, there is no guarantee that vaccines
will be effective against emerging variants of the disease. These events also
adversely affect the prices and liquidity of a fund's portfolio securities or
other instruments and could result in disruptions in the trading markets. Any of
such circumstances could have a materially negative impact on the value of a
fund's shares and result in increased market volatility. During any such events,
a fund's shares may trade at increased premiums or discounts to their net asset
value and the bid/ask spread on a fund's shares may widen.
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;
capital controls; lack of liquidity; currency exchange rates; excessive
taxation; government seizure of assets; the imposition of sanctions by foreign
governments; 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. Each fund relies on third-parties for a range of services, including
custody. Any delay or failure relating to engaging or maintaining such service
providers may affect a fund's ability to meet its investment objective. Although
the funds and the funds' investment 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.
PREFERRED SECURITIES RISK. Preferred securities combine some of the
characteristics of both common stocks and bonds. Preferred securities are
typically subordinated to bonds and other debt securities in a company's capital
structure in terms of priority to corporate income, subjecting them to greater
credit risk than those debt securities. Generally, holders of preferred
securities have no voting rights with respect to the issuing company unless
preferred dividends have been in arrears for a specified number of periods, at
which time the preferred security holders may obtain limited rights. In certain
circumstances, an issuer of preferred securities may defer payment on the
securities and, in some cases, redeem the securities prior to a specified date.
Preferred securities may also be substantially less liquid than other
securities, including common stock.
VALUATION RISK. The valuation of certain securities may carry more risk than
that of common stock. Uncertainties in the conditions of the financial markets,
unreliable reference data, lack of transparency and inconsistency of valuation
models and processes may lead to inaccurate asset pricing. A fund may hold
investments in sizes smaller than institutionally sized round lot positions
Page 27
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2023 (UNAUDITED)
(sometimes referred to as odd lots). However, third-party pricing services
generally provide evaluations on the basis of institutionally-sized round lots.
If a fund sells certain of its investments in an odd lot transaction, the sale
price may be less than the value at which such securities have been held by the
fund. Odd lots often trade at lower prices than institutional round lots. There
is no assurance that the fund will be able to sell a portfolio security at the
price established by the pricing service, which could result in a loss to the
fund.
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 17, 2023 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 17, 2022 through the Liquidity Committee's annual meeting held
on March 23, 2023 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 any
highly liquid investment minimum.
As stated in the written report, during the review period, two funds breached
the 15% limitation on illiquid investments for one day each, as a result of an
unscheduled week-long closure of the stock exchange in Istanbul following
devastating earthquakes in February, causing all Turkish equities to be
re-classified as "illiquid" for one day. Each fund filed a Form N-RN on the day
after the breach occurred, and one day later after the breach was cured. No fund
with a highly liquid investment minimum breached that minimum during the
reporting period. 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 28
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 South Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
320 South Canal Street
Chicago, IL 60606
[BLANK BACK COVER]
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, 2023
----------------------------
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
SEMI-ANNUAL REPORT
APRIL 30, 2023 (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....................................................... 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 Cboe Vest(SM) 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-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 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.
--------------------------------------------------------------------------------
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, 2023
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 six months ended
April 30, 2023.
It pleases me to write that on May 5, 2023, the World Health Organization
officially declared that the coronavirus ("COVID-19") pandemic no longer
qualified as a global health emergency. While the virus officially no longer
poses an immediate threat, its full impact on the world economy remains to be
seen, in my opinion. Recall, if you will, those early days of the pandemic;
companies sent workers home, consumers were afraid or unwilling to leave their
homes, supply chains dried up, and grocery shelves were left bare. Hoping to
provide relief to their constituents and to bolster economic activity,
governments across the globe funneled trillions of dollars in stimulus directly
into the hands of their citizens. Unfortunately, economist Milton Friedman's
age-old economic adage "there's no such thing as a free lunch" still holds. As a
result of the U.S. government stimulus, gross domestic product rebounded
quickly, but so did inflation.
As many investors are aware, the Federal Reserve (the "Fed") has been locked in
a battle with stubbornly high inflation for several years now. Inflation, as
measured by the trailing 12-month rate of change in the Consumer Price Index
("CPI"), surged from 1.4% on December 31, 2020, to 9.1% as of June 30, 2022.
Since then, the trailing rate on the CPI has come down, but remains elevated. On
April 30, 2023, the CPI stood at 4.9%, well above the Fed's goal of 2.0%.
Surging prices have not been restricted to the U.S. Headline inflation rates in
each of the countries that make up the so-called Group of Ten (G-10) stand above
the targets set by their central banks, according to data from Bloomberg.
From the Fed's perspective, monetary policy is the most efficient means to
combat rising prices. From December 31, 2020 through May 3, 2023, the Fed
increased the Federal Funds target rate (upper bound) a total of ten times,
raising the rate from 0.25% to 5.25%. As mentioned, tighter monetary policy
resulted in a decrease in the CPI, but there have been casualties in the Fed's
battle with rising prices. The most recent banking turmoil is one example.
Another is the spike in mortgage rates. According to Bankrate, the national
average for a 30-year mortgage stood at just 2.87% on December 31, 2020. As of
May 1, 2023, the average 30-year mortgage rate had surged to 6.88%. Not all the
news is negative, however. Driven by a strong U.S. labor market, consumer
spending remained robust in April 2023. Notably, American corporations added
253,000 jobs during the month, and the unemployment rate stood at a 53-year low.
Bob Carey, Chief Market Strategist at First Trust, recently summed up the
current situation, noting that "we're not out of the woods yet." That said, even
the most difficult situations don't last forever. In my opinion, like the
COVID-19 pandemic, inflation, and the tighter monetary policy it ushered in,
will pass with time.
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
--------------------------------------------------------------------------------
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(R) 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 Aristocrat Stocks 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 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (3/26/18) Ended (3/26/18)
4/30/23 4/30/23 4/30/23 to 4/30/23 4/30/23 to 4/30/23
<S> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 6.38% 3.17% 10.08% 9.79% 61.65% 60.92%
Market Price 6.38% 2.76% 10.07% 9.78% 61.60% 60.91%
INDEX PERFORMANCE
Cboe S&P 500(R) Dividend Aristocrats
Target Income Index Monthly Series 6.76% 3.88% 10.91% 10.61% 67.82% 67.18%
S&P 500(R) Dividend Aristocrats Index 6.85% 3.97% 11.41% 11.09% 71.61% 70.88%
S&P 500(R) Index 8.63% 2.66% 11.45% 11.16% 71.93% 71.48%
------------------------------------------------------------------------------------------------------------------------------------
</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
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
---------------------------------------------------------------
% OF TOTAL
LONG-TERM
SECTOR CLASSIFICATION INVESTMENTS
---------------------------------------------------------------
Consumer Staples 24.3%
Industrials 22.8
Materials 12.1
Financials 10.7
Health Care 10.5
Real Estate 4.6
Consumer Discretionary 4.5
Utilities 4.4
Information Technology 3.1
Energy 3.0
-------
Total 100.0%
=======
---------------------------------------------------------------
% OF NET
FUND ALLOCATION ASSETS
---------------------------------------------------------------
Common Stocks 99.9%
Call Options Written (0.2)
Net Other Assets and Liabilities 0.3
-------
Total 100.0%
=======
---------------------------------------------------------------
% OF TOTAL
LONG-TERM
TOP TEN HOLDINGS INVESTMENTS
---------------------------------------------------------------
Pentair PLC 1.6%
Stanley Black & Decker, Inc. 1.6
Albemarle Corp. 1.6
Medtronic PLC 1.6
Church & Dwight Co., Inc. 1.6
Aflac, Inc. 1.6
Brown & Brown, Inc. 1.6
Colgate-Palmolive Co. 1.6
W.W. Grainger, Inc. 1.6
C.H. Robinson Worldwide, Inc. 1.6
-------
Total 16.0%
=======
Page 3
--------------------------------------------------------------------------------
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, 2023
FT Cboe Vest S&P 500(R) Cboe S&P 500(R) Dividend
Dividend Aristocrats Aristocrats Target Income S&P 500(R) 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 15,088 15,446 15,754 16,667
10/31/21 15,847 16,285 16,622 18,485
4/30/22 15,601 16,096 16,436 16,701
10/31/22 15,130 15,659 15,992 15,785
4/30/23 16,092 16,718 17,088 17,148
</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 4
--------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT
--------------------------------------------------------------------------------
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
SEMI-ANNUAL REPORT
APRIL 30, 2023 (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" or 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 Vest(SM) 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 8350 Broad Street,
Suite 240, McLean, VA 22102, was founded in 2012. Cboe Vest had approximately
$12.1 billion under management or committed to management as of April 30, 2023.
PORTFOLIO MANAGEMENT TEAM
KARAN SOOD, DIRECTOR OF CBOE VEST
HOWARD RUBIN, MANAGING DIRECTOR OF CBOE VEST
The portfolio managers are primarily and jointly responsible for the day-to-day
management of the Fund. Each portfolio manager has served as a part of the
portfolio management team of the Fund since March 2021.
Page 5
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
UNDERSTANDING YOUR FUND EXPENSES
APRIL 30, 2023 (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, 2023.
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, 2022 APRIL 30, 2023 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 $1,063.80 0.75% $3.84
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,
2022 through April 30, 2023), multiplied by 181/365 (to reflect the
six-month period).
Page 6
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2023 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- -------------------------------------------------------------------------------------------- ----------------
<S> <C> <C>
COMMON STOCKS -- 99.9%
AEROSPACE & DEFENSE -- 1.5%
41,073 General Dynamics Corp. (a).................................................................. $ 8,967,879
----------------
AIR FREIGHT & LOGISTICS -- 3.1%
94,899 C.H. Robinson Worldwide, Inc. (a)........................................................... 9,572,462
83,084 Expeditors International of Washington, Inc. (a)............................................ 9,458,283
----------------
19,030,745
----------------
BEVERAGES -- 4.6%
144,478 Brown-Forman Corp., Class B................................................................. 9,404,073
144,297 Coca-Cola (The) Co. (a)..................................................................... 9,256,652
49,848 PepsiCo, Inc. (a)........................................................................... 9,515,485
----------------
28,176,210
----------------
BIOTECHNOLOGY -- 1.4%
56,907 AbbVie, Inc. (a)............................................................................ 8,599,786
----------------
BUILDING PRODUCTS -- 1.5%
134,374 A.O. Smith Corp. (a)........................................................................ 9,176,400
----------------
CAPITAL MARKETS -- 4.6%
346,281 Franklin Resources, Inc. (a)................................................................ 9,308,033
26,277 S&P Global, Inc. (a)........................................................................ 9,527,515
82,549 T. Rowe Price Group, Inc. (a)............................................................... 9,272,729
----------------
28,108,277
----------------
CHEMICALS -- 9.1%
31,807 Air Products and Chemicals, Inc. (a)........................................................ 9,362,709
53,193 Albemarle Corp. (a)......................................................................... 9,865,174
55,811 Ecolab, Inc. (a)............................................................................ 9,367,318
25,238 Linde PLC (a)............................................................................... 9,324,179
65,095 PPG Industries, Inc. (a).................................................................... 9,130,225
39,558 Sherwin-Williams (The) Co. (a).............................................................. 9,396,607
----------------
56,446,212
----------------
COMMERCIAL SERVICES & SUPPLIES -- 1.5%
20,097 Cintas Corp. (a)............................................................................ 9,159,610
----------------
CONSUMER STAPLES DISTRIBUTION & RETAIL -- 6.0%
122,316 Sysco Corp. (a)............................................................................. 9,386,530
56,987 Target Corp. (a)............................................................................ 8,989,699
262,042 Walgreens Boots Alliance, Inc. (a).......................................................... 9,236,980
60,912 Walmart, Inc. (a)........................................................................... 9,195,885
----------------
36,809,094
----------------
CONTAINERS & PACKAGING -- 1.5%
835,645 Amcor PLC (a)............................................................................... 9,167,026
----------------
DISTRIBUTORS -- 1.5%
55,502 Genuine Parts Co. (a)....................................................................... 9,341,542
----------------
ELECTRIC UTILITIES -- 1.4%
117,005 NextEra Energy, Inc. (a).................................................................... 8,966,093
----------------
ELECTRICAL EQUIPMENT -- 1.5%
107,970 Emerson Electric Co. (a).................................................................... 8,989,582
----------------
</TABLE>
See Notes to Financial Statements Page 7
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2023 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- -------------------------------------------------------------------------------------------- ----------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
FOOD PRODUCTS -- 6.0%
114,810 Archer-Daniels-Midland Co. (a).............................................................. $ 8,964,365
231,925 Hormel Foods Corp. (a)...................................................................... 9,379,047
61,110 J.M. Smucker (The) Co. (a).................................................................. 9,435,995
107,869 McCormick & Co., Inc. (a)................................................................... 9,476,292
----------------
37,255,699
----------------
GAS UTILITIES -- 1.5%
80,103 Atmos Energy Corp. (a)...................................................................... 9,142,956
----------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 4.6%
82,771 Abbott Laboratories (a)..................................................................... 9,143,712
35,382 Becton, Dickinson and Co. (a)............................................................... 9,351,817
107,806 Medtronic PLC (a)........................................................................... 9,804,956
----------------
28,300,485
----------------
HEALTH CARE PROVIDERS & SERVICES -- 1.5%
115,412 Cardinal Health, Inc. (a)................................................................... 9,475,325
----------------
HOTELS, RESTAURANTS & LEISURE -- 1.5%
31,645 McDonald's Corp. (a)........................................................................ 9,359,009
----------------
HOUSEHOLD PRODUCTS -- 7.7%
100,887 Church & Dwight Co., Inc. (a)............................................................... 9,798,145
55,925 Clorox (The) Co. (a)........................................................................ 9,262,298
120,342 Colgate-Palmolive Co. (a)................................................................... 9,603,292
65,284 Kimberly-Clark Corp. (a).................................................................... 9,458,999
59,218 Procter & Gamble (The) Co. (a).............................................................. 9,260,511
----------------
47,383,245
----------------
INDUSTRIAL CONGLOMERATES -- 1.5%
88,459 3M Co. (a).................................................................................. 9,396,115
----------------
INSURANCE -- 6.2%
140,076 Aflac, Inc. (a)............................................................................. 9,784,308
150,525 Brown & Brown, Inc. (a)..................................................................... 9,692,305
45,938 Chubb Ltd. (a).............................................................................. 9,259,263
87,372 Cincinnati Financial Corp. (a).............................................................. 9,299,876
----------------
38,035,752
----------------
IT SERVICES -- 1.5%
73,509 International Business Machines Corp. (a)................................................... 9,292,273
----------------
LIFE SCIENCES TOOLS & SERVICES -- 1.5%
25,260 West Pharmaceutical Services, Inc. (a)...................................................... 9,124,922
----------------
MACHINERY -- 9.2%
41,959 Caterpillar, Inc. (a)....................................................................... 9,180,629
62,583 Dover Corp. (a)............................................................................. 9,147,131
39,130 Illinois Tool Works, Inc. (a)............................................................... 9,467,112
42,233 Nordson Corp. (a)........................................................................... 9,135,420
172,881 Pentair PLC (a)............................................................................. 10,040,929
115,528 Stanley Black & Decker, Inc. (a)............................................................ 9,974,688
----------------
56,945,909
----------------
METALS & MINING -- 1.4%
60,230 Nucor Corp. (a)............................................................................. 8,924,881
----------------
</TABLE>
Page 8 See Notes to Financial Statements
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2023 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- -------------------------------------------------------------------------------------------- ----------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
MULTI-UTILITIES -- 1.5%
93,318 Consolidated Edison, Inc. (a)............................................................... $ 9,189,023
----------------
OIL, GAS & CONSUMABLE FUELS -- 3.0%
54,649 Chevron Corp. (a)........................................................................... 9,212,729
79,668 Exxon Mobil Corp. (a)....................................................................... 9,427,911
----------------
18,640,640
----------------
PHARMACEUTICALS -- 1.5%
56,809 Johnson & Johnson (a)....................................................................... 9,299,633
----------------
PROFESSIONAL SERVICES -- 1.5%
42,945 Automatic Data Processing, Inc. (a)......................................................... 9,447,900
----------------
RESIDENTIAL REITS -- 1.5%
43,509 Essex Property Trust, Inc. (a).............................................................. 9,560,233
----------------
RETAIL REITS -- 3.0%
95,006 Federal Realty Investment Trust (a)......................................................... 9,395,143
148,279 Realty Income Corp. (a)..................................................................... 9,317,853
----------------
18,712,996
----------------
SOFTWARE -- 1.5%
20,750 Roper Technologies, Inc. (a)................................................................ 9,436,685
----------------
SPECIALTY RETAIL -- 1.5%
43,794 Lowe's Cos., Inc. (a)....................................................................... 9,101,707
----------------
TRADING COMPANIES & DISTRIBUTORS -- 1.6%
13,792 W.W. Grainger, Inc. (a)..................................................................... 9,593,301
----------------
TOTAL INVESTMENTS -- 99.9%.................................................................. 616,557,145
(Cost $586,674,121) ----------------
</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)%
(45) 3M Co............................................. $ (477,990) $ 105.00 05/19/23 (13,095)
(127) A.O. Smith Corp................................... (867,283) 70.00 05/19/23 (10,795)
(48) Abbott Laboratories............................... (530,256) 110.00 05/19/23 (10,272)
(74) AbbVie, Inc....................................... (1,118,288) 165.00 05/19/23 (370)
(75) Aflac, Inc........................................ (523,875) 65.00 05/19/23 (38,250)
(19) Air Products and Chemicals, Inc................... (559,284) 290.00 05/19/23 (19,950)
(12) Albemarle Corp.................................... (222,552) 175.00 05/19/23 (18,300)
(634) Amcor PLC......................................... (695,498) 11.00 05/19/23 (15,850)
(66) Archer-Daniels-Midland Co......................... (515,328) 80.00 05/19/23 (4,290)
(130) Atmos Energy Corp................................. (1,483,820) 115.00 05/19/23 (31,200)
(16) Automatic Data Processing, Inc.................... (352,000) 210.00 05/19/23 (18,960)
(26) Becton, Dickinson and Co.......................... (687,206) 260.00 05/19/23 (22,646)
(206) Brown & Brown, Inc................................ (1,326,434) 60.00 05/19/23 (90,228)
(49) C.H. Robinson Worldwide, Inc...................... (494,263) 97.50 05/19/23 (18,767)
(78) Cardinal Health, Inc.............................. (640,380) 80.00 05/19/23 (27,300)
(19) Caterpillar, Inc.................................. (415,720) 220.00 05/19/23 (9,215)
(41) Chevron Corp...................................... (691,178) 170.00 05/19/23 (10,988)
(25) Chubb Ltd......................................... (503,900) 200.00 05/19/23 (12,250)
(64) Church & Dwight Co., Inc.......................... (621,568) 90.00 05/19/23 (49,280)
(42) Cincinnati Financial Corp......................... (447,048) 105.00 05/19/23 (14,700)
</TABLE>
See Notes to Financial Statements Page 9
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2023 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
---------------- -------------------------------------------------- ------------ ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
CALL OPTIONS WRITTEN (CONTINUED)
(19) Cintas Corp....................................... $ (865,963) $ 460.00 05/19/23 $ (12,350)
(43) Clorox (The) Co................................... (712,166) 165.00 05/19/23 (22,489)
(297) Coca-Cola (The) Co................................ (1,905,255) 65.00 05/19/23 (10,098)
(127) Colgate-Palmolive Co.............................. (1,013,460) 77.50 05/19/23 (37,465)
(127) Consolidated Edison, Inc.......................... (1,250,569) 100.00 05/19/23 (12,827)
(30) Dover Corp........................................ (438,480) 145.00 05/19/23 (10,800)
(42) Ecolab, Inc....................................... (704,928) 165.00 05/19/23 (23,688)
(59) Emerson Electric Co............................... (491,234) 85.00 05/19/23 (6,195)
(22) Essex Property Trust, Inc......................... (483,406) 210.00 05/19/23 (27,830)
(43) Expeditors International of Washington, Inc....... (489,512) 110.00 05/19/23 (29,240)
(48) Exxon Mobil Corp.................................. (568,032) 115.00 05/19/23 (21,888)
(48) Federal Realty Investment Trust................... (474,672) 95.00 05/19/23 (25,200)
(275) Franklin Resources, Inc........................... (739,200) 27.50 05/19/23 (15,950)
(20) General Dynamics Corp............................. (436,680) 220.00 05/19/23 (5,180)
(37) Genuine Parts Co.................................. (622,747) 165.00 05/19/23 (20,905)
(232) Hormel Foods Corp................................. (938,208) 40.00 05/19/23 (22,040)
(41) Illinois Tool Works, Inc.......................... (991,954) 240.00 05/19/23 (30,217)
(72) International Business Machines Corp.............. (910,152) 125.00 05/19/23 (16,488)
(59) J.M. Smucker (The) Co............................. (911,019) 150.00 05/19/23 (30,385)
(37) Johnson & Johnson................................. (605,690) 160.00 05/19/23 (17,649)
(48) Kimberly-Clark Corp............................... (695,472) 140.00 05/19/23 (27,696)
(20) Linde PLC......................................... (738,900) 365.00 05/19/23 (19,600)
(30) Lowe's Cos., Inc.................................. (623,490) 210.00 05/19/23 (10,590)
(96) McCormick & Co., Inc.............................. (843,360) 85.00 05/19/23 (35,520)
(26) McDonald's Corp................................... (768,950) 290.00 05/19/23 (20,306)
(128) Medtronic PLC..................................... (1,164,160) 87.50 05/19/23 (53,760)
(102) NextEra Energy, Inc............................... (781,626) 80.00 05/19/23 (4,182)
(92) Nordson Corp...................................... (1,990,052) 220.00 05/19/23 (27,600)
(34) Nucor Corp........................................ (503,812) 155.00 05/19/23 (6,460)
(78) Pentair PLC....................................... (453,024) 52.50 05/19/23 (40,560)
(52) PepsiCo, Inc...................................... (992,628) 185.00 05/19/23 (32,500)
(39) PPG Industries, Inc............................... (547,014) 140.00 05/19/23 (12,363)
(58) Procter & Gamble (The) Co......................... (907,004) 155.00 05/19/23 (15,602)
(143) Realty Income Corp................................ (898,612) 62.50 05/19/23 (19,305)
(23) Roper Technologies, Inc........................... (1,045,994) 450.00 05/19/23 (26,266)
(15) S&P Global, Inc................................... (543,870) 350.00 05/19/23 (21,420)
(17) Sherwin-Williams (The) Co......................... (403,818) 230.00 05/19/23 (18,530)
(43) Stanley Black & Decker, Inc....................... (371,262) 80.00 05/19/23 (31,820)
(72) Sysco Corp........................................ (552,528) 75.00 05/19/23 (21,600)
(31) T. Rowe Price Group, Inc.......................... (348,223) 110.00 05/19/23 (13,671)
(23) Target Corp....................................... (362,825) 160.00 05/19/23 (11,385)
(10) W.W. Grainger, Inc................................ (695,570) 670.00 05/19/23 (36,100)
(164) Walgreens Boots Alliance, Inc..................... (578,100) 35.00 05/19/23 (13,940)
(43) Walmart, Inc...................................... (649,171) 150.00 05/19/23 (15,179)
(15) West Pharmaceutical Services, Inc................. (541,860) 360.00 05/19/23 (13,425)
----------------
TOTAL CALL OPTIONS WRITTEN.................................................................. (1,384,970)
(Premiums received $1,193,338) ----------------
NET OTHER ASSETS AND LIABILITIES -- 0.3%.................................................... 2,097,290
----------------
NET ASSETS -- 100.0%........................................................................ $ 617,269,465
================
</TABLE>
(a) All or a portion of this security is pledged as collateral for the options
written. At April 30, 2023, the value of these securities amounts to
$46,728,523.
Page 10 See Notes to Financial Statements
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2023 (UNAUDITED)
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2023 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
4/30/2023 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Common Stocks*........................................ $ 616,557,145 $ 616,557,145 $ -- $ --
=============== =============== =============== ===============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
4/30/2023 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
Call Options Written.................................. $ (1,384,970) $ (1,384,970) $ -- $ --
=============== =============== =============== ===============
</TABLE>
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 11
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2023 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value.................................................. $ 616,557,145
Cash................................................................... 1,767,373
Cash segregated as collateral for open options contracts............... 6,930
Receivables:
Investment securities sold.......................................... 35,251,911
Capital shares sold................................................. 20,812,920
Dividends........................................................... 713,626
--------------
Total Assets........................................................ 675,109,905
--------------
LIABILITIES:
Options contracts written, at value.................................... 1,384,970
Payables:
Investment securities purchased..................................... 35,119,271
Capital shares purchased............................................ 20,968,757
Investment advisory fees............................................ 367,442
--------------
Total Liabilities................................................... 57,840,440
--------------
NET ASSETS............................................................. $ 617,269,465
==============
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $ 633,944,044
Par value.............................................................. 117,750
Accumulated distributable earnings (loss).............................. (16,792,329)
--------------
NET ASSETS............................................................. $ 617,269,465
==============
NET ASSET VALUE, per share............................................. $ 52.42
==============
Number of shares outstanding (unlimited number of shares authorized,
par value $0.01 per share).......................................... 11,775,000
==============
Investments, at cost................................................... $ 586,674,121
==============
Premiums received on options contracts written......................... $ 1,193,338
==============
</TABLE>
Page 12 See Notes to Financial Statements
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2023 (UNAUDITED)
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Dividends.............................................................. $ 6,917,834
--------------
Total investment income................................................ 6,917,834
--------------
EXPENSES:
Investment advisory fees............................................... 2,118,005
--------------
Total expenses......................................................... 2,118,005
--------------
NET INVESTMENT INCOME (LOSS)........................................... 4,799,829
--------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments......................................................... (27,139,455)
In-kind redemptions................................................. 10,497,088
Written options contracts........................................... 2,683,140
--------------
Net realized gain (loss)............................................... (13,959,227)
--------------
Net change in unrealized appreciation (depreciation) on:
Investments......................................................... 42,322,766
Written options contracts........................................... 551,378
--------------
Net change in unrealized appreciation (depreciation)................... 42,874,144
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ 28,914,917
--------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ 33,714,746
==============
</TABLE>
See Notes to Financial Statements Page 13
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
4/30/2023 ENDED
(UNAUDITED) 10/31/2022
------------------ ------------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss)........................................... $ 4,799,829 $ 6,971,178
Net realized gain (loss)............................................... (13,959,227) 12,015,289
Net change in unrealized appreciation (depreciation)................... 42,874,144 (47,292,895)
-------------- --------------
Net increase (decrease) in net assets resulting from operations........ 33,714,746 (28,306,428)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations.................................................. (11,518,043) (17,788,530)
-------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold.............................................. 133,058,140 343,702,208
Cost of shares redeemed................................................ (44,552,905) (85,454,751)
-------------- --------------
Net increase (decrease) in net assets resulting from
shareholder transactions............................................ 88,505,235 258,247,457
-------------- --------------
Total increase (decrease) in net assets................................ 110,701,938 212,152,499
NET ASSETS:
Beginning of period.................................................... 506,567,527 294,415,028
-------------- --------------
End of period.......................................................... $ 617,269,465 $ 506,567,527
============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................................ 10,075,000 5,375,000
Shares sold............................................................ 2,550,000 6,400,000
Shares redeemed........................................................ (850,000) (1,700,000)
-------------- --------------
Shares outstanding, end of period...................................... 11,775,000 10,075,000
============== ==============
</TABLE>
Page 14 See Notes to Financial Statements
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
4/30/2023 ---------------------------------------------------- ENDED
(UNAUDITED) 2022 2021 2020 2019 10/31/2018 (a)
------------- ---------- ---------- ---------- ---------- --------------
<S> <C> <C> <C>
Net asset value, beginning of period....... $ 50.28 $ 54.77 $ 42.40 $ 44.69 $ 40.28 $ 40.00
--------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............... 0.47 0.81 0.73 0.81 (b) 0.74 (b) 0.43 (b)
Net realized and unrealized gain (loss).... 2.71 (3.28) 13.57 (1.35) (c) 5.52 0.70 (c)
--------- -------- -------- -------- -------- --------
Total from investment operations........... 3.18 (2.47) 14.30 (0.54) 6.26 1.13
--------- -------- -------- -------- -------- --------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income...................... (1.04) (1.45) (0.58) (1.75) (1.57) (0.40)
Net realized gain.......................... -- (0.57) (1.35) -- (0.29) (0.46)
--------- -------- -------- -------- -------- --------
Total distributions........................ (1.04) (2.02) (1.93) (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............. $ 52.42 $ 50.28 $ 54.77 $ 42.40 $ 44.69 $ 40.28
========= ======== ======== ======== ======== ========
TOTAL RETURN (e)........................... 6.38% (4.52)% 34.14% (0.93)% 15.98% 2.84%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)....... $ 617,269 $506,568 $294,415 $ 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% 0.75% 0.75% (f)
Ratio of net investment income (loss) to
average net assets...................... 1.70% (f) 1.55% 1.65% 1.89% 1.75% 1.73% (f)
Portfolio turnover rate (g)................ 31% 55% 62% 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
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
APRIL 30, 2023 (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 fourteen 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 the
Index's secondary goal is to generate capital appreciation based on the price
returns of the equity securities contained in the 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 readily available market quotations such as last sale or
official closing prices from a national or foreign exchange (i.e., a regulated
market) and are primarily obtained from third-party pricing services. Fair value
prices represent any prices not considered market value prices and are either
obtained from a third-party pricing service or are determined by the Pricing
Committee of the Fund's investment advisor, First Trust Advisors L.P. ("First
Trust" or the "Advisor"), in accordance with valuation procedures approved by
the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act
and rules thereunder. Investments valued by the Advisor's Pricing Committee, if
any, are footnoted as such in the footnotes to the Portfolio of Investments. The
Fund's investments are valued as follows:
Common stocks and other equity securities listed on any national or
foreign exchange (excluding 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 primary exchange 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 valued at the mean of
their most recent bid and asked price, if available, and otherwise at
their closing bid price. Over-the-counter options contracts are valued at
the mean of their most recent and asked price, if available, and otherwise
at their closing bid price.
Securities traded in an over-the-counter market are valued at the mean of
their most recent bid and asked price, if available, and otherwise at
their last trade price.
Shares of open-end funds are valued based on NAV per share.
Page 16
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
APRIL 30, 2023 (UNAUDITED)
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Advisor's Pricing Committee at
fair value. These securities generally include, but are not limited to,
restricted securities (securities which may not be publicly sold without
registration under the Securities Act of 1933, as amended) for which a
third-party pricing service is unable to provide a market price; securities
whose trading has been formally suspended; a security whose market or fair value
price is not available from a pre-established pricing source; a security with
respect to which an event has occurred that is likely to materially affect the
value of the security after the market has closed but before the calculation of
the Fund's NAV or make it difficult or impossible to obtain a reliable market
quotation; and a security whose price, as provided by the third-party pricing
service, does not reflect the security's fair value. As a general principle, the
current fair value of a security would appear to be the amount which the owner
might reasonably expect to receive for the security upon its current sale. When
fair value prices are used, generally they will differ from market quotations or
official closing prices on the applicable exchanges. A variety of factors may be
considered in determining the fair value of such securities, including, but not
limited to, the following:
1) the last sale price on the exchange on which they are
principally traded or, for Nasdaq and AIM securities, the
official closing price;
2) the type of security;
3) the size of the holding;
4) the initial cost of the security;
5) transactions in comparable securities;
6) price quotes from dealers and/or third-party pricing services;
7) relationships among various securities;
8) information obtained by contacting the issuer, analysts, or
the appropriate stock exchange;
9) an analysis of the issuer's financial statements;
10) the existence of merger proposals or tender offers that might
affect the value of the security; and
11) other relevant factors
The Fund is subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
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, 2023, 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.
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(R) 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
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,
Page 17
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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, 2023 (UNAUDITED)
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 gains earned by the Fund, if any, are distributed
at least annually. The Fund may also designate a portion of the amount paid to
redeeming shareholders as a distribution for tax purposes.
Distributions from net investment income and realized capital gains are
determined in accordance with federal income tax regulations, which may differ
from U.S. GAAP. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These permanent differences are primarily due to the varying
treatment of income and gain/loss on 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,
2022 was as follows:
Distributions paid from:
Ordinary income................................. $ 17,742,155
Capital gains................................... 46,375
Return of capital............................... --
As of October 31, 2022, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income................... $ --
Accumulated capital and other gain (loss)....... --
Net unrealized appreciation (depreciation)...... (38,989,032)
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 2019,
2020, 2021, and 2022 remain open to federal and state audit. As of April 30,
2023, management has evaluated the application of these standards to the Fund
and has determined that no provision for income tax is required in the Fund's
financial statements for uncertain tax positions.
Page 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, 2023 (UNAUDITED)
The Fund intends to utilize provisions of the federal income tax laws, which
allow it to carry a realized capital loss forward indefinitely following the
year of the loss and offset such loss against any future realized capital gains.
The Fund is subject to certain limitations under U.S. tax rules on the use of
capital loss carryforwards and net unrealized built-in losses. These limitations
apply when there has been a 50% change in ownership. At October 31, 2022, the
Fund had no 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, 2022, the Fund had no
net late year ordinary or capital losses.
As of April 30, 2023, the aggregate cost, gross unrealized appreciation, gross
unrealized depreciation, and net unrealized appreciation/(depreciation) on
investments (including short positions and derivatives, if any) for federal
income tax purposes were as follows:
<TABLE>
<CAPTION>
Gross Gross Net Unrealized
Unrealized Unrealized Appreciation
Tax Cost Appreciation (Depreciation) (Depreciation)
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
$ 585,480,783 $ 43,942,405 $ (14,251,013) $ 29,691,392
</TABLE>
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. Effective
November 1, 2022, the annual unitary management fee payable by the Fund to First
Trust for these services will be reduced at certain levels of the Fund's net
assets ("breakpoints") and calculated pursuant to the schedule below:
<TABLE>
<CAPTION>
Breakpoints
-------------------------------------------------------------------------
<S> <C>
Fund net assets up to and including $2.5 billion 0.75000%
Fund net assets greater than $2.5 billion up to and including $5 billion 0.73125%
Fund net assets greater than $5 billion up to and including $7.5 billion 0.71250%
Fund net assets greater than $7.5 billion up to and including $10 billion 0.69375%
Fund net assets greater than $10 billion 0.67500%
</TABLE>
Prior to November 1, 2022, the Fund paid First Trust an annual unitary
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-advisor. Cboe Vest receives a sub-advisory fee equal to 0.20% of the
average daily net assets of the Fund. 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.
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, 2023 (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,
target outcome fund or an index fund.
Additionally, the Lead Independent Trustee and the Chairs 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 Chairs
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, 2023, the cost of purchases and proceeds from
sales of investments, excluding short-term investments and in-kind transactions,
were $174,852,127 and $176,530,338, respectively.
For the six months ended April 30, 2023, the cost of in-kind purchases and
proceeds from in-kind sales were $132,945,897 and $41,977,489, respectively.
5. DERIVATIVE TRANSACTIONS
The following table presents the types of derivatives held by the Fund at April
30, 2023, 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>
Options Equity -- $ -- Options contracts written,
Risk at value $1,384,970
</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, 2023, on derivative instruments, as well as the primary
underlying risk exposure associated with the instruments.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS LOCATION
--------------------------------------------------------------------------------
<S> <C>
EQUITY RISK EXPOSURE
Net realized gain (loss) on written options contracts $ 2,683,140
Net change in unrealized appreciation (depreciation) on
written options contracts 551,378
</TABLE>
During the six months ended April 30, 2023, the premiums for written options
contracts opened were $6,491,835 and the premiums for written options contracts
closed, exercised and expired were $6,192,952.
6. 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.
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, 2023 (UNAUDITED)
The following is a summary of the Statement of Assets and Liabilities subject to
offsetting in the Fund as of the end of the reporting period:
<TABLE>
<CAPTION>
NET AMOUNT GROSS AMOUNT NOT OFFSET
GROSS AMOUNT OF LIABILITIES IN THE STATEMENT OF
GROSS OFFSET IN THE PRESENTED IN ASSETS AND LIABILITIES
AMOUNT OF STATEMENT OF THE STATEMENT ------------------------------
DESCRIPTION/ RECOGNIZED ASSETS AND OF ASSETS AND FINANCIAL CASH COLLATERAL NET
COUNTERPARTY LIABILITIES LIABILITIES LIABILITIES INSTRUMENTS PLEDGED AMOUNT
-------------------------------- ------------ ------------- -------------- ------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Written Options
Societe Generale $ 1,384,970 $ -- $ 1,384,970 $ (1,384,970) $ -- $ --
</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.
7. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
The Fund generally issues and redeems its shares in primary market transactions
through a creation and redemption mechanism and does not sell or redeem
individual shares. Instead, financial entities known as "Authorized
Participants" have contractual arrangements with the Fund or one of the Fund's
service providers to purchase and redeem Fund shares directly with the Fund in
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.
8. DISTRIBUTION PLAN
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Fund is
authorized to pay an amount up to 0.25% of its average daily net assets each
year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the
Fund, for amounts expended to finance activities primarily intended to result in
the sale 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, 2024.
Page 21
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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, 2023 (UNAUDITED)
9. INDEMNIFICATION
The Trust, on behalf of the Fund, has a variety of indemnification obligations
under contracts with its service providers. The Trust's maximum exposure under
these arrangements is unknown. However, the Trust has not had prior claims or
losses pursuant to these contracts and expects the risk of loss to be remote.
10. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Fund through
the date the financial statements were issued and has determined that there were
the following subsequent events:
On May 23, 2023, the Advisor's Pricing Committee approved changes to the
Advisor's Valuation Procedures for the First Trust Funds, including
clarifications to certain pricing methodologies. These changes will be reflected
in future reports' Notes to Financial Statements.
Effective on or about July 24, 2023, the index that the Fund seeks to track (the
"Index") will change as follows. The Index will seek to generate an annualized
level of income from stock dividends and option premiums that is approximately
8% over the annual dividend yield of the S&P 500(R) Index. Additionally, the 20%
notional value cap on the Covered Calls written by the Index will be removed,
and the Covered Calls will be typically written on a notional value less than
the total value of each underlying Aristocrat Stock, such that the short
position in each call option is "covered" by a portion of the corresponding
Aristocrat Stock held by the Index. In connection with the Index changes
described above, the distribution frequency for the Fund will change from
quarterly to monthly.
Page 22
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
APRIL 30, 2023 (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 significant
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
more broadly diversified.
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.
DEFINED OUTCOME FUNDS RISK. To the extent a fund's investment strategy is
designed to deliver returns tied to the price performance of an underlying ETF,
an investor may not realize the returns the fund seeks to achieve if that
investor does not hold shares for the entire target outcome period. In the event
an investor purchases shares after the first day of the target outcome period or
sells shares prior to the end of the target outcome period, the buffer that the
fund seeks to provide against a decline in the value of the underlying ETF may
not be available, the enhanced returns that the fund seeks to provide (if any)
may not be available and the investor may not participate in a gain in the value
of the underlying ETF up to the cap for the investor's investment period.
Additionally, the fund will not participate in gains of the underlying ETF above
the cap and a shareholder may lose their entire investment. If the fund seeks
enhanced returns, there are certain time periods when the value of the fund may
fall faster than the value of the underlying ETF, and it is very unlikely that,
on any given day during which the underlying ETF share price increases in value,
the fund's share price will increase at the same rate as the enhanced returns
sought by the fund, which is designed for an entire target outcome period.
Trading flexible exchange options involves risks different from, or possibly
greater than, the risks associated with investing directly in securities, such
as less liquidity and correlation and valuation risks. A fund may experience
substantial downside from specific flexible exchange option positions and
certain positions may expire worthless.
Page 23
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
APRIL 30, 2023 (UNAUDITED)
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
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 OR MODEL CONSTITUENT RISK. Certain funds may be a constituent of one or
more indices or ETF models. 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 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. In addition, index rebalances may potentially result in increased
trading activity in a fund's shares.
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 has ceased making LIBOR available as a
reference rate over a phase-out period that began December 31, 2021. There is no
assurance that any alternative reference rate, including the Secured Overnight
Financing Rate ("SOFR") will be similar to or produce the same value or economic
equivalence as LIBOR or that instruments using an alternative rate will have the
Page 24
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
APRIL 30, 2023 (UNAUDITED)
same volume or liquidity. 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. Market risk is the risk that a particular security, or shares of a
fund in general, may fall in value. 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. In February
2022, Russia invaded Ukraine which has caused and could continue to cause
significant market disruptions and volatility within the markets in Russia,
Europe, and the United States. The hostilities and sanctions resulting from
those hostilities could have a significant impact on certain fund investments as
well as fund performance. The COVID-19 global pandemic and the ensuing policies
enacted by governments and central banks have caused and may continue to cause
significant volatility and uncertainty in global financial markets. While the
U.S. has resumed "reasonably" normal business activity, many countries continue
to impose lockdown measures. Additionally, there is no guarantee that vaccines
will be effective against emerging variants of the disease. These events also
adversely affect the prices and liquidity of a fund's portfolio securities or
other instruments and could result in disruptions in the trading markets. Any of
such circumstances could have a materially negative impact on the value of a
fund's shares and result in increased market volatility. During any such events,
a fund's shares may trade at increased premiums or discounts to their net asset
value and the bid/ask spread on a fund's shares may widen.
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;
capital controls; lack of liquidity; currency exchange rates; excessive
taxation; government seizure of assets; the imposition of sanctions by foreign
governments; 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. Each fund relies on third-parties for a range of services, including
custody. Any delay or failure relating to engaging or maintaining such service
providers may affect a fund's ability to meet its investment objective. Although
the funds and the funds' investment 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.
PREFERRED SECURITIES RISK. Preferred securities combine some of the
characteristics of both common stocks and bonds. Preferred securities are
typically subordinated to bonds and other debt securities in a company's capital
structure in terms of priority to corporate income, subjecting them to greater
credit risk than those debt securities. Generally, holders of preferred
securities have no voting rights with respect to the issuing company unless
preferred dividends have been in arrears for a specified number of periods, at
which time the preferred security holders may obtain limited rights. In certain
circumstances, an issuer of preferred securities may defer payment on the
securities and, in some cases, redeem the securities prior to a specified date.
Preferred securities may also be substantially less liquid than other
securities, including common stock.
VALUATION RISK. The valuation of certain securities may carry more risk than
that of common stock. Uncertainties in the conditions of the financial markets,
unreliable reference data, lack of transparency and inconsistency of valuation
models and processes may lead to inaccurate asset pricing. A fund may hold
investments in sizes smaller than institutionally sized round lot positions
Page 25
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
APRIL 30, 2023 (UNAUDITED)
(sometimes referred to as odd lots). However, third-party pricing services
generally provide evaluations on the basis of institutionally-sized round lots.
If a fund sells certain of its investments in an odd lot transaction, the sale
price may be less than the value at which such securities have been held by the
fund. Odd lots often trade at lower prices than institutional round lots. There
is no assurance that the fund will be able to sell a portfolio security at the
price established by the pricing service, which could result in a loss to the
fund.
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 17, 2023 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 17, 2022 through the Liquidity Committee's annual meeting held
on March 23, 2023 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 any
highly liquid investment minimum.
As stated in the written report, during the review period, two funds breached
the 15% limitation on illiquid investments for one day each, as a result of an
unscheduled week-long closure of the stock exchange in Istanbul following
devastating earthquakes in February, causing all Turkish equities to be
re-classified as "illiquid" for one day. Each fund filed a Form N-RN on the day
after the breach occurred, and one day later after the breach was cured. No fund
with a highly liquid investment minimum breached that minimum during the
reporting period. 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 26
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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 Vest(SM) Financial LLC
8350 Broad Street, Suite 240
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 South Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
320 South Canal Street
Chicago, IL 60606
[BLANK BACK COVER]
FIRST TRUST
First Trust Exchange-Traded Fund IV
--------------------------------------------------------------------------------
First Trust Limited Duration Investment Grade Corporate ETF (FSIG)
----------------------------
Semi-Annual Report
For the Six Months Ended
April 30, 2023
----------------------------
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST LIMITED DURATION INVESTMENT GRADE CORPORATE ETF (FSIG)
SEMI-ANNUAL REPORT
APRIL 30, 2023
Shareholder Letter........................................................... 1
Fund Performance Overview.................................................... 2
Portfolio Management......................................................... 5
Understanding Your Fund Expenses............................................. 6
Portfolio of Investments..................................................... 7
Statement of Assets and Liabilities.......................................... 14
Statement of Operations...................................................... 15
Statements of Changes in Net Assets.......................................... 16
Financial Highlights......................................................... 17
Notes to Financial Statements................................................ 18
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 its 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 Limited Duration Investment Grade Corporate 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.
--------------------------------------------------------------------------------
SHAREHOLDER LETTER
--------------------------------------------------------------------------------
FIRST TRUST LIMITED DURATION INVESTMENT GRADE CORPORATE ETF (FSIG)
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
APRIL 30, 2023
Dear Shareholders:
First Trust is pleased to provide you with the semi-annual report for the First
Trust Limited Duration Investment Grade Corporate ETF (the "Fund"), which
contains detailed information about the Fund for the six months ended April 30,
2023.
It pleases me to write that on May 5, 2023, the World Health Organization
officially declared that the coronavirus ("COVID-19") pandemic no longer
qualified as a global health emergency. While the virus officially no longer
poses an immediate threat, its full impact on the world economy remains to be
seen, in my opinion. Recall, if you will, those early days of the pandemic;
companies sent workers home, consumers were afraid or unwilling to leave their
homes, supply chains dried up, and grocery shelves were left bare. Hoping to
provide relief to their constituents and to bolster economic activity,
governments across the globe funneled trillions of dollars in stimulus directly
into the hands of their citizens. Unfortunately, economist Milton Friedman's
age-old economic adage "there's no such thing as a free lunch" still holds. As a
result of the U.S. government stimulus, gross domestic product rebounded
quickly, but so did inflation.
As many investors are aware, the Federal Reserve (the "Fed") has been locked in
a battle with stubbornly high inflation for several years now. Inflation, as
measured by the trailing 12-month rate of change in the Consumer Price Index
("CPI"), surged from 1.4% on December 31, 2020, to 9.1% as of June 30, 2022.
Since then, the trailing rate on the CPI has come down, but remains elevated. On
April 30, 2023, the CPI stood at 4.9%, well above the Fed's goal of 2.0%.
Surging prices have not been restricted to the U.S. Headline inflation rates in
each of the countries that make up the so-called Group of Ten (G-10) stand above
the targets set by their central banks, according to data from Bloomberg.
From the Fed's perspective, monetary policy is the most efficient means to
combat rising prices. From December 31, 2020 through May 3, 2023, the Fed
increased the Federal Funds target rate (upper bound) a total of ten times,
raising the rate from 0.25% to 5.25%. As mentioned, tighter monetary policy
resulted in a decrease in the CPI, but there have been casualties in the Fed's
battle with rising prices. The most recent banking turmoil is one example.
Another is the spike in mortgage rates. According to Bankrate, the national
average for a 30-year mortgage stood at just 2.87% on December 31, 2020. As of
May 1, 2023, the average 30-year mortgage rate had surged to 6.88%. Not all the
news is negative, however. Driven by a strong U.S. labor market, consumer
spending remained robust in April 2023. Notably, American corporations added
253,000 jobs during the month, and the unemployment rate stood at a 53-year low.
Bob Carey, Chief Market Strategist at First Trust, recently summed up the
current situation, noting that "we're not out of the woods yet." That said, even
the most difficult situations don't last forever. In my opinion, like the
COVID-19 pandemic, inflation, and the tighter monetary policy it ushered in,
will pass with time.
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
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
FIRST TRUST LIMITED DURATION INVESTMENT GRADE CORPORATE ETF (FSIG)
The First Trust Limited Duration Investment Grade Corporate ETF's (the "Fund")
primary investment objective is to deliver current income. Under normal market
conditions, the Fund seeks to achieve its objective by investing at least 80% of
its net assets (plus any borrowings for investment purposes) in investment grade
corporate debt securities. Corporate debt securities are debt obligations issued
by businesses to finance their operations. Notes, bonds, loans, debentures and
commercial paper are the most common types of corporate debt securities, with
the primary differences being their maturities and secured or unsecured status.
Commercial paper has the shortest term and is usually unsecured. Corporate debt
securities may have fixed or floating interest rates. The corporate debt
securities in which the Fund may invest may include senior loans and
covenant-lite loans.
At least 80% of the Fund's net assets will be invested in corporate debt
securities that are, at the time of purchase, investment grade (i.e., rated
Baa3/BBB- or above) by at least one nationally recognized statistical rating
organization ("NRSRO") rating such securities, or if unrated, debt securities
determined by the Fund's investment advisor to be of comparable quality. In the
case of a split rating between one or more of the NRSROs, the Fund will consider
the highest rating. For an unrated security to be considered investment grade,
the Fund's investment advisor will consider, at the time of purchase, whether
such security is of comparable quality based on fundamental credit analysis of
the unrated security and comparable securities that are rated by an NRSRO.
Although the Fund intends to invest primarily in investment grade corporate debt
securities, the Fund may invest up to 20% of its net assets (plus any borrowings
for investment purposes) in debt securities of any credit quality, including
senior loans and other debt 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 Fund's investment
advisor to be of comparable quality to rated investment grade securities. The
Fund is classified as "non-diversified" under the Investment Company Act of
1940, as amended. The Fund's investments will be concentrated (i.e., invest more
than 25% of Fund assets) in the industries or group of industries comprising the
financials sector.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months Ended 1 Year Ended Inception (11/17/21) Inception (11/17/21)
4/30/23 4/30/23 to 4/30/23 to 4/30/23
<S> <C> <C> <C> <C>
FUND PERFORMANCE
NAV* 4.43% 2.44% -1.47% -2.13%
Market Price 4.43% 2.54% -1.37% -1.97%
INDEX PERFORMANCE
Bloomberg US Corporate Bond 1-5 Year Index 4.71% 1.81% -2.34% -3.37%
------------------------------------------------------------------------------------------------------------------------------------
</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 total returns would have been lower if certain fees had not been
waived by the Advisor.
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. 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 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.
-----------------------------
* On January 3, 2023, the fair value methodology used to value the senior
loan investments held by the Fund was changed. Prior to that date, the
senior loans were valued using the bid side price provided by a pricing
service. After such date, the senior loans were valued using the midpoint
between the bid and ask price provided by a pricing service. The change in
the Fund's fair value methodology on January 3, 2023, resulted in a
one-time increase in the Fund's net asset value of approximately $0.003
per share on that date, which represented a positive impact on the Fund's
performance of 0.01%. Without the change to the pricing methodology, the
performance of the Fund on a NAV basis would have been 4.38%, 2.38%,
-1.51% and -2.18%, in the six-months, one-year, since inception average
annual, and since inception cumulative periods ended April 30, 2023,
respectively.
Page 2
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LIMITED DURATION INVESTMENT GRADE CORPORATE ETF (FSIG)
---------------------------------------------------------------
% OF TOTAL
LONG-TERM
INDUSTRY CLASSIFICATION INVESTMENTS(1)
---------------------------------------------------------------
Banking 20.7%
Technology 12.2
Healthcare 12.1
Pharmaceuticals 8.8
Food and Beverage 7.8
Health Insurance 7.1
Wireless 5.9
Environmental 4.3
Cable Satellite 4.1
Property & Casualty Insurance 3.6
Electric 2.9
Brokerage Assetmanagers Exchanges 1.9
Aerospace/Defense 1.7
Wirelines 1.6
Construction Machinery 1.5
Packaging 1.2
Other Utility 0.9
Gaming 0.4
Restaurants 0.3
Midstream 0.2
Consumer Products 0.2
Railroads 0.2
Paper 0.2
Lodging 0.1
Consumer Cyclical Services 0.1
Retailers 0.0*
-------
Total 100.0%
=======
---------------------------------------------------------------
% OF TOTAL
LONG-TERM
ASSET CLASSIFICATION INVESTMENTS(1)
---------------------------------------------------------------
Corporate Bonds and Notes 87.9%
Foreign Corporate Bonds and Notes 6.2
Senior Floating-Rate Loan Interests 5.9
-------
Total 100.0%
=======
* Amount is less than 0.1%.
---------------------------------------------------------------
% OF SENIOR LOANS
AND OTHER DEBT
CREDIT QUALITY(2) SECURITIES(1)
---------------------------------------------------------------
AA 1.3%
AA- 13.5
A+ 9.2
A 10.0
A- 19.8
BBB+ 17.7
BBB 13.8
BBB- 13.2
BB+ 1.2
BB- 0.3
-------
Total 100.0%
=======
---------------------------------------------------------------
% OF TOTAL
LONG-TERM
TOP 10 ISSUERS INVESTMENTS(1)
---------------------------------------------------------------
Bank of America Corp. 3.9%
JPMorgan Chase & Co. 3.6
Elevance Health, Inc. 2.6
Crown Castle, Inc. 2.4
T-Mobile USA, Inc. 2.3
Morgan Stanley 2.3
Waste Management, Inc. 2.2
Zoetis, Inc. 2.1
Republic Services, Inc. 2.1
Comcast Corp. 2.1
-------
Total 25.6%
=======
-----------------------------
(1) Percentages are based on long-term positions. Commercial paper is
excluded.
(2) The ratings are by one or more nationally recognized statistical rating
organizations (NRSROs), including S&P Global Ratings, Moody's Investors
Service, Inc., Fitch Ratings, or a comparably rated NRSRO. For situations
in which a security is rated by more than one NRSRO and the ratings are
not equivalent, the highest ratings are used. 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. "NR" indicates no rating. 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
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LIMITED DURATION INVESTMENT GRADE CORPORATE ETF (FSIG)
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
NOVEMBER 17, 2021 - APRIL 30, 2023
First Trust Limited Bloomberg U.S.
Duration Investment Corporate Bond
Grade Corporate ETF 1-5 Year Index
<S> <C> <C>
11/17/21 $10,000 $10,000
4/30/22 9,554 9,491
10/31/22 9,372 9,228
4/30/23 9,787 9,663
</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
--------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT
--------------------------------------------------------------------------------
FIRST TRUST LIMITED DURATION INVESTMENT GRADE CORPORATE ETF (FSIG)
SEMI-ANNUAL REPORT
APRIL 30, 2023 (UNAUDITED)
ADVISOR
First Trust Advisors L.P. ("First Trust") is the investment advisor to the First
Trust Limited Duration Investment Grade Corporate ETF (the "Fund" or "FSIG"). 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
WILLIAM HOUSEY, CFA - MANAGING DIRECTOR OF FIXED INCOME AND SENIOR PORTFOLIO
MANAGER OF FIRST TRUST
TODD LARSON, CFA - SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER OF FIRST TRUST
ERIC R. MAISEL, CFA - SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER OF FIRST TRUST
JEFFREY SCOTT, CFA - SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER OF FIRST TRUST
NATHAN SIMONS, CFA - VICE PRESIDENT AND PORTFOLIO MANAGER OF FIRST TRUST
SCOTT SKOWRONSKI, CFA - SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER OF FIRST
TRUST
The portfolio managers are primarily and jointly responsible for the day-to-day
management of the Fund. William Housey, Todd Larson, Eric R. Maisel, Jeffrey
Scott, and Nathan Simons have served as a part of the portfolio management team
of the Fund since November, 2021. Scott Skowronski has served as part of the
portfolio management team of the Fund since November, 2022.
Page 5
FIRST TRUST LIMITED DURATION INVESTMENT GRADE CORPORATE ETF (FSIG)
UNDERSTANDING YOUR FUND EXPENSES
APRIL 30, 2023 (UNAUDITED)
As a shareholder of First Trust Limited Duration Investment Grade Corporate 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, 2023.
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 NUMBER OF DAYS SIX-MONTH
NOVEMBER 1, 2022 APRIL 30, 2023 IN THE PERIOD (a) PERIOD (b)
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST LIMITED DURATION INVESTMENT GRADE CORPORATE ETF (FSIG)
Actual $1,000.00 $1,044.30 0.45% $2.28
Hypothetical (5% return before expenses) $1,000.00 $1,022.56 0.45% $2.26
</TABLE>
(a) These expense ratios reflect expense waivers. See Note 3 in the Notes to
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,
2022 through April 30, 2023), multiplied by 181/365 (to reflect the
six-month period).
Page 6
FIRST TRUST LIMITED DURATION INVESTMENT GRADE CORPORATE ETF (FSIG)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2023 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES -- 78.4%
AEROSPACE/DEFENSE -- 1.5%
$ 50,000 L3Harris Technologies, Inc...................................... 3.85% 06/15/23 $ 49,911
40,000 L3Harris Technologies, Inc...................................... 3.85% 12/15/26 38,885
1,300,000 Lockheed Martin Corp............................................ 5.10% 11/15/27 1,353,152
8,310,000 Northrop Grumman Corp........................................... 2.93% 01/15/25 8,062,768
----------------
9,504,716
----------------
BANKING -- 16.2%
6,750,000 Bank of America Corp. (a)....................................... 5.08% 01/20/27 6,741,728
1,895,000 Bank of America Corp. (a)....................................... 5.20% 04/25/29 1,908,724
5,250,000 Bank of America Corp., Global Medium-Term Note.................. 3.50% 04/19/26 5,105,664
145,000 Bank of America Corp., Medium-Term Note......................... 4.13% 01/22/24 143,805
2,750,000 Bank of America Corp., Medium-Term Note......................... 3.88% 08/01/25 2,691,557
5,250,000 Bank of America Corp., Medium-Term Note (a)..................... 4.95% 07/22/28 5,235,107
5,150,000 Bank of New York Mellon (The) Corp. (a)......................... 4.41% 07/24/26 5,091,744
1,000,000 Bank of New York Mellon (The) Corp. (a)......................... 4.95% 04/26/27 1,007,798
125,000 Bank of New York Mellon (The) Corp., Medium-Term Note (a)....... 3.43% 06/13/25 122,444
2,500,000 Bank of New York Mellon (The) Corp., Medium-Term Note (a)....... 5.22% 11/21/25 2,505,245
5,000,000 Goldman Sachs Group (The), Inc.................................. 3.00% 03/15/24 4,895,388
3,000,000 Goldman Sachs Group (The), Inc.................................. 5.70% 11/01/24 3,027,922
1,000,000 Goldman Sachs Group (The), Inc. (a)............................. 3.27% 09/29/25 967,947
7,800,000 JPMorgan Chase & Co............................................. 3.90% 07/15/25 7,688,875
5,750,000 JPMorgan Chase & Co............................................. 3.30% 04/01/26 5,572,355
7,000,000 JPMorgan Chase & Co. (a)........................................ 4.85% 07/25/28 7,023,674
7,500,000 Morgan Stanley (a).............................................. 5.05% 01/28/27 7,524,505
3,250,000 Morgan Stanley, Global Medium-Term Note......................... 4.00% 07/23/25 3,204,904
2,000,000 Morgan Stanley Bank NA.......................................... 4.75% 04/21/26 2,011,217
5,000,000 PNC Financial Services Group (The), Inc. (a).................... 4.76% 01/26/27 4,947,226
1,000,000 PNC Financial Services Group (The), Inc......................... 3.15% 05/19/27 941,455
5,234,000 State Street Corp. (a).......................................... 4.86% 01/26/26 5,228,614
4,250,000 State Street Corp. (a).......................................... 5.82% 11/04/28 4,443,818
4,000,000 Truist Financial Corp., Medium-Term Note (a).................... 4.87% 01/26/29 3,918,783
3,000,000 US Bancorp (a).................................................. 5.73% 10/21/26 3,022,759
4,000,000 Wells Fargo & Co................................................ 3.00% 10/23/26 3,767,486
2,750,000 Wells Fargo & Co., Medium-Term Note............................. 3.55% 09/29/25 2,675,816
1,250,000 Wells Fargo & Co., Medium-Term Note (a)......................... 2.41% 10/30/25 1,196,395
----------------
102,612,955
----------------
BROKERAGE ASSETMANAGERS EXCHANGES -- 1.7%
7,000,000 Intercontinental Exchange, Inc.................................. 4.00% 09/15/27 6,929,671
3,790,000 LPL Holdings, Inc. (b).......................................... 4.63% 11/15/27 3,584,658
----------------
10,514,329
----------------
CABLE SATELLITE -- 2.0%
1,000,000 Charter Communications Operating LLC / Charter
Communications Operating Capital............................. 4.91% 07/23/25 990,940
150,000 Comcast Corp.................................................... 3.95% 10/15/25 148,288
10,000,000 Comcast Corp.................................................... 5.25% 11/07/25 10,210,823
1,250,000 Comcast Corp.................................................... 5.35% 11/15/27 1,301,874
----------------
12,651,925
----------------
CONSTRUCTION MACHINERY -- 1.3%
4,000,000 Caterpillar Financial Services Corp............................. 4.80% 01/06/26 4,064,837
100,000 John Deere Capital Corp., Medium-Term Note...................... 4.05% 09/08/25 99,417
</TABLE>
See Notes to Financial Statements Page 7
FIRST TRUST LIMITED DURATION INVESTMENT GRADE CORPORATE ETF (FSIG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2023 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
CONSTRUCTION MACHINERY (CONTINUED)
$ 4,000,000 John Deere Capital Corp., Medium-Term Note...................... 4.80% 01/09/26 $ 4,062,474
----------------
8,226,728
----------------
CONSUMER CYCLICAL SERVICES -- 0.0%
300,000 Expedia Group, Inc. (b)......................................... 6.25% 05/01/25 303,690
----------------
CONSUMER PRODUCTS -- 0.2%
1,000,000 Kenvue, Inc. (b)................................................ 5.35% 03/22/26 1,027,089
----------------
ELECTRIC -- 2.6%
3,800,000 AEP Transmission Co. LLC........................................ 3.10% 12/01/26 3,637,982
2,189,000 Duke Energy Carolinas LLC....................................... 2.95% 12/01/26 2,084,451
425,000 FirstEnergy Transmission LLC (b)................................ 4.35% 01/15/25 418,801
2,250,000 Florida Power & Light Co........................................ 5.05% 04/01/28 2,331,176
125,000 Pacific Gas and Electric Co..................................... 3.25% 02/16/24 122,395
25,000 Pacific Gas and Electric Co..................................... 4.95% 06/08/25 24,751
25,000 Pacific Gas and Electric Co..................................... 5.45% 06/15/27 24,854
5,000,000 Trans-Allegheny Interstate Line Co. (b)......................... 3.85% 06/01/25 4,874,389
1,550,000 Virginia Electric and Power Co., Series A....................... 3.10% 05/15/25 1,497,485
1,550,000 Virginia Electric and Power Co., Series B....................... 3.75% 05/15/27 1,518,912
150,000 WEC Energy Group, Inc........................................... 5.00% 09/27/25 150,882
----------------
16,686,078
----------------
ENVIRONMENTAL -- 3.8%
8,250,000 Republic Services, Inc.......................................... 3.20% 03/15/25 8,030,849
1,550,000 Republic Services, Inc.......................................... 2.90% 07/01/26 1,481,549
2,350,000 Republic Services, Inc.......................................... 4.88% 04/01/29 2,399,540
4,937,000 Waste Management, Inc........................................... 3.50% 05/15/24 4,862,624
5,621,000 Waste Management, Inc........................................... 3.13% 03/01/25 5,483,869
2,000,000 Waste Management, Inc........................................... 3.15% 11/15/27 1,914,407
----------------
24,172,838
----------------
FOOD AND BEVERAGE -- 5.9%
7,000,000 Anheuser-Busch Cos. LLC / Anheuser-Busch InBev
Worldwide, Inc............................................... 3.65% 02/01/26 6,884,167
3,000,000 Conagra Brands, Inc............................................. 4.30% 05/01/24 2,970,825
6,500,000 Constellation Brands, Inc....................................... 4.75% 12/01/25 6,524,623
421,000 Constellation Brands, Inc....................................... 5.00% 02/02/26 419,822
1,000,000 Constellation Brands, Inc....................................... 4.35% 05/09/27 992,548
2,975,000 Keurig Dr Pepper, Inc........................................... 2.55% 09/15/26 2,775,688
2,000,000 Keurig Dr Pepper, Inc........................................... 3.43% 06/15/27 1,926,494
3,000,000 McCormick & Co., Inc............................................ 3.40% 08/15/27 2,863,456
2,825,000 Molson Coors Beverage Co........................................ 3.00% 07/15/26 2,683,400
2,500,000 Nestle Holdings, Inc. (b)....................................... 5.25% 03/13/26 2,572,490
2,500,000 Nestle Holdings, Inc. (b)....................................... 5.00% 03/14/28 2,601,333
4,000,000 PepsiCo, Inc.................................................... 4.55% 02/13/26 4,060,106
----------------
37,274,952
----------------
GAMING -- 0.3%
100,000 VICI Properties, L.P. / VICI Note Co., Inc. (b)................. 3.50% 02/15/25 96,206
2,050,000 VICI Properties, L.P. / VICI Note Co., Inc. (b)................. 4.63% 06/15/25 1,993,291
75,000 VICI Properties, L.P. / VICI Note Co., Inc. (b)................. 4.25% 12/01/26 71,557
----------------
2,161,054
----------------
</TABLE>
Page 8 See Notes to Financial Statements
FIRST TRUST LIMITED DURATION INVESTMENT GRADE CORPORATE ETF (FSIG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2023 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
HEALTH INSURANCE -- 6.3%
$ 3,549,000 Aetna, Inc...................................................... 3.50% 11/15/24 $ 3,463,953
5,325,000 Centene Corp.................................................... 4.25% 12/15/27 5,093,469
3,550,000 Elevance Health, Inc............................................ 3.35% 12/01/24 3,464,876
5,000,000 Elevance Health, Inc............................................ 5.35% 10/15/25 5,070,192
333,000 Elevance Health, Inc............................................ 4.90% 02/08/26 332,556
6,000,000 Elevance Health, Inc............................................ 4.10% 03/01/28 5,915,843
4,500,000 Humana, Inc..................................................... 4.50% 04/01/25 4,475,295
2,000,000 Humana, Inc..................................................... 3.95% 03/15/27 1,945,457
625,000 UnitedHealth Group, Inc......................................... 5.00% 10/15/24 628,566
3,750,000 UnitedHealth Group, Inc......................................... 3.75% 07/15/25 3,699,042
5,550,000 UnitedHealth Group, Inc......................................... 5.25% 02/15/28 5,802,575
----------------
39,891,824
----------------
HEALTHCARE -- 9.3%
125,000 Abbott Laboratories............................................. 3.75% 11/30/26 124,659
6,500,000 Alcon Finance Corp. (b)......................................... 2.75% 09/23/26 6,124,462
100,000 AmerisourceBergen Corp.......................................... 3.40% 05/15/24 98,180
1,550,000 Baxter International, Inc....................................... 1.32% 11/29/24 1,460,390
3,500,000 Becton Dickinson & Co........................................... 3.73% 12/15/24 3,432,545
3,000,000 Becton Dickinson & Co........................................... 3.70% 06/06/27 2,908,677
1,250,000 Boston Scientific Corp.......................................... 3.45% 03/01/24 1,231,710
5,250,000 Cigna Group (The)............................................... 4.13% 11/15/25 5,185,034
2,500,000 Cigna Group (The)............................................... 4.50% 02/25/26 2,495,386
1,550,000 CVS Health Corp................................................. 3.88% 07/20/25 1,525,524
2,000,000 CVS Health Corp................................................. 5.00% 02/20/26 2,024,199
4,835,000 Danaher Corp.................................................... 3.35% 09/15/25 4,724,194
4,170,000 HCA, Inc........................................................ 5.88% 02/15/26 4,236,445
2,000,000 HCA, Inc........................................................ 4.50% 02/15/27 1,965,453
1,550,000 McKesson Corp................................................... 3.80% 03/15/24 1,529,885
1,000,000 McKesson Corp................................................... 5.25% 02/15/26 1,000,630
5,800,000 Stryker Corp.................................................... 3.38% 11/01/25 5,622,915
7,121,000 Thermo Fisher Scientific, Inc................................... 4.80% 11/21/27 7,320,824
3,400,000 Zimmer Biomet Holdings, Inc..................................... 1.45% 11/22/24 3,220,654
2,500,000 Zimmer Biomet Holdings, Inc..................................... 3.55% 04/01/25 2,434,224
----------------
58,665,990
----------------
LODGING -- 0.1%
50,000 Hilton Domestic Operating Co., Inc. (b)......................... 5.38% 05/01/25 49,972
435,000 Hyatt Hotels Corp............................................... 5.38% 04/23/25 436,838
----------------
486,810
----------------
MIDSTREAM -- 0.2%
50,000 Energy Transfer, L.P............................................ 5.88% 01/15/24 49,994
75,000 Energy Transfer, L.P............................................ 2.90% 05/15/25 71,622
1,250,000 Enterprise Products Operating LLC............................... 5.05% 01/10/26 1,271,116
----------------
1,392,732
----------------
OTHER UTILITY -- 0.8%
5,000,000 American Water Capital Corp..................................... 3.85% 03/01/24 4,956,453
----------------
PACKAGING -- 1.1%
7,000,000 Berry Global, Inc. (b).......................................... 5.50% 04/15/28 7,008,058
----------------
PAPER -- 0.2%
1,000,000 Packaging Corp. of America...................................... 3.40% 12/15/27 960,474
----------------
</TABLE>
See Notes to Financial Statements Page 9
FIRST TRUST LIMITED DURATION INVESTMENT GRADE CORPORATE ETF (FSIG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2023 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
PHARMACEUTICALS -- 6.4%
$ 2,700,000 AbbVie, Inc..................................................... 2.60% 11/21/24 $ 2,607,420
2,000,000 AbbVie, Inc..................................................... 3.80% 03/15/25 1,966,900
1,550,000 AbbVie, Inc..................................................... 3.20% 05/14/26 1,493,801
1,580,000 Amgen, Inc...................................................... 3.63% 05/22/24 1,558,262
2,250,000 Amgen, Inc...................................................... 5.25% 03/02/25 2,270,381
2,250,000 Amgen, Inc...................................................... 5.15% 03/02/28 2,303,741
2,250,000 Astrazeneca Finance LLC......................................... 4.88% 03/03/28 2,324,016
1,500,000 Bayer US Finance II LLC (b)..................................... 3.88% 12/15/23 1,484,758
2,650,000 Gilead Sciences, Inc............................................ 3.70% 04/01/24 2,613,373
2,500,000 Gilead Sciences, Inc............................................ 3.65% 03/01/26 2,445,803
5,750,000 Merck & Co., Inc................................................ 2.75% 02/10/25 5,595,828
2,250,000 Roche Holdings, Inc. (b)........................................ 2.63% 05/15/26 2,147,897
10,500,000 Zoetis, Inc..................................................... 4.50% 11/13/25 10,451,094
600,000 Zoetis, Inc..................................................... 5.40% 11/14/25 611,739
1,000,000 Zoetis, Inc..................................................... 3.00% 09/12/27 952,101
----------------
40,827,114
----------------
PROPERTY & CASUALTY INSURANCE -- 3.2%
3,000,000 Aon Corp. / Aon Global Holdings PLC............................. 2.85% 05/28/27 2,794,461
5,250,000 Brown & Brown, Inc.............................................. 4.20% 09/15/24 5,190,828
2,323,000 Brown & Brown, Inc.............................................. 4.50% 03/15/29 2,233,523
8,685,000 Marsh & McLennan Cos., Inc...................................... 3.88% 03/15/24 8,577,913
1,650,000 Marsh & McLennan Cos., Inc...................................... 3.75% 03/14/26 1,621,164
----------------
20,417,889
----------------
RAILROADS -- 0.2%
1,000,000 Union Pacific Corp.............................................. 4.75% 02/21/26 1,011,297
----------------
RESTAURANTS -- 0.3%
2,000,000 McDonald's Corp., Medium-Term Note.............................. 3.50% 03/01/27 1,950,667
----------------
RETAILERS -- 0.0%
109,000 Nordstrom, Inc.................................................. 2.30% 04/08/24 103,955
----------------
TECHNOLOGY -- 9.2%
5,000,000 Autodesk, Inc................................................... 4.38% 06/15/25 4,958,895
2,000,000 Autodesk, Inc................................................... 3.50% 06/15/27 1,937,525
2,000,000 Black Knight InfoServ LLC (b)................................... 3.63% 09/01/28 1,810,000
500,000 Cadence Design Systems, Inc..................................... 4.38% 10/15/24 494,749
3,500,000 FactSet Research Systems, Inc................................... 2.90% 03/01/27 3,275,683
3,550,000 Fidelity National Information Services, Inc..................... 4.50% 07/15/25 3,517,110
50,000 Global Payments, Inc............................................ 4.00% 06/01/23 49,928
3,074,000 Global Payments, Inc............................................ 1.50% 11/15/24 2,902,887
5,000,000 Infor, Inc. (b)................................................. 1.75% 07/15/25 4,581,153
8,000,000 MSCI, Inc. (b).................................................. 4.00% 11/15/29 7,217,720
6,000,000 Oracle Corp..................................................... 5.80% 11/10/25 6,152,534
775,000 Oracle Corp..................................................... 3.25% 11/15/27 730,896
2,250,000 Oracle Corp..................................................... 2.30% 03/25/28 2,013,629
1,000,000 Oracle Corp..................................................... 4.50% 05/06/28 990,122
3,000,000 Roper Technologies, Inc......................................... 3.80% 12/15/26 2,922,686
2,000,000 VMware, Inc..................................................... 1.00% 08/15/24 1,894,133
1,550,000 VMware, Inc..................................................... 4.50% 05/15/25 1,535,018
2,500,000 VMware, Inc..................................................... 4.65% 05/15/27 2,481,323
9,275,000 Workday, Inc.................................................... 3.50% 04/01/27 8,907,750
----------------
58,373,741
----------------
</TABLE>
Page 10 See Notes to Financial Statements
FIRST TRUST LIMITED DURATION INVESTMENT GRADE CORPORATE ETF (FSIG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2023 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
WIRELESS -- 4.2%
$ 8,991,000 Crown Castle, Inc............................................... 3.15% 07/15/23 $ 8,950,236
4,583,000 Crown Castle, Inc............................................... 4.45% 02/15/26 4,539,552
5,000,000 T-Mobile USA, Inc............................................... 5.38% 04/15/27 5,051,560
8,000,000 T-Mobile USA, Inc............................................... 4.75% 02/01/28 7,967,637
----------------
26,508,985
----------------
WIRELINES -- 1.4%
2,000,000 AT&T, Inc....................................................... 5.54% 02/20/26 2,002,719
1,550,000 Verizon Communications, Inc..................................... 3.50% 11/01/24 1,523,491
5,550,000 Verizon Communications, Inc..................................... 4.13% 03/16/27 5,501,116
----------------
9,027,326
----------------
TOTAL CORPORATE BONDS AND NOTES............................................................. 496,719,669
(Cost $494,324,151) ----------------
</TABLE>
<TABLE>
<CAPTION>
ANNUALIZED
YIELD ON
PRINCIPAL DATE OF STATED
VALUE DESCRIPTION PURCHASE MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER -- 10.6%
CHEMICALS -- 1.9%
12,000,000 FMC Corp........................................................ 5.58% 05/01/23 12,000,000
----------------
FOOD AND BEVERAGE -- 3.0%
12,000,000 Conagra Brands, Inc............................................. 5.38% 05/01/23 12,000,000
6,900,000 Constellation Brands, Inc....................................... 5.36% 05/01/23 6,900,000
----------------
18,900,000
----------------
MIDSTREAM -- 1.9%
12,000,000 Energy Transfer, L.P............................................ 5.58% 05/01/23 12,000,000
----------------
TECHNOLOGY -- 3.8%
12,000,000 Global Payments, Inc............................................ 5.71% 05/01/23 12,000,000
12,000,000 Jabil, Inc...................................................... 5.65% 05/01/23 12,000,000
----------------
24,000,000
----------------
TOTAL COMMERCIAL PAPER...................................................................... 66,900,000
(Cost $66,900,000) ----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
FOREIGN CORPORATE BONDS AND NOTES -- 5.6%
BANKING -- 2.3%
755,000 Royal Bank of Canada............................................ 3.38% 04/14/25 734,329
1,300,000 Royal Bank of Canada, Global Medium-Term Note................... 4.95% 04/25/25 1,301,270
6,500,000 Royal Bank of Canada, Global Medium-Term Note................... 4.88% 01/12/26 6,537,884
4,500,000 Toronto-Dominion Bank (The)..................................... 3.77% 06/06/25 4,395,879
1,550,000 Toronto-Dominion Bank (The), Medium-Term Note................... 4.29% 09/13/24 1,533,013
----------------
14,502,375
----------------
FOOD AND BEVERAGE -- 1.1%
2,000,000 Diageo Capital PLC.............................................. 5.20% 10/24/25 2,031,249
5,000,000 Mondelez International Holdings Netherlands BV (b).............. 4.25% 09/15/25 4,937,024
----------------
6,968,273
----------------
</TABLE>
See Notes to Financial Statements Page 11
FIRST TRUST LIMITED DURATION INVESTMENT GRADE CORPORATE ETF (FSIG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2023 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
FOREIGN CORPORATE BONDS AND NOTES (CONTINUED)
HEALTHCARE -- 0.5%
$ 2,900,000 DH Europe Finance II Sarl....................................... 2.20% 11/15/24 $ 2,789,395
----------------
PHARMACEUTICALS -- 1.4%
5,250,000 AstraZeneca PLC................................................. 3.38% 11/16/25 5,133,735
3,881,000 CSL Finance PLC (b)............................................. 3.85% 04/27/27 3,798,672
----------------
8,932,407
----------------
TECHNOLOGY -- 0.3%
2,000,000 Open Text Corp. (b)............................................. 6.90% 12/01/27 2,067,826
----------------
TOTAL FOREIGN CORPORATE BONDS AND NOTES..................................................... 35,260,276
(Cost $35,135,344) ----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (c) MATURITY (d) VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS -- 5.2%
CABLE SATELLITE -- 1.6%
27,501 Charter Communications Operating LLC, Term Loan B1, 1 Mo.
SOFR + 1.75%, 0.00% Floor.................................... 6.80% 04/30/25 27,493
10,489,822 Charter Communications Operating LLC, Term Loan B1, 3 Mo.
SOFR + 1.75%, 0.00% Floor.................................... 6.73% 04/30/25 10,486,938
----------------
10,514,431
----------------
HEALTHCARE -- 1.1%
2,000,000 IQVIA, Inc. (Quintiles), Term Loan B2, 1 Mo. LIBOR + 1.75%,
0.00% Floor.................................................. 6.77% 01/01/25 2,000,630
5,146,796 IQVIA, Inc. (Quintiles), Term Loan B3, 3 Mo. LIBOR + 1.75%,
0.00% Floor.................................................. 6.77% 06/11/25 5,144,505
----------------
7,145,135
----------------
TECHNOLOGY -- 1.4%
1,994,751 Open Text Corp. (GXS), Term Loan B, 1 Mo. LIBOR + 1.75%,
0.00% Floor.................................................. 6.77% 05/30/25 1,997,244
2,476,763 SS&C Technologies Holdings, Inc., Term Loan B-3, 1 Mo.
LIBOR + 1.75%, 0.00% Floor................................... 6.77% 04/16/25 2,474,869
2,195,722 SS&C Technologies Holdings, Inc., Term Loan B-4, 1 Mo.
LIBOR + 1.75%, 0.00% Floor................................... 6.77% 04/16/25 2,194,042
2,108,647 SS&C Technologies Holdings, Inc., Term Loan B-5, 1 Mo.
LIBOR + 1.75%, 0.00% Floor................................... 6.77% 04/16/25 2,106,812
----------------
8,772,967
----------------
WIRELESS -- 1.1%
6,738,230 SBA Senior Finance II LLC, Term Loan B, 1 Mo. LIBOR +
1.75%, 0.00% Floor........................................... 6.78% 04/11/25 6,740,151
----------------
TOTAL SENIOR FLOATING-RATE LOAN INTERESTS................................................... 33,172,684
(Cost $33,119,709) ----------------
TOTAL INVESTMENTS -- 99.8%.................................................................. 632,052,629
(Cost $629,479,204)
NET OTHER ASSETS AND LIABILITIES -- 0.2%.................................................... 1,130,945
----------------
NET ASSETS -- 100.0%........................................................................ $ 633,183,574
================
</TABLE>
Page 12 See Notes to Financial Statements
FIRST TRUST LIMITED DURATION INVESTMENT GRADE CORPORATE ETF (FSIG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2023 (UNAUDITED)
(a) Fixed-to-floating or fixed-to-variable rate security. The interest rate
shown reflects the fixed rate in effect at April 30, 2023. At a
predetermined date, the fixed rate will change to a floating rate or a
variable rate.
(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, 2023, securities noted as such amounted
to $58,771,046 or 9.3% of net assets.
(c) 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 SOFR obtained from
the U.S. Department of the Treasury's Office of Financial Research, (iii)
the prime rate offered by one or more United States banks or (iv) the
certificate of deposit rate. Certain Senior Loans are subject to a LIBOR
or SOFR floor that establishes a minimum LIBOR or SOFR rate. When a range
of rates is disclosed, the Fund holds more than one contract within the
same tranche with identical LIBOR or SOFR period, spread and floor, but
different LIBOR or SOFR reset dates.
(d) 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.
LIBOR - London Interbank Offered Rate
SOFR - Secured Overnight Financing Rate
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2023 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
4/30/2023 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Corporate Bonds and Notes*............................ $ 496,719,669 $ -- $ 496,719,669 $ --
Commercial Paper*..................................... 66,900,000 -- 66,900,000 --
Foreign Corporate Bonds and Notes*.................... 35,260,276 -- 35,260,276 --
Senior Floating-Rate Loan Interests*.................. 33,172,684 -- 33,172,684 --
--------------- --------------- --------------- ---------------
Total Investments..................................... $ 632,052,629 $ -- $ 632,052,629 $ --
=============== =============== =============== ===============
</TABLE>
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 13
FIRST TRUST LIMITED DURATION INVESTMENT GRADE CORPORATE ETF (FSIG)
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2023 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value.................................................. $ 632,052,629
Cash................................................................... 10,449,747
Interest Receivable.................................................... 5,898,225
--------------
Total Assets........................................................ 648,400,601
--------------
LIABILITIES:
Payables:
Investment securities purchased..................................... 14,999,078
Investment advisory fees............................................ 217,949
--------------
Total Liabilities................................................... 15,217,027
--------------
NET ASSETS............................................................. $ 633,183,574
==============
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $ 631,066,337
Par value.............................................................. 336,500
Accumulated distributable earnings (loss).............................. 1,780,737
--------------
NET ASSETS............................................................. $ 633,183,574
==============
NET ASSET VALUE, per share............................................. $ 18.82
==============
Number of shares outstanding (unlimited number of shares authorized,
par value $0.01 per share).......................................... 33,650,002
==============
Investments, at cost................................................... $ 629,479,204
==============
</TABLE>
Page 14 See Notes to Financial Statements
FIRST TRUST LIMITED DURATION INVESTMENT GRADE CORPORATE ETF (FSIG)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2023 (UNAUDITED)
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Interest............................................................... $ 7,469,371
Dividends.............................................................. 76,066
--------------
Total investment income............................................. 7,545,437
--------------
EXPENSES:
Investment advisory fees............................................... 839,171
--------------
Total expenses...................................................... 839,171
Less fees waived by the investment advisor.......................... (152,577)
--------------
Net expenses........................................................ 686,594
--------------
NET INVESTMENT INCOME (LOSS)........................................... 6,858,843
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investments................................ (362,987)
Net change in unrealized appreciation (depreciation) on investments.... 3,156,433
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ 2,793,446
--------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ 9,652,289
==============
</TABLE>
See Notes to Financial Statements Page 15
FIRST TRUST LIMITED DURATION INVESTMENT GRADE CORPORATE ETF (FSIG)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
4/30/2023 ENDED
(UNAUDITED) 10/31/2022 (a)
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss)........................................... $ 6,858,843 $ 248,834
Net realized gain (loss)............................................... (362,987) (434,326)
Net change in unrealized appreciation (depreciation)................... 3,156,433 (583,008)
-------------- --------------
Net increase (decrease) in net assets resulting from operations........ 9,652,289 (768,500)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations.................................................. (6,869,501) (233,551)
-------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold.............................................. 623,135,329 24,179,235
Cost of shares redeemed................................................ (9,276,173) (6,635,554)
-------------- --------------
Net increase (decrease) in net assets resulting from shareholder
transactions........................................................ 613,859,156 17,543,681
-------------- --------------
Total increase (decrease) in net assets................................ 616,641,944 16,541,630
NET ASSETS:
Beginning of period.................................................... 16,541,630 --
-------------- --------------
End of period.......................................................... $ 633,183,574 $ 16,541,630
============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................................ 900,002 --
Shares sold............................................................ 33,250,000 1,250,002
Shares redeemed........................................................ (500,000) (350,000)
-------------- --------------
Shares outstanding, end of period...................................... 33,650,002 900,002
============== ==============
</TABLE>
(a) Inception date is November 17, 2021, 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
FIRST TRUST LIMITED DURATION INVESTMENT GRADE CORPORATE ETF (FSIG)
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
4/30/2023 ENDED
(UNAUDITED) 10/31/2022 (a)
-------------- --------------
<S> <C> <C>
Net asset value, beginning of period....... $ 18.38 $ 20.00
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............... 0.42 (b) 0.39
Net realized and unrealized gain (loss).... 0.39 (1.64)
---------- ----------
Total from investment operations........... 0.81 (1.25)
---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income...................... (0.37) (0.37)
---------- ----------
Net asset value, end of period............. $ 18.82 $ 18.38
========== ==========
TOTAL RETURN (c)........................... 4.43% (6.28)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)....... $ 633,184 $ 16,542
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets.................................. 0.55% (d) 0.55% (d)
Ratio of net expenses to average net assets 0.45% (d) 0.45% (d)
Ratio of net investment income (loss) to
average net assets...................... 4.50% (d) 2.33% (d)
Portfolio turnover rate (e)................ 16% 113%
</TABLE>
(a) Inception date is November 17, 2021, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
(b) Based on average shares outstanding.
(c) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year. The total return would have been lower if certain
fees had not been waived by the investment advisor.
(d) Annualized.
(e) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
See Notes to Financial Statements Page 17
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST LIMITED DURATION INVESTMENT GRADE CORPORATE ETF (FSIG)
APRIL 30, 2023 (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 fourteen funds that are offering shares. This
report covers the First Trust Limited Duration Investment Grade Corporate ETF
(the "Fund"), a non-diversified series of the Trust, which trades under the
ticker "FSIG" on The NYSE Arca, Inc. ("NYSE Arca"). 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 deliver current income. Under
normal market conditions, the Fund seeks to achieve its objective by investing
at least 80% of its net assets (plus any borrowings for investment purposes) in
investment grade corporate debt securities. Corporate debt securities are debt
obligations issued by businesses to finance their operations. Notes, bonds,
loans, debentures and commercial paper are the most common types of corporate
debt securities, with the primary differences being their maturities and secured
or unsecured status. At least 80% of the Fund's net assets will be invested in
corporate debt securities that are, at the time of purchase, investment grade
(i.e. rated Baa3/BBB- or above) by at least one nationally recognized
statistical rating organization ("NRSRO") rating such securities, or if unrated,
debt securities determined by the Fund's investment advisor, First Trust
Advisors L.P. ("First Trust" or the "Advisor") to be of comparable quality. In
the case of a split rating between one or more of the NRSROs, the Fund will
consider the highest rating. For an unrated security to be considered investment
grade, the Advisor will consider, at the time of purchase, whether such security
is of comparable quality based on fundamental credit analysis of the unrated
security and comparable securities that are rated by an NRSRO.
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 readily available market quotations such as last sale or
official closing prices from a national or foreign exchange (i.e., a regulated
market) and are primarily obtained from third-party pricing services. Fair value
prices represent any prices not considered market value prices and are either
obtained from a third-party pricing service or are determined by the Advisor's
Pricing Committee, in accordance with valuation procedures approved by the
Trust's Board of Trustees, and in accordance with provisions of the 1940 Act and
rules thereunder. Investments valued by the Advisor's Pricing Committee, if any,
are footnoted as such in the footnotes to the Portfolio of Investments. The
Fund's investments are valued as follows:
Corporate bonds, corporate notes and other debt securities are fair valued
on the basis of valuations provided by a third-party pricing service
approved by the Advisor's Pricing Committee, which may use the following
valuation inputs when available:
1) benchmark yields;
2) reported trades;
3) broker/dealer quotes;
4) issuer spreads;
5) benchmark securities;
6) bids and offers; and
7) reference data including market research publications.
Page 18
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LIMITED DURATION INVESTMENT GRADE CORPORATE ETF (FSIG)
APRIL 30, 2023 (UNAUDITED)
Shares of open-end funds are valued based on NAV per share.
Securities traded in an over-the-counter market are valued at the mean of
their most recent bid and asked price, if available, and otherwise at
their last trade 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 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 most recent price provided by a pricing service;
2) the fundamental business data relating to the borrower/issuer;
3) an evaluation of the forces which influence the market in
which these securities are purchased and sold;
4) the type, size and cost of a security;
5) the financial statements of the borrower/issuer, or the
financial condition of the country of issue;
6) the credit quality and cash flow of the borrower/issuer, or
country of issue, based on the Pricing Committee's,
sub-advisor's or portfolio manager's analysis, as applicable,
or external analysis;
7) the information as to any transactions in or offers for the
security;
8) the price and extent of public trading in similar securities
of the issuer/borrower, or comparable companies;
9) the coupon payments;
10) the quality, value and salability of collateral, if any,
securing the security;
11) 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;
-----------------------------
(1) The terms "security" and "securities" used throughout the Notes to
Financial Statements include Senior Loans.
Page 19
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LIMITED DURATION INVESTMENT GRADE CORPORATE ETF (FSIG)
APRIL 30, 2023 (UNAUDITED)
12) 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;
13) borrower's/issuer's competitive position within the industry;
14) borrower's/issuer's ability to access additional liquidity
through public and/or private markets; and
15) 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, 2023, 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 (the "FCA"), which regulates
the London Interbank Offered Rates ("LIBOR") announced on March 5, 2021 that it
intended to phase-out all LIBOR reference rates, beginning December 31, 2021.
Since that announcement, the FCA has ceased publication of all non-USD LIBOR
reference rates and the 1-week and 2-month USD LIBOR reference rates as of
December 31, 2021. The remaining USD LIBOR settings will cease to be published
or no longer be representative immediately after June 30, 2023. The
International Swaps and Derivatives Association, Inc. ("ISDA") confirmed that
the FCA's March 5, 2021 announcement of its intention to cease providing LIBOR
reference rates, 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. There is no assurance that
any alternative reference rate, including SOFR, will be similar to or produce
the same value or economic equivalence as LIBOR or that instruments using an
alternative rate will have the same volume or liquidity.
At this time, it is not possible to predict the full impact of the elimination
of LIBOR and the establishment of an alternative reference rate on the Fund or
its investments.
Securities purchased or sold on a when-issued, delayed-delivery or forward
purchase commitment basis may have extended settlement periods. The value of the
security so purchased is subject to market fluctuations during this period. Due
to the nature of the Senior Loan market, the actual settlement date may not be
certain at the time of the purchase or sale for some of the Senior Loans.
Interest income on such Senior Loans is not accrued until settlement date. The
Fund maintains liquid assets with a current value at least equal to the amount
of its when-issued, delayed-delivery or forward purchase commitments. The Fund
had no when-issued, delayed-delivery, or forward purchase commitments as of
April 30, 2023.
Page 20
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LIMITED DURATION INVESTMENT GRADE CORPORATE ETF (FSIG)
APRIL 30, 2023 (UNAUDITED)
C. UNFUNDED LOAN COMMITMENTS
The Fund may enter into certain credit agreements, all or a portion of which may
be unfunded. The Fund is obligated to fund these loan commitments at the
borrower's discretion. The Fund had no unfunded loan commitments as of April 30,
2023.
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. The Fund may also designate a portion of the amount paid to
redeeming shareholders as a distribution for tax purposes.
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 period ended October
31, 2022 was as follows:
Distributions paid from:
Ordinary income................................. $ 233,551
Capital gains................................... --
Return of capital............................... --
As of October 31, 2022, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income................... $ 11,477
Accumulated capital and other gain (loss)....... (380,508)
Net unrealized appreciation (depreciation)...... (633,020)
E. INCOME TAXES
The Fund intends to qualify as a regulated investment company by complying with
the requirements under Subchapter M of the Internal Revenue Code of 1986, as
amended, which includes distributing substantially all of its net investment
income and net realized gains to shareholders. Accordingly, no provision has
been made for federal and state income taxes. However, due to the timing and
amount of distributions, the Fund may be subject to an excise tax of 4% of the
amount by which approximately 98% of the Fund's taxable income exceeds the
distributions from such taxable income for the calendar year.
The Fund is subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. The taxable year ended October
31, 2022 remains open to federal and state audit. As of April 30, 2023,
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, 2022, the
Fund had non-expiring capital loss carryforwards available for federal income
tax purposes of $380,508.
Certain losses realized during the current fiscal year may be deferred and
treated as occurring on the first day of the following fiscal year for federal
income tax purposes. For the fiscal period ended October 31, 2022, the Fund had
no net late year ordinary or capital losses.
Page 21
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LIMITED DURATION INVESTMENT GRADE CORPORATE ETF (FSIG)
APRIL 30, 2023 (UNAUDITED)
As of April 30, 2023, the aggregate cost, gross unrealized appreciation, gross
unrealized depreciation, and net unrealized appreciation/(depreciation) on
investments (including short positions and derivatives, if any) for federal
income tax purposes were as follows:
<TABLE>
<CAPTION>
Gross Gross Net Unrealized
Unrealized Unrealized Appreciation
Tax Cost Appreciation (Depreciation) (Depreciation)
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
$ 629,479,204 $ 3,150,390 $ (576,965) $ 2,573,425
</TABLE>
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, 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.
Effective November 1, 2022, the annual unitary management fee payable by the
Fund to First Trust for these services will be reduced at a certain levels of
the Fund's net assets ("breakpoints") and calculated pursuant to the schedule
below:
<TABLE>
<CAPTION>
Breakpoints
-------------------------------------------------------------------------
<S> <C>
Fund net assets up to and including $2.5 billion 0.55000%
Fund net assets greater than $2.5 billion up to and including $5 billion 0.53625%
Fund net assets greater than $5 billion up to and including $7.5 billion 0.52250%
Fund net assets greater than $7.5 billion up to and including $10 billion 0.50875%
Fund net assets greater than $10 billion 0.49500%
</TABLE>
Prior to November 1, 2022, the Fund paid First Trust an annual unitary
management fee equal to 0.55% of its average daily net assets.
Pursuant to a contractual agreement, First Trust has agreed to waive management
fees of 0.10% of average daily net assets until November 12, 2023. The waiver
agreement may be terminated by action of the Board at any time upon 60 days'
written notice by the Trust, on behalf of the Fund, or by First Trust only after
November 12, 2023. During any period in which the waiver agreement is in effect,
the Fund will not be eligible for any breakpoints described above. During the
six months ended April 30, 2023, the Advisor waived fees of $152,577.
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 target outcome fund or an index fund.
Page 22
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LIMITED DURATION INVESTMENT GRADE CORPORATE ETF (FSIG)
APRIL 30, 2023 (UNAUDITED)
Additionally, the Lead Independent Trustee and the Chairs 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 Chairs
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, 2023, the cost of purchases and proceeds from
sales of investments, excluding short-term investments and in-kind transactions,
were $570,000,302 and $42,341,680, respectively.
For the six months ended April 30, 2023, there were 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 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, 2024.
Page 23
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LIMITED DURATION INVESTMENT GRADE CORPORATE ETF (FSIG)
APRIL 30, 2023 (UNAUDITED)
7. INDEMNIFICATION
The Trust, on behalf of the Fund, has a variety of indemnification obligations
under contracts with its service providers. The Trust's maximum exposure under
these arrangements is unknown. However, the Trust has not had prior claims or
losses pursuant to these contracts and expects the risk of loss to be remote.
8. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Fund through
the date the financial statements were issued and has determined that there was
the following subsequent event:
On May 23, 2023, the Advisor's Pricing Committee approved changes to the
Advisor's Valuation Procedures for the First Trust Funds, including
clarifications to certain pricing methodologies. These changes will be reflected
in future reports' Notes to Financial Statements.
Page 24
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST LIMITED DURATION INVESTMENT GRADE CORPORATE ETF (FSIG)
APRIL 30, 2023 (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 significant
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
more broadly diversified.
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.
DEFINED OUTCOME FUNDS RISK. To the extent a fund's investment strategy is
designed to deliver returns tied to the price performance of an underlying ETF,
an investor may not realize the returns the fund seeks to achieve if that
investor does not hold shares for the entire target outcome period. In the event
an investor purchases shares after the first day of the target outcome period or
sells shares prior to the end of the target outcome period, the buffer that the
fund seeks to provide against a decline in the value of the underlying ETF may
not be available, the enhanced returns that the fund seeks to provide (if any)
may not be available and the investor may not participate in a gain in the value
of the underlying ETF up to the cap for the investor's investment period.
Additionally, the fund will not participate in gains of the underlying ETF above
the cap and a shareholder may lose their entire investment. If the fund seeks
enhanced returns, there are certain time periods when the value of the fund may
fall faster than the value of the underlying ETF, and it is very unlikely that,
on any given day during which the underlying ETF share price increases in value,
the fund's share price will increase at the same rate as the enhanced returns
sought by the fund, which is designed for an entire target outcome period.
Trading flexible exchange options involves risks different from, or possibly
greater than, the risks associated with investing directly in securities, such
as less liquidity and correlation and valuation risks. A fund may experience
substantial downside from specific flexible exchange option positions and
certain positions may expire worthless.
Page 25
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LIMITED DURATION INVESTMENT GRADE CORPORATE ETF (FSIG)
APRIL 30, 2023 (UNAUDITED)
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
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 OR MODEL CONSTITUENT RISK. Certain funds may be a constituent of one or
more indices or ETF models. 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 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. In addition, index rebalances may potentially result in increased
trading activity in a fund's shares.
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 has ceased making LIBOR available as a
reference rate over a phase-out period that began December 31, 2021. There is no
assurance that any alternative reference rate, including the Secured Overnight
Financing Rate ("SOFR") will be similar to or produce the same value or economic
equivalence as LIBOR or that instruments using an alternative rate will have the
same volume or liquidity. The unavailability or replacement of LIBOR may affect
the value, liquidity or return on certain fund investments and may result in
Page 26
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LIMITED DURATION INVESTMENT GRADE CORPORATE ETF (FSIG)
APRIL 30, 2023 (UNAUDITED)
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. Market risk is the risk that a particular security, or shares of a
fund in general, may fall in value. 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. In February
2022, Russia invaded Ukraine which has caused and could continue to cause
significant market disruptions and volatility within the markets in Russia,
Europe, and the United States. The hostilities and sanctions resulting from
those hostilities could have a significant impact on certain fund investments as
well as fund performance. The COVID-19 global pandemic and the ensuing policies
enacted by governments and central banks have caused and may continue to cause
significant volatility and uncertainty in global financial markets. While the
U.S. has resumed "reasonably" normal business activity, many countries continue
to impose lockdown measures. Additionally, there is no guarantee that vaccines
will be effective against emerging variants of the disease. These events also
adversely affect the prices and liquidity of a Fund's portfolio securities or
other instruments and could result in disruptions in the trading markets. Any of
such circumstances could have a materially negative impact on the value of a
Fund's shares and result in increased market volatility. During any such events,
a Fund's shares may trade at increased premiums or discounts to their net asset
value and the bid/ask spread on a Fund's shares may widen.
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;
capital controls; lack of liquidity; currency exchange rates; excessive
taxation; government seizure of assets; the imposition of sanctions by foreign
governments; 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. Each fund relies on third-parties for a range of services, including
custody. Any delay or failure relating to engaging or maintaining such service
providers may affect a fund's ability to meet its investment objective. Although
the funds and the funds' investment 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.
PREFERRED SECURITIES RISK. Preferred securities combine some of the
characteristics of both common stocks and bonds. Preferred securities are
typically subordinated to bonds and other debt securities in a company's capital
structure in terms of priority to corporate income, subjecting them to greater
credit risk than those debt securities. Generally, holders of preferred
securities have no voting rights with respect to the issuing company unless
preferred dividends have been in arrears for a specified number of periods, at
which time the preferred security holders may obtain limited rights. In certain
circumstances, an issuer of preferred securities may defer payment on the
securities and, in some cases, redeem the securities prior to a specified date.
Preferred securities may also be substantially less liquid than other
securities, including common stock.
VALUATION RISK. The valuation of certain securities may carry more risk than
that of common stock. Uncertainties in the conditions of the financial markets,
unreliable reference data, lack of transparency and inconsistency of valuation
models and processes may lead to inaccurate asset pricing. A fund may hold
investments in sizes smaller than institutionally sized round lot positions
Page 27
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LIMITED DURATION INVESTMENT GRADE CORPORATE ETF (FSIG)
APRIL 30, 2023 (UNAUDITED)
(sometimes referred to as odd lots). However, third-party pricing services
generally provide evaluations on the basis of institutionally-sized round lots.
If a fund sells certain of its investments in an odd lot transaction, the sale
price may be less than the value at which such securities have been held by the
fund. Odd lots often trade at lower prices than institutional round lots. There
is no assurance that the fund will be able to sell a portfolio security at the
price established by the pricing service, which could result in a loss to the
fund.
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 17, 2023 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 17, 2022 through the Liquidity Committee's annual meeting held
on March 23, 2023 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 any
highly liquid investment minimum.
As stated in the written report, during the review period, two funds breached
the 15% limitation on illiquid investments for one day each, as a result of an
unscheduled week-long closure of the stock exchange in Istanbul following
devastating earthquakes in February, causing all Turkish equities to be
re-classified as "illiquid" for one day. Each fund filed a Form N-RN on the day
after the breach occurred, and one day later after the breach was cured. No fund
with a highly liquid investment minimum breached that minimum during the
reporting period. 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 28
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 South Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
320 South Canal Street
Chicago, IL 60606
[BLANK BACK COVER]
FIRST TRUST
First Trust Exchange-Traded Fund IV
--------------------------------------------------------------------------------
FT Cboe Vest Rising Dividend Achievers Target Income ETF (RDVI)
----------------------------
Semi-Annual Report
For the Six Months
Ended
April 30, 2023
----------------------------
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FT CBOE VEST RISING DIVIDEND ACHIEVERS TARGET INCOME ETF (RDVI)
SEMI-ANNUAL REPORT
APRIL 30, 2023
Shareholder Letter........................................................... 1
Fund Performance Overview.................................................... 2
Portfolio Management......................................................... 4
Understanding Your Fund Expenses............................................. 5
Portfolio of Investments..................................................... 6
Statement of Assets and Liabilities.......................................... 9
Statement of Operations...................................................... 10
Statements of Changes in Net Assets.......................................... 11
Financial Highlights......................................................... 12
Notes to Financial Statements................................................ 13
Additional Information....................................................... 19
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 Vest(SM) 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 Rising Dividend Achievers Target 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-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 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 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.
--------------------------------------------------------------------------------
SHAREHOLDER LETTER
--------------------------------------------------------------------------------
FT CBOE VEST RISING DIVIDEND ACHIEVERS TARGET INCOME ETF (RDVI)
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
APRIL 30, 2023
Dear Shareholders:
First Trust is pleased to provide you with the semi-annual report for the FT
Cboe Vest Rising Dividend Achievers Target Income ETF (the "Fund"), which
contains detailed information about the Fund for the six months ended April 30,
2023.
It pleases me to write that on May 5, 2023, the World Health Organization
officially declared that the coronavirus ("COVID-19") pandemic no longer
qualified as a global health emergency. While the virus officially no longer
poses an immediate threat, its full impact on the world economy remains to be
seen, in my opinion. Recall, if you will, those early days of the pandemic;
companies sent workers home, consumers were afraid or unwilling to leave their
homes, supply chains dried up, and grocery shelves were left bare. Hoping to
provide relief to their constituents and to bolster economic activity,
governments across the globe funneled trillions of dollars in stimulus directly
into the hands of their citizens. Unfortunately, economist Milton Friedman's
age-old economic adage "there's no such thing as a free lunch" still holds. As a
result of the U.S. government stimulus, gross domestic product rebounded
quickly, but so did inflation.
As many investors are aware, the Federal Reserve (the "Fed") has been locked in
a battle with stubbornly high inflation for several years now. Inflation, as
measured by the trailing 12-month rate of change in the Consumer Price Index
("CPI"), surged from 1.4% on December 31, 2020, to 9.1% as of June 30, 2022.
Since then, the trailing rate on the CPI has come down, but remains elevated. On
April 30, 2023, the CPI stood at 4.9%, well above the Fed's goal of 2.0%.
Surging prices have not been restricted to the U.S. Headline inflation rates in
each of the countries that make up the so-called Group of Ten (G-10) stand above
the targets set by their central banks, according to data from Bloomberg.
From the Fed's perspective, monetary policy is the most efficient means to
combat rising prices. From December 31, 2020 through May 3, 2023, the Fed
increased the Federal Funds target rate (upper bound) a total of ten times,
raising the rate from 0.25% to 5.25%. As mentioned, tighter monetary policy
resulted in a decrease in the CPI, but there have been casualties in the Fed's
battle with rising prices. The most recent banking turmoil is one example.
Another is the spike in mortgage rates. According to Bankrate, the national
average for a 30-year mortgage stood at just 2.87% on December 31, 2020. As of
May 1, 2023, the average 30-year mortgage rate had surged to 6.88%. Not all the
news is negative, however. Driven by a strong U.S. labor market, consumer
spending remained robust in April 2023. Notably, American corporations added
253,000 jobs during the month, and the unemployment rate stood at a 53-year low.
Bob Carey, Chief Market Strategist at First Trust, recently summed up the
current situation, noting that "we're not out of the woods yet." That said, even
the most difficult situations don't last forever. In my opinion, like the
COVID-19 pandemic, inflation, and the tighter monetary policy it ushered in,
will pass with time.
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
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
FT CBOE VEST RISING DIVIDEND ACHIEVERS TARGET INCOME ETF (RDVI)
The FT Cboe Vest Rising Dividend Achievers Target Income ETF (the "Fund") seeks
to provide investors with current income with a secondary objective of providing
capital appreciation. The shares of the Fund are listed on Cboe BZX Exchange,
Inc. under the ticker symbol "RDVI." Under normal market conditions, the Fund
will pursue its investment objectives by investing primarily in U.S.
exchange-traded equity securities contained in the Nasdaq US Rising Dividend
Achievers(TM) Index (the "Index") and by utilizing an "option strategy"
consisting of writing (selling) U.S. exchange-traded call options on the S&P
500(R) Index or exchange-traded funds that track the S&P 500(R) Index
("Underlying ETFs"). Under normal market conditions, the Fund will invest at
least 80% of its net assets (plus any borrowings for investment purposes) in
dividend-paying securities and/or investments that provide exposure to
dividend-paying securities.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURNS
6 Months Ended Inception (10/19/22)
4/30/23 to 4/30/23
<S> <C> <C>
FUND PERFORMANCE
NAV 5.83% 13.42%
Market Price 5.87% 13.52%
INDEX PERFORMANCE
Nasdaq US Rising Dividend Achievers(TM) Index 5.80% 13.69%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Total returns for the period since inception are calculated from the inception
date of the Fund. "Cumulative Total Returns" represent the total change in value
of an investment over the period indicated.
The Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint 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. 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
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST RISING DIVIDEND ACHIEVERS TARGET INCOME ETF (RDVI) (CONTINUED)
---------------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION INVESTMENTS
---------------------------------------------------------------
Financials 40.5%
Information Technology 15.6
Energy 12.6
Materials 11.6
Health Care 7.8
Industrials 4.0
Communication Services 3.9
Consumer Discretionary 2.0
Consumer Staples 2.0
-------
Total 100.0%
=======
---------------------------------------------------------------
% OF
FUND ALLOCATION NET 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
---------------------------------------------------------------
MGIC Investment Corp. 2.2%
Exxon Mobil Corp. 2.2
Popular, Inc. 2.2
Chord Energy Corp. 2.2
Aflac, Inc. 2.1
Abbott Laboratories 2.1
Micron Technology, Inc. 2.1
Goldman Sachs Group (The), Inc. 2.1
Discover Financial Services 2.1
Accenture PLC, Class A 2.1
-------
Total 21.4%
=======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
OCTOBER 19, 2022 - APRIL 30, 2023
FT Cboe Vest Nasdaq US
Rising Dividend Achievers Rising Dividend
Target Income ETF Achievers(TM) Index
<S> <C> <C>
10/29/22 $10,000 $10,000
10/31/22 10,718 10,746
4/30/23 11,342 11,369
</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 3
--------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT
--------------------------------------------------------------------------------
FT CBOE VEST RISING DIVIDEND ACHIEVERS TARGET INCOME ETF (RDVI)
SEMI-ANNUAL REPORT
APRIL 30, 2023 (UNAUDITED)
ADVISOR
First Trust Advisors L.P. ("First Trust" or the "Advisor") is the investment
advisor to the FT Cboe Vest Rising Dividend Achievers Target Income ETF ("RDVI"
or 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 Vest(SM) 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 8350 Broad Street,
Suite 240, McLean, VA 22102, was founded in 2012. Cboe Vest had approximately
$12.1 billion under management or committed to management as of April 30, 2023.
PORTFOLIO MANAGEMENT TEAM
KARAN SOOD, MANAGING DIRECTOR OF CBOE VEST
HOWARD RUBIN, MANAGING DIRECTOR OF CBOE VEST
The portfolio managers are primarily and jointly responsible for the day-to-day
management of the Fund. Each portfolio manager has served as a part of the
portfolio management team of the Fund since October 2022.
Page 4
FT CBOE VEST RISING DIVIDEND ACHIEVERS TARGET INCOME ETF (RDVI)
UNDERSTANDING YOUR FUND EXPENSES
APRIL 30, 2023 (UNAUDITED)
As a shareholder of FT Cboe Vest Rising Dividend Achievers Target 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, 2023.
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, 2022 APRIL 30, 2023 PERIOD PERIOD (a)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FT CBOE VEST RISING DIVIDEND ACHIEVERS TARGET INCOME ETF (RDVI)
Actual $1,000.00 $1,058.30 0.75% $3.83
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,
2022 through April 30, 2023), multiplied by 181/365 (to reflect the
six-month period).
Page 5
FT CBOE VEST RISING DIVIDEND ACHIEVERS TARGET INCOME ETF (RDVI)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2023 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- -------------------------------------------------------------------------------------------- ----------------
<S> <C> <C>
COMMON STOCKS -- 100.0%
BANKS -- 15.9%
77,128 Bank of America Corp. (a)................................................................... $ 2,258,308
69,531 Citizens Financial Group, Inc. (a).......................................................... 2,151,289
49,224 Comerica, Inc. (a).......................................................................... 2,134,845
207,508 Huntington Bancshares, Inc. (a)............................................................. 2,324,090
17,052 JPMorgan Chase & Co. (a).................................................................... 2,357,268
17,340 PNC Financial Services Group (The), Inc. (a)................................................ 2,258,535
42,192 Popular, Inc. (a)........................................................................... 2,531,942
119,932 Regions Financial Corp. (a)................................................................. 2,189,958
----------------
18,206,235
----------------
CAPITAL MARKETS -- 4.1%
7,067 Goldman Sachs Group (The), Inc. (a)......................................................... 2,427,091
25,489 Morgan Stanley (a).......................................................................... 2,293,245
----------------
4,720,336
----------------
CHEMICALS -- 1.9%
30,252 CF Industries Holdings, Inc. (a)............................................................ 2,165,438
----------------
COMMUNICATIONS EQUIPMENT -- 1.8%
42,750 Cisco Systems, Inc. (a)..................................................................... 2,019,938
----------------
CONSUMER FINANCE -- 8.0%
13,705 American Express Co. (a).................................................................... 2,211,165
23,923 Capital One Financial Corp. (a)............................................................. 2,327,708
23,259 Discover Financial Services (a)............................................................. 2,406,609
75,313 Synchrony Financial (a)..................................................................... 2,222,486
----------------
9,167,968
----------------
FINANCIAL SERVICES -- 8.3%
91,461 Equitable Holdings, Inc. (a)................................................................ 2,377,071
6,130 Mastercard, Inc., Class A (a)............................................................... 2,329,584
173,176 MGIC Investment Corp. (a)................................................................... 2,575,127
9,865 Visa, Inc., Class A (a)..................................................................... 2,295,882
----------------
9,577,664
----------------
FOOD PRODUCTS -- 2.0%
28,890 Archer-Daniels-Midland Co. (a).............................................................. 2,255,731
----------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 2.1%
22,121 Abbott Laboratories (a)..................................................................... 2,443,707
----------------
HEALTH CARE PROVIDERS & SERVICES -- 3.9%
4,627 Elevance Health, Inc. (a)................................................................... 2,168,444
4,327 Humana, Inc. (a)............................................................................ 2,295,430
----------------
4,463,874
----------------
HOUSEHOLD DURABLES -- 2.0%
20,733 Lennar Corp., Class A (a)................................................................... 2,338,890
----------------
INSURANCE -- 4.1%
35,008 Aflac, Inc. (a)............................................................................. 2,445,309
30,658 Principal Financial Group, Inc. (a)......................................................... 2,289,846
----------------
4,735,155
----------------
</TABLE>
Page 6 See Notes to Financial Statements
FT CBOE VEST RISING DIVIDEND ACHIEVERS TARGET INCOME ETF (RDVI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2023 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- -------------------------------------------------------------------------------------------- ----------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
IT SERVICES -- 4.0%
8,578 Accenture PLC, Class A (a).................................................................. $ 2,404,327
37,125 Cognizant Technology Solutions Corp., Class A (a)........................................... 2,216,734
----------------
4,621,061
----------------
MACHINERY -- 4.0%
30,444 Mueller Industries, Inc. (a)................................................................ 2,187,401
9,266 Snap-on, Inc. (a)........................................................................... 2,403,693
----------------
4,591,094
----------------
MEDIA -- 3.9%
63,609 Interpublic Group of (The) Cos., Inc. (a)................................................... 2,272,749
24,903 Omnicom Group, Inc. (a)..................................................................... 2,255,465
----------------
4,528,214
----------------
METALS & MINING -- 7.7%
59,221 Freeport-McMoRan, Inc. (a).................................................................. 2,245,068
14,884 Nucor Corp. (a)............................................................................. 2,205,511
8,915 Reliance Steel & Aluminum Co. (a)........................................................... 2,209,137
20,647 Steel Dynamics, Inc. (a).................................................................... 2,146,256
----------------
8,805,972
----------------
OIL, GAS & CONSUMABLE FUELS -- 12.6%
14,089 Chevron Corp. (a)........................................................................... 2,375,124
17,656 Chord Energy Corp. (a)...................................................................... 2,512,978
34,792 Civitas Resources, Inc. (a)................................................................. 2,402,388
22,729 ConocoPhillips (a).......................................................................... 2,338,587
21,491 Exxon Mobil Corp. (a)....................................................................... 2,543,245
109,244 Magnolia Oil & Gas Corp., Class A (a)....................................................... 2,307,233
----------------
14,479,555
----------------
PAPER & FOREST PRODUCTS -- 2.1%
39,457 Louisiana-Pacific Corp. (a)................................................................. 2,357,161
----------------
PHARMACEUTICALS -- 1.8%
53,507 Pfizer, Inc. (a)............................................................................ 2,080,887
----------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 5.8%
4,213 Lam Research Corp. (a)...................................................................... 2,207,949
37,866 Micron Technology, Inc. (a)................................................................. 2,437,056
12,208 Texas Instruments, Inc. (a)................................................................. 2,041,177
----------------
6,686,182
----------------
SOFTWARE -- 2.1%
7,682 Microsoft Corp. (a)......................................................................... 2,360,371
----------------
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 1.9%
34,904 NetApp, Inc. (a)............................................................................ 2,195,113
----------------
TOTAL INVESTMENTS -- 100.0%................................................................. 114,800,546
(Cost $111,974,380) ----------------
</TABLE>
See Notes to Financial Statements Page 7
FT CBOE VEST RISING DIVIDEND ACHIEVERS TARGET INCOME ETF (RDVI)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2023 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
---------------- -------------------------------------------------- ------------ ------------ ------------ ----------------
<S> <C> <C> <C> <C>
CALL OPTIONS WRITTEN -- (0.2)%
(47) S&P 500 Weeklys................................... $(19,596,556) $ 4,160.00 05/05/23 $ (201,630)
(Premiums received $168,597) ----------------
NET OTHER ASSETS AND LIABILITIES -- 0.2%................................................... 221,153
----------------
NET ASSETS -- 100.0%....................................................................... $ 114,820,069
================
</TABLE>
(a) All or a portion of this security is pledged as collateral for the options
written. At April 30, 2023, the value of these securities amounts to
$8,092,511.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2023 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
4/30/2023 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Common Stocks*........................................ $ 114,800,546 $ 114,800,546 $ -- $ --
=============== =============== =============== ===============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
4/30/2023 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
Call Options Written.................................. $ (201,630) $ (201,630) $ -- $ --
=============== =============== =============== ===============
</TABLE>
* See Portfolio of Investments for industry breakout.
Page 8 See Notes to Financial Statements
FT CBOE VEST RISING DIVIDEND ACHIEVERS TARGET INCOME ETF (RDVI)
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2023 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value.................................................. $ 114,800,546
Cash segregated as collateral for open options contracts............... 246,826
Receivables:
Capital shares sold................................................. 1,073,194
Investment securities sold.......................................... 168,597
Dividends........................................................... 87,092
--------------
Total Assets........................................................ 116,376,255
--------------
LIABILITIES:
Options contracts written, at value.................................... 201,630
Due to custodian....................................................... 45,984
Payables:
Investment securities purchased..................................... 1,254,315
Investment advisory fees............................................ 54,257
--------------
Total Liabilities................................................... 1,556,186
--------------
NET ASSETS............................................................. $ 114,820,069
==============
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $ 115,497,972
Par value.............................................................. 53,500
Accumulated distributable earnings (loss).............................. (731,403)
--------------
NET ASSETS............................................................. $ 114,820,069
==============
NET ASSET VALUE, per share............................................. $ 21.46
==============
Number of shares outstanding (unlimited number of shares authorized,
par value $0.01 per share).......................................... 5,350,002
==============
Investments, at cost................................................... $ 111,974,380
==============
Premiums received on options contracts written......................... $ 168,597
==============
</TABLE>
See Notes to Financial Statements Page 9
FT CBOE VEST RISING DIVIDEND ACHIEVERS TARGET INCOME ETF (RDVI)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2023 (UNAUDITED)
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Dividends.............................................................. $ 432,520
--------------
Total investment income............................................. 432,520
--------------
EXPENSES:
Investment advisory fees............................................... 136,574
--------------
Total expenses...................................................... 136,574
--------------
NET INVESTMENT INCOME (LOSS)........................................... 295,946
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments ........................................................ (2,125,163)
In-kind redemptions................................................. 132,966
Written options contracts........................................... 110,916
--------------
Net realized gain (loss)............................................... (1,881,281)
--------------
Net change in unrealized appreciation (depreciation) on:
Investments......................................................... 2,758,979
Written options contracts........................................... (34,263)
--------------
Net change in unrealized appreciation (depreciation)................... 2,724,716
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ 843,435
--------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ 1,139,381
==============
</TABLE>
Page 10 See Notes to Financial Statements
FT CBOE VEST RISING DIVIDEND ACHIEVERS TARGET INCOME ETF (RDVI)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
4/30/2023 ENDED
(UNAUDITED) 10/31/2022 (a)
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss)........................................... $ 295,946 $ 495
Net realized gain (loss)............................................... (1,881,281) (2,919)
Net change in unrealized appreciation (depreciation)................... 2,724,716 68,417
-------------- --------------
Net increase (decrease) in net assets resulting from operations........ 1,139,381 65,993
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations ................................................. (1,936,777) --
-------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold.............................................. 114,560,273 2,055,338
Cost of shares redeemed................................................ (1,064,139) --
-------------- --------------
Net increase (decrease) in net assets resulting from
shareholder transactions............................................ 113,496,134 2,055,338
-------------- --------------
Total increase (decrease) in net assets................................ 112,698,738 2,121,331
NET ASSETS:
Beginning of period.................................................... 2,121,331 --
-------------- --------------
End of period.......................................................... $ 114,820,069 $ 2,121,331
============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................................ 100,002 --
Shares sold............................................................ 5,300,000 100,002
Shares redeemed........................................................ (50,000) --
-------------- --------------
Shares outstanding, end of period...................................... 5,350,002 100,002
============== ==============
</TABLE>
(a) Inception date is October 19, 2022, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
See Notes to Financial Statements Page 11
FT CBOE VEST RISING DIVIDEND ACHIEVERS TARGET INCOME ETF (RDVI)
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
4/30/2023 ENDED
(UNAUDITED) 10/31/2022 (a)
-------------- --------------
<S> <C> <C>
Net asset value, beginning of period $ 21.21 $ 19.79
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.16 (b) 0.00 (c)
Net realized and unrealized gain (loss) 1.08 1.42
---------- ----------
Total from investment operations 1.24 1.42
---------- ----------
DISTRIBUTION PAID TO SHAREHOLDERS FROM:
Net investment income (0.99) --
---------- ----------
Net asset value, end of period $ 21.46 $ 21.21
========== ==========
TOTAL RETURN (d) 5.83% 7.18%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 114,820 $ 2,121
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.75% (e) 0.75% (e)
Ratio of net investment income (loss) to
average net assets 1.63% (e) 1.47% (e)
Portfolio turnover rate (f) 69% 0%
</TABLE>
(a) Inception dates is October 19, 2022, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
(b) Based on average shares outstanding.
(c) Amount is less than $0.01.
(d) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year.
(e) Annualized.
(f) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
Page 12 See Notes to Financial Statements
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FT CBOE VEST RISING DIVIDEND ACHIEVERS TARGET INCOME ETF (RDVI)
APRIL 30, 2023 (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 fourteen funds that are offering shares. This
report covers the FT Cboe Vest Rising Dividend Achievers Target Income ETF (the
"Fund"), which trades under the ticker "RDVI" 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 is an actively managed exchange-traded fund. The Fund's investment
objective seeks to provide investors with current income with a secondary
objective of providing capital appreciation. Under normal market conditions, the
Fund will pursue its investment objectives by investing primarily in U.S.
exchange-traded equity securities contained in the Nasdaq US Rising Dividend
AchieversTM Index (the "Index") and by utilizing an "option strategy" consisting
of writing (selling) U.S. exchange-traded call options on the S&P 500(R) Index
or exchange-traded funds that track the S&P 500(R) Index ("Underlying ETFs").
Under normal market conditions, the Fund will invest at least 80% of its net
assets (plus any borrowings for investment purposes) in dividend-paying
securities and/or investments that provide exposure to dividend-paying
securities.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund is considered an investment company and follows accounting and
reporting guidance under Financial Accounting Standards Board Accounting
Standards Codification Topic 946, "Financial Services-Investment Companies." The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of the financial statements. The preparation of
the financial statements in accordance with accounting principles generally
accepted in the United States of America ("U.S. GAAP") requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
The Fund's NAV is determined daily as of the close of regular trading on the New
York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the
NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV
is determined as of that time. The Fund's NAV is calculated by dividing the
value of all assets of the Fund (including accrued interest and dividends), less
all liabilities (including accrued expenses and dividends declared but unpaid),
by the total number of shares outstanding.
The Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent readily available market quotations such as last sale or
official closing prices from a national or foreign exchange (i.e., a regulated
market) and are primarily obtained from third-party pricing services. Fair value
prices represent any prices not considered market value prices and are either
obtained from a third-party pricing service or are determined by the Pricing
Committee of the Fund's investment advisor, First Trust Advisors L.P. ("First
Trust" or the "Advisor"), in accordance with valuation procedures approved by
the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act
and rules thereunder. Investments valued by the Advisor's Pricing Committee, if
any, are footnoted as such in the footnotes to the Portfolio of Investments. The
Fund's investments are valued as follows:
Common stocks and other equity securities listed on any national or
foreign exchange (excluding 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 primary exchange 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 valued at the mean of
their most recent bid and asked price, if available, and otherwise at
their closing bid price. Over-the-counter options contracts are 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 valued at the mean of
their most recent bid and asked price, if available, and otherwise at
their last trade price.
Page 13
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST RISING DIVIDEND ACHIEVERS TARGET INCOME ETF (RDVI)
APRIL 30, 2023 (UNAUDITED)
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Advisor's Pricing Committee at
fair value. These securities generally include, but are not limited to,
restricted securities (securities which may not be publicly sold without
registration under the Securities Act of 1933, as amended) for which a
third-party pricing service is unable to provide a market price; securities
whose trading has been formally suspended; a security whose market or fair value
price is not available from a pre-established pricing source; a security with
respect to which an event has occurred that is likely to materially affect the
value of the security after the market has closed but before the calculation of
the Fund's NAV or make it difficult or impossible to obtain a reliable market
quotation; and a security whose price, as provided by the third-party pricing
service, does not reflect the security's fair value. As a general principle, the
current fair value of a security would appear to be the amount which the owner
might reasonably expect to receive for the security upon its current sale. When
fair value prices are used, generally they will differ from market quotations or
official closing prices on the applicable exchanges. A variety of factors may be
considered in determining the fair value of such securities, including, but not
limited to, the following:
1) the last sale price on the exchange on which they are principally
traded or, for Nasdaq and AIM securities, the official closing
price;
2) the type of security;
3) the size of the holding;
4) the initial cost of the security;
5) transactions in comparable securities;
6) price quotes from dealers and/or third-party pricing services;
7) relationships among various securities;
8) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;
9) an analysis of the issuer's financial statements;
10) the existence of merger proposals or tender offers that might affect
the value of the security; and
11) other relevant factors.
The Fund is subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
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, 2023, 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.
C. OPTIONS CONTRACTS
The Fund will utilize an "option strategy" consisting of writing (selling) U.S.
exchanged-traded call options on the S&P 500(R) Index or exchange-traded funds
that track the S&P 500(R) Index. 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 receives an amount (premium) for writing (selling) the option.
In the event the underlying asset appreciates above the strike price as of the
Page 14
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST RISING DIVIDEND ACHIEVERS TARGET INCOME ETF (RDVI)
APRIL 30, 2023 (UNAUDITED)
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 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. The Fund may also designate a portion of the amount paid to
redeeming shareholders as a distribution for tax purposes.
Distributions from net investment income and realized capital gains are
determined in accordance with federal income tax regulations, which may differ
from U.S. GAAP. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These permanent differences are primarily due to the varying
treatment of income and gain/loss on 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 Fund did not pay a distribution during its fiscal period ended October 31,
2022.
As of October 31, 2022, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income................... $ 495
Accumulated capital and other gain (loss)....... (1,689)
Net unrealized appreciation (depreciation)...... 67,187
E. INCOME TAXES
The Fund intends to qualify as a regulated investment company by complying with
the requirements under Subchapter M of the Internal Revenue Code of 1986, as
amended, which includes distributing substantially all of its net investment
income and net realized gains to shareholders. Accordingly, no provision has
been made for federal and state income taxes. However, due to the timing and
amount of distributions, the Fund may be subject to an excise tax of 4% of the
amount by which approximately 98% of the Fund's taxable income exceeds the
distributions from such taxable income for the calendar year.
The Fund is subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. The taxable period ended 2022
remains open to federal and state audit. As of April 30, 2023, 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, 2022, the
Fund had non-expiring capital loss carryforwards available for federal income
tax purposes of $1,689.
Page 15
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST RISING DIVIDEND ACHIEVERS TARGET INCOME ETF (RDVI)
APRIL 30, 2023 (UNAUDITED)
Certain losses realized during the current fiscal period may be deferred and
treated as occurring on the first day of the following fiscal year for federal
income tax purposes. For the fiscal period ended October 31, 2022, the Fund had
no net late year ordinary or capital losses.
As of April 30, 2023, the aggregate cost, gross unrealized appreciation, gross
unrealized depreciation, and net unrealized appreciation/(depreciation) on
investments (including short positions and derivatives, if any) for federal
income tax purposes were as follows:
<TABLE>
<CAPTION>
Gross Gross Net Unrealized
Unrealized Unrealized Appreciation
Tax Cost Appreciation (Depreciation) (Depreciation)
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
$ 11,805,783 $ 4,166,698 $ (1,373,565) $ 2,793,133
</TABLE>
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. Effective
November 1, 2022, the annual unitary management fee payable by the Fund to First
Trust for these services will be reduced at certain levels of the Fund's net
assets ("breakpoints") and calculated pursuant to the schedule below:
<TABLE>
<CAPTION>
Breakpoints
-------------------------------------------------------------------------
<S> <C>
Fund net assets up to and including $2.5 billion 0.75000%
Fund net assets greater than $2.5 billion up to and including $5 billion 0.73125%
Fund net assets greater than $5 billion up to and including $7.5 billion 0.71250%
Fund net assets greater than $7.5 billion up to and including $10 billion 0.69375%
Fund net assets greater than $10 billion 0.67500%
</TABLE>
Prior to November 1, 2022, the Fund paid First Trust an annual unitary
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-advisor. Cboe Vest receives a sub-advisory fee equal to 0.20% of the
average daily net assets of the Fund. 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,
target outcome fund or an index fund.
Page 16
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST RISING DIVIDEND ACHIEVERS TARGET INCOME ETF (RDVI)
APRIL 30, 2023 (UNAUDITED)
Additionally, the Lead Independent Trustee and the Chairs 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 Chairs
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, 2023, the cost of purchases and proceeds from
sales of investments, excluding short-term investments and in-kind transactions,
were $28,398,460 and $29,857,857, respectively.
For the six months ended April 30, 2023, the cost of in-kind purchases and
proceeds from in-kind sales were $114,392,490 and $1,021,680, respectively.
5. DERIVATIVE TRANSACTIONS
The following table presents the types of derivatives held by the Fund at April
30, 2023, 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>
Options Equity Risk -- $ -- Options contracts written, at value $ 201,630
</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, 2023, on derivative instruments, as well as the primary
underlying risk exposure associated with the instruments.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS LOCATION
--------------------------------------------------------------------------------
<S> <C>
EQUITY RISK EXPOSURE
Net realized gain (loss) on written options contracts $ 110,916
Net change in unrealized appreciation (depreciation) on written
options contracts (34,263)
</TABLE>
During the six months ended April 30, 2023, the premiums for written options
contracts opened were $1,428,855 and the premiums for written options contracts
closed, exercised and expired were $1,263,834.
The Fund does not have the right to offset financial assets and financial
liabilities related to 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 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.
Page 17
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FT CBOE VEST RISING DIVIDEND ACHIEVERS TARGET INCOME ETF (RDVI)
APRIL 30, 2023 (UNAUDITED)
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 October 18, 2024.
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 was
the following subsequent event:
On May 23, 2023, the Advisor's Pricing Committee approved changes to the
Advisor's Valuation Procedures for the First Trust Funds, including
clarifications to certain pricing methodologies. These changes will be reflected
in future reports' Notes to Financial Statements.
Page 18
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ADDITIONAL INFORMATION
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FT CBOE VEST RISING DIVIDEND ACHIEVERS TARGET INCOME ETF (RDVI)
APRIL 30, 2023 (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 significant
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
more broadly diversified.
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.
DEFINED OUTCOME FUNDS RISK. To the extent a fund's investment strategy is
designed to deliver returns tied to the price performance of an underlying ETF,
an investor may not realize the returns the fund seeks to achieve if that
investor does not hold shares for the entire target outcome period. In the event
an investor purchases shares after the first day of the target outcome period or
sells shares prior to the end of the target outcome period, the buffer that the
fund seeks to provide against a decline in the value of the underlying ETF may
not be available, the enhanced returns that the fund seeks to provide (if any)
may not be available and the investor may not participate in a gain in the value
of the underlying ETF up to the cap for the investor's investment period.
Additionally, the fund will not participate in gains of the underlying ETF above
the cap and a shareholder may lose their entire investment. If the fund seeks
enhanced returns, there are certain time periods when the value of the fund may
fall faster than the value of the underlying ETF, and it is very unlikely that,
on any given day during which the underlying ETF share price increases in value,
the fund's share price will increase at the same rate as the enhanced returns
sought by the fund, which is designed for an entire target outcome period.
Trading flexible exchange options involves risks different from, or possibly
greater than, the risks associated with investing directly in securities, such
as less liquidity and correlation and valuation risks. A fund may experience
substantial downside from specific flexible exchange option positions and
certain positions may expire worthless.
Page 19
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ADDITIONAL INFORMATION (CONTINUED)
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FT CBOE VEST RISING DIVIDEND ACHIEVERS TARGET INCOME ETF (RDVI)
APRIL 30, 2023 (UNAUDITED)
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
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 OR MODEL CONSTITUENT RISK. Certain funds may be a constituent of one or
more indices or ETF models. 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 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. In addition, index rebalances may potentially result in increased
trading activity in a fund's shares.
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 has ceased making LIBOR available as a
reference rate over a phase-out period that began December 31, 2021. There is no
assurance that any alternative reference rate, including the Secured Overnight
Financing Rate ("SOFR") will be similar to or produce the same value or economic
Page 20
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ADDITIONAL INFORMATION (CONTINUED)
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FT CBOE VEST RISING DIVIDEND ACHIEVERS TARGET INCOME ETF (RDVI)
APRIL 30, 2023 (UNAUDITED)
equivalence as LIBOR or that instruments using an alternative rate will have the
same volume or liquidity. 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. Market risk is the risk that a particular security, or shares of a
fund in general, may fall in value. 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. In February
2022, Russia invaded Ukraine which has caused and could continue to cause
significant market disruptions and volatility within the markets in Russia,
Europe, and the United States. The hostilities and sanctions resulting from
those hostilities could have a significant impact on certain fund investments as
well as fund performance. The COVID-19 global pandemic and the ensuing policies
enacted by governments and central banks have caused and may continue to cause
significant volatility and uncertainty in global financial markets. While the
U.S. has resumed "reasonably" normal business activity, many countries continue
to impose lockdown measures. Additionally, there is no guarantee that vaccines
will be effective against emerging variants of the disease. These events also
adversely affect the prices and liquidity of a fund's portfolio securities or
other instruments and could result in disruptions in the trading markets. Any of
such circumstances could have a materially negative impact on the value of a
fund's shares and result in increased market volatility. During any such events,
a fund's shares may trade at increased premiums or discounts to their net asset
value and the bid/ask spread on a fund's shares may widen.
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;
capital controls; lack of liquidity; currency exchange rates; excessive
taxation; government seizure of assets; the imposition of sanctions by foreign
governments; 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. Each fund relies on third-parties for a range of services, including
custody. Any delay or failure relating to engaging or maintaining such service
providers may affect a fund's ability to meet its investment objective. Although
the funds and the funds' investment 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.
PREFERRED SECURITIES RISK. Preferred securities combine some of the
characteristics of both common stocks and bonds. Preferred securities are
typically subordinated to bonds and other debt securities in a company's capital
structure in terms of priority to corporate income, subjecting them to greater
credit risk than those debt securities. Generally, holders of preferred
securities have no voting rights with respect to the issuing company unless
preferred dividends have been in arrears for a specified number of periods, at
which time the preferred security holders may obtain limited rights. In certain
circumstances, an issuer of preferred securities may defer payment on the
securities and, in some cases, redeem the securities prior to a specified date.
Preferred securities may also be substantially less liquid than other
securities, including common stock.
Page 21
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ADDITIONAL INFORMATION (CONTINUED)
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FT CBOE VEST RISING DIVIDEND ACHIEVERS TARGET INCOME ETF (RDVI)
APRIL 30, 2023 (UNAUDITED)
VALUATION RISK. The valuation of certain securities may carry more risk than
that of common stock. Uncertainties in the conditions of the financial markets,
unreliable reference data, lack of transparency and inconsistency of valuation
models and processes may lead to inaccurate asset pricing. A fund may hold
investments in sizes smaller than institutionally sized round lot positions
(sometimes referred to as odd lots). However, third-party pricing services
generally provide evaluations on the basis of institutionally-sized round lots.
If a fund sells certain of its investments in an odd lot transaction, the sale
price may be less than the value at which such securities have been held by the
fund. Odd lots often trade at lower prices than institutional round lots. There
is no assurance that the fund will be able to sell a portfolio security at the
price established by the pricing service, which could result in a loss to the
fund.
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 17, 2023 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 17, 2022 through the Liquidity Committee's annual meeting held
on March 23, 2023 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 any
highly liquid investment minimum.
As stated in the written report, during the review period, two funds breached
the 15% limitation on illiquid investments for one day each, as a result of an
unscheduled week-long closure of the stock exchange in Istanbul following
devastating earthquakes in February, causing all Turkish equities to be
re-classified as "illiquid" for one day. Each fund filed a Form N-RN on the day
after the breach occurred, and one day later after the breach was cured. No fund
with a highly liquid investment minimum breached that minimum during the
reporting period. 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 22
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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 Vest(SM) Financial LLC
8350 Broad Street, Suite 240
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 South Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
320 South Canal Street
Chicago, IL 60606
[BLANK BACK COVER]
FIRST TRUST
First Trust Exchange-Traded Fund IV
--------------------------------------------------------------------------------
FT Cboe Vest DJIA(R) Dogs 10 Target Income ETF (DOGG)
----------------------------
Semi-Annual Report
For the Period
April 26, 2023
(Commencement of Operations)
through
April 30, 2023
----------------------------
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FT CBOE VEST DJIA(R) DOGS 10 TARGET INCOME ETF (DOGG)
SEMI-ANNUAL REPORT
APRIL 30, 2023
Shareholder Letter........................................................... 1
Fund Performance Overview.................................................... 2
Portfolio Management......................................................... 4
Understanding Your Fund Expenses............................................. 5
Portfolio of Investments..................................................... 6
Statement of Assets and Liabilities.......................................... 9
Statement of Operations...................................................... 10
Statement of Changes in Net Assets........................................... 11
Financial Highlights......................................................... 12
Notes to Financial Statements................................................ 13
Additional Information....................................................... 19
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 Vest(SM) 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 DJIA(R) Dogs 10 Target 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 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 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.
--------------------------------------------------------------------------------
SHAREHOLDER LETTER
--------------------------------------------------------------------------------
FT CBOE VEST DJIA(R) DOGS 10 TARGET INCOME ETF (DOGG)
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
APRIL 30, 2023
Dear Shareholders:
First Trust is pleased to provide you with the semi-annual report for the FT
Cboe Vest DJIA(R) Dogs 10 Target Income ETF (the "Fund"), which contains
detailed information about the Fund since its inception on April 26, 2023
through April 30, 2023. Please note that the information contained in this
letter and the report prior to the Fund's inception date does not apply to the
Fund.
It pleases me to write that on May 5, 2023, the World Health Organization
officially declared that the coronavirus ("COVID-19") pandemic no longer
qualified as a global health emergency. While the virus officially no longer
poses an immediate threat, its full impact on the world economy remains to be
seen, in my opinion. Recall, if you will, those early days of the pandemic;
companies sent workers home, consumers were afraid or unwilling to leave their
homes, supply chains dried up, and grocery shelves were left bare. Hoping to
provide relief to their constituents and to bolster economic activity,
governments across the globe funneled trillions of dollars in stimulus directly
into the hands of their citizens. Unfortunately, economist Milton Friedman's
age-old economic adage "there's no such thing as a free lunch" still holds. As a
result of the U.S. government stimulus, gross domestic product rebounded
quickly, but so did inflation.
As many investors are aware, the Federal Reserve (the "Fed") has been locked in
a battle with stubbornly high inflation for several years now. Inflation, as
measured by the trailing 12-month rate of change in the Consumer Price Index
("CPI"), surged from 1.4% on December 31, 2020, to 9.1% as of June 30, 2022.
Since then, the trailing rate on the CPI has come down, but remains elevated. On
April 30, 2023, the CPI stood at 4.9%, well above the Fed's goal of 2.0%.
Surging prices have not been restricted to the U.S. Headline inflation rates in
each of the countries that make up the so-called Group of Ten (G-10) stand above
the targets set by their central banks, according to data from Bloomberg.
From the Fed's perspective, monetary policy is the most efficient means to
combat rising prices. From December 31, 2020 through May 3, 2023, the Fed
increased the Federal Funds target rate (upper bound) a total of ten times,
raising the rate from 0.25% to 5.25%. As mentioned, tighter monetary policy
resulted in a decrease in the CPI, but there have been casualties in the Fed's
battle with rising prices. The most recent banking turmoil is one example.
Another is the spike in mortgage rates. According to Bankrate, the national
average for a 30-year mortgage stood at just 2.87% on December 31, 2020. As of
May 1, 2023, the average 30-year mortgage rate had surged to 6.88%. Not all the
news is negative, however. Driven by a strong U.S. labor market, consumer
spending remained robust in April 2023. Notably, American corporations added
253,000 jobs during the month, and the unemployment rate stood at a 53-year low.
Bob Carey, Chief Market Strategist at First Trust, recently summed up the
current situation, noting that "we're not out of the woods yet." That said, even
the most difficult situations don't last forever. In my opinion, like the
COVID-19 pandemic, inflation, and the tighter monetary policy it ushered in,
will pass with time.
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
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
FT CBOE VEST DJIA(R) DOGS 10 TARGET INCOME ETF (DOGG)
FT Cboe Vest DJIA(R) Dogs 10 Target Income ETF (the "Fund") seeks to provide
current income with a secondary objective of providing capital appreciation.
Under normal market conditions, the Fund will pursue its objective by investing
primarily in common stocks, exchange-traded options (including FLexible EXchange
options ("FLEX Options")) and short-term U.S. Treasury securities. The Fund
seeks to provide exposure to the "Dogs of the Dow," the ten highest
dividend-yielding stocks in the Dow Jones Industrial Average ("DJIA") on an
annual basis. The Fund will purchase securities comprising the Dogs of the Dow
and gain synthetic exposure to the price movements of the securities comprising
the Dogs of the Dow through the use of a combination of puts, calls and U.S.
Treasury securities. The Fund will invest at least 80% of its net assets (plus
any borrowings for investment purposes) in securities comprising the Dogs of the
Dow or in options contracts that utilize Dogs of the Dow constituents as the
reference asset. Through its investments in securities comprising the Dogs of
the Dow and portfolio of investments that reference the Dogs of the Dow, the
Fund seeks to provide exposure to a concentrated portfolio of
large-capitalization U.S. equity securities while providing a consistent level
of income that, when annualized, is approximately 8% (before fees and expenses)
above the annualized yield of the DJIA.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURNS
Inception (4/26/23)
to 4/30/23
<S> <C>
FUND PERFORMANCE
NAV 2.56%
Market Price 2.76%
INDEX PERFORMANCE
Dow Jones Industrial Average(R) - Price Return 2.39%
S&P 500(R) Index - Price Return 2.80%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Total returns for the period since inception are calculated from the inception
date of the Fund. "Cumulative total returns" represent the total change in value
of an investment over the period indicated.
The Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint 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. 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 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 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.
-----------------------------
The "Dow Jones Industrial Average" is a product of S&P Dow Jones Indices LLC
("SPDJI"), and has been licensed for use by First Trust. S&P(R) is a registered
trademark of Standard & Poor's Financial Services LLC ("S&P"); "Dow Jones(R)"
and "DJIA" are trademarks of Dow Jones Trademark Holdings LLC ("Dow Jones"); and
these trademarks have been licensed for use by SPDJI and sublicensed for certain
purposes by First Trust. The Fund is not sponsored, endorsed, sold or promoted
by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties
make any representation regarding the advisability of investing in such
product(s) nor do they have any liability for any errors, omissions, or
interruptions of the Index.
Page 2
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST DJIA(R) DOGS 10 TARGET INCOME ETF (DOGG)
---------------------------------------------------------------
% OF NET
FUND ALLOCATION ASSETS
---------------------------------------------------------------
U.S. Treasury Bills 70.3%
Common Stocks 49.6
Call Options Purchased 0.2
Call Options Written (0.1)
Put Options Written (22.5)
Net Other Assets and Liabilities 2.5
-------
Total 100.0%
=======
---------------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION COMMON STOCKS
---------------------------------------------------------------
Information Technology 30.3%
Financials 10.3
Communication Services 10.2
Materials 10.2
Consumer Staples 9.9
Health Care 9.8
Energy 9.7
Industrials 9.6
-------
Total 100.0%
=======
---------------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS INVESTMENTS
---------------------------------------------------------------
U.S. Treasury Bill 58.6%
Intel Corp. 4.3
JPMorgan Chase & Co. 4.3
Dow, Inc. 4.2
Verizon Communications, Inc. 4.2
Cisco Systems, Inc. 4.1
Walgreens Boots Alliance, Inc. 4.1
Amgen, Inc. 4.1
International Business Machines Corp. 4.1
Chevron Corp. 4.0
-------
Total 96.0%
=======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
APRIL 26, 2023 - APRIL 30, 2023
FT Cboe Vest DJIA(R) Dow Jones Industrial S&P 500(R) Index -
Dogs 10 Target Income ETF Average(R) - Price Return Price Return
<S> <C> <C> <C>
4/26/23 $10,000 $10,000 $10,000
4/30/23 10,256 10,239 10,280
</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
--------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT
--------------------------------------------------------------------------------
FT CBOE VEST DJIA(R) DOGS 10 TARGET INCOME ETF (DOGG)
SEMI-ANNUAL REPORT
APRIL 30, 2023 (UNAUDITED)
ADVISOR
First Trust Advisors L.P. ("First Trust" or the "Advisor") is the investment
advisor to the FT Cboe Vest DJIA(R) Dogs 10 Target Income ETF ("DOGG" or 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 Vest(SM) 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 8350 Broad Street,
Suite 240, McLean, VA 22102, was founded in 2012. Cboe Vest had approximately
$12.1 billion under management or committed to management as of April 30, 2023.
PORTFOLIO MANAGEMENT TEAM
KARAN SOOD, MANAGING DIRECTOR OF CBOE VEST
HOWARD RUBIN, MANAGING DIRECTOR OF CBOE VEST
The portfolio managers are primarily and jointly responsible for the day-to-day
management of the Fund. Each portfolio manager has served as a part of the
portfolio management team of the Fund since April 2023.
Page 4
FT CBOE VEST DJIA(R) DOGS 10 TARGET INCOME ETF (DOGG)
UNDERSTANDING YOUR FUND EXPENSES
APRIL 30, 2023 (UNAUDITED)
As a shareholder of FT Cboe Vest DJIA(R) Dogs 10 Target 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 (or since inception) and held through the six-month period (or shorter)
ended April 30, 2023.
ACTUAL EXPENSES
The first line in the following table provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During the Period"
to estimate the expenses you paid on your account during this six-month (or
shorter) period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as brokerage
commissions. Therefore, the second line in the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
ANNUALIZED EXPENSES PAID
EXPENSE RATIO DURING THE PERIOD
BEGINNING ENDING BASED ON THE APRIL 26, 2023 (a)
ACCOUNT VALUE ACCOUNT VALUE NUMBER OF DAYS TO
APRIL 26, 2023 (a) APRIL 30, 2023 IN THE PERIOD APRIL 30, 2023 (b)
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FT CBOE VEST DJIA(R) DOGS 10 TARGET INCOME ETF (DOGG)
Actual $1,000.00 $1,025.60 0.75% $0.10
Hypothetical (5% return before expenses) $1,000.00 $1,021.08 0.75% $3.76
</TABLE>
(a) Inception date.
(b) Actual expenses are equal to the annualized expense ratio as indicated in
the table multiplied by the average account value over the period (April
26, 2023 through April 30, 2023), multiplied by 5/365. Hypothetical
expenses are assumed for the most recent six-month period.
Page 5
FT CBOE VEST DJIA(R) DOGS 10 TARGET INCOME ETF (DOGG)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2023 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- -------------------------------------------------------------------------------------------- ----------------
<S> <C> <C>
COMMON STOCKS -- 49.6%
BANKS -- 5.1%
752 JPMorgan Chase & Co......................................................................... $ 103,956
----------------
BIOTECHNOLOGY -- 4.9%
416 Amgen, Inc.................................................................................. 99,732
----------------
CHEMICALS -- 5.1%
1,908 Dow, Inc.................................................................................... 103,795
----------------
COMMUNICATIONS EQUIPMENT -- 5.0%
2,146 Cisco Systems, Inc.......................................................................... 101,399
----------------
CONSUMER STAPLES DISTRIBUTION & RETAIL -- 4.9%
2,832 Walgreens Boots Alliance, Inc............................................................... 99,828
----------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 5.0%
2,660 Verizon Communications, Inc................................................................. 103,288
----------------
INDUSTRIAL CONGLOMERATES -- 4.7%
916 3M Co....................................................................................... 97,298
----------------
IT SERVICES -- 4.9%
788 International Business Machines Corp........................................................ 99,611
----------------
OIL, GAS & CONSUMABLE FUELS -- 4.8%
582 Chevron Corp................................................................................ 98,113
----------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 5.2%
3,424 Intel Corp.................................................................................. 106,349
----------------
TOTAL COMMON STOCKS......................................................................... 1,013,369
(Cost $987,532) ----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
U.S. TREASURY BILLS -- 70.3%
$ 1,485,000 U.S. Treasury Bill (a).......................................... (b) 01/25/24 1,435,668
(Cost $1,436,492) ----------------
TOTAL INVESTMENTS -- 119.9%................................................................. 2,449,037
(Cost $2,424,024) ----------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
---------------- -------------------------------------------------- ------------ ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
PURCHASED OPTIONS -- 0.2%
CALL OPTIONS PURCHASED -- 0.2%
10 3M Co............................................. $ 106,220 $ 156.44 01/22/24 327
4 Amgen, Inc........................................ 95,896 358.05 01/22/24 57
6 Chevron Corp...................................... 101,148 251.93 01/22/24 186
21 Cisco Systems, Inc................................ 99,225 69.98 01/22/24 122
19 Dow, Inc.......................................... 103,360 79.26 01/22/24 341
35 Intel Corp........................................ 108,710 44.36 01/22/24 1,992
8 International Business Machines Corp.............. 101,128 188.47 01/22/24 32
7 JPMorgan Chase & Co............................... 96,768 203.31 01/22/24 112
27 Verizon Communications, Inc....................... 104,841 55.82 01/22/24 107
29 Walgreens Boots Alliance, Inc..................... 102,225 52.19 01/22/24 321
----------------
TOTAL CALL OPTIONS PURCHASED................................................................ 3,597
(Cost $3,315) ----------------
TOTAL PURCHASED OPTIONS..................................................................... 3,597
(Cost $3,315) ----------------
</TABLE>
Page 6 See Notes to Financial Statements
FT CBOE VEST DJIA(R) DOGS 10 TARGET INCOME ETF (DOGG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2023 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
---------------- -------------------------------------------------- ------------ ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
WRITTEN OPTIONS -- (22.6)%
CALL OPTIONS WRITTEN -- (0.1)%
(2) 3M Co............................................. $ (21,244) $ 106.00 05/05/23 $ (282)
(1) Amgen, Inc........................................ (23,974) 240.00 05/05/23 (227)
(2) Chevron Corp...................................... (33,716) 170.00 05/05/23 (250)
(4) Cisco Systems, Inc................................ (18,900) 47.00 05/05/23 (232)
(2) Dow, Inc.......................................... (10,880) 54.00 05/05/23 (200)
(4) Intel Corp........................................ (12,424) 31.00 05/05/23 (212)
(2) International Business Machines Corp.............. (25,282) 126.00 05/05/23 (272)
(2) JPMorgan Chase & Co............................... (27,648) 138.00 05/05/23 (314)
(8) Verizon Communications, Inc....................... (31,064) 39.00 05/05/23 (232)
(5) Walgreens Boots Alliance, Inc..................... (17,625) 35.00 05/05/23 (270)
----------------
TOTAL CALL OPTIONS WRITTEN.................................................................. (2,491)
(Premiums received $2,282) ----------------
PUT OPTIONS WRITTEN -- (22.5)%
(10) 3M Co............................................. (106,220) 156.44 01/22/24 (48,936)
(4) Amgen, Inc........................................ (95,896) 358.05 01/22/24 (44,489)
(6) Chevron Corp...................................... (101,148) 251.93 01/22/24 (47,205)
(21) Cisco Systems, Inc................................ (99,225) 69.98 01/22/24 (44,784)
(19) Dow, Inc.......................................... (103,360) 79.26 01/22/24 (45,944)
(35) Intel Corp........................................ (108,710) 44.36 01/22/24 (43,845)
(8) International Business Machines Corp.............. (101,128) 188.47 01/22/24 (47,840)
(7) JPMorgan Chase & Co............................... (96,768) 203.31 01/22/24 (42,442)
(27) Verizon Communications, Inc....................... (104,841) 55.82 01/22/24 (45,463)
(29) Walgreens Boots Alliance, Inc..................... (102,225) 52.19 01/22/24 (48,128)
----------------
TOTAL PUT OPTIONS WRITTEN................................................................... (459,076)
(Premiums received $484,418) ----------------
TOTAL WRITTEN OPTIONS....................................................................... (461,567)
(Premiums received $486,700)
NET OTHER ASSETS AND LIABILITIES -- 2.5%.................................................... 51,039
----------------
NET ASSETS -- 100.0%........................................................................ $ 2,042,106
================
</TABLE>
(a) All or a portion of this security is pledged as collateral for the options
written. At April 30, 2023, the value of this security amounts to
$1,435,668.
(b) Zero coupon security.
See Notes to Financial Statements Page 7
FT CBOE VEST DJIA(R) DOGS 10 TARGET INCOME ETF (DOGG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2023 (UNAUDITED)
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2023 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
4/30/2023 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Common Stocks*........................................ $ 1,013,369 $ 1,013,369 $ -- $ --
U.S. Treasury Bills................................... 1,435,668 -- 1,435,668 --
--------------- --------------- --------------- ---------------
Total Investments..................................... 2,449,037 1,013,369 1,435,668 --
Call Options Purchased................................ 3,597 -- 3,597 --
--------------- --------------- --------------- ---------------
Total................................................. $ 2,452,634 $ 1,013,369 $ 1,439,265 $ --
=============== =============== =============== ===============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
4/30/2023 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
Call Options Written.................................. $ (2,491) $ (2,491) $ -- $ --
Put Options Written................................... (459,076) -- (459,076) --
--------------- --------------- --------------- ---------------
Total................................................. $ (461,567) $ (2,491) $ (459,076) $ --
=============== =============== =============== ===============
</TABLE>
* See Portfolio of Investments for industry breakout.
Page 8 See Notes to Financial Statements
FT CBOE VEST DJIA(R) DOGS 10 TARGET INCOME ETF (DOGG)
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2023 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value.................................................. $ 2,449,037
Options contracts purchased, at value.................................. 3,597
Cash................................................................... 1,483,739
Cash segregated as collateral for open options contracts............... 1,152
Investment securities sold receivable.................................. 2,282
--------------
Total Assets........................................................ 3,939,807
--------------
LIABILITIES:
Options contracts written, at value.................................... 461,567
Payables:
Investment securities purchased..................................... 1,435,969
Investment advisory fees............................................ 165
--------------
Total Liabilities................................................... 1,897,701
--------------
NET ASSETS............................................................. $ 2,042,106
==============
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $ 1,990,321
Par value.............................................................. 1,000
Accumulated distributable earnings (loss).............................. 50,785
--------------
NET ASSETS............................................................. $ 2,042,106
==============
NET ASSET VALUE, per share............................................. $ 20.42
==============
Number of shares outstanding (unlimited number of shares authorized,
par value $0.01 per share).......................................... 100,002
==============
Investments, at cost................................................... $ 2,424,024
==============
Premiums paid on options contracts purchased........................... $ 3,315
==============
Premiums received on options contracts written......................... $ 486,700
==============
</TABLE>
See Notes to Financial Statements Page 9
FT CBOE VEST DJIA(R) DOGS 10 TARGET INCOME ETF (DOGG)
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED APRIL 30, 2023 (UNAUDITED) (a)
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Dividends.............................................................. $ 523
--------------
Total investment income............................................. 523
--------------
EXPENSES:
Investment advisory fees............................................... 166
--------------
Total expenses...................................................... 166
--------------
NET INVESTMENT INCOME (LOSS)........................................... 357
--------------
UNREALIZED GAIN (LOSS):
Net change in unrealized appreciation (depreciation) on:
Investments......................................................... 25,013
Purchased options contracts......................................... 282
Written options contracts........................................... 25,133
--------------
Net change in unrealized appreciation (depreciation)................... 50,428
--------------
UNREALIZED GAIN (LOSS)................................................. 50,428
--------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ 50,785
==============
</TABLE>
(a) Inception date is April 26, 2023, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
Page 10 See Notes to Financial Statements
FT CBOE VEST DJIA(R) DOGS 10 TARGET INCOME ETF (DOGG)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PERIOD
ENDED
4/30/2023
(UNAUDITED) (a)
---------------
<S> <C>
OPERATIONS:
Net investment income (loss)........................................... $ 357
Net change in unrealized appreciation (depreciation)................... 50,428
---------------
Net increase (decrease) in net assets resulting from operations........ 50,785
---------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold.............................................. 1,991,321
Cost of shares redeemed................................................ --
---------------
Net increase (decrease) in net assets resulting from
shareholder transactions............................................ 1,991,321
---------------
Total increase (decrease) in net assets................................ 2,042,106
NET ASSETS:
Beginning of period.................................................... --
---------------
End of period.......................................................... $ 2,042,106
===============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................................ --
Shares sold............................................................ 100,002
Shares redeemed........................................................ --
---------------
Shares outstanding, end of period...................................... 100,002
===============
</TABLE>
(a) Inception date is April 26, 2023, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
See Notes to Financial Statements Page 11
FT CBOE VEST DJIA(R) DOGS 10 TARGET INCOME ETF (DOGG)
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
PERIOD
ENDED
4/30/2023 (a)
(UNAUDITED)
--------------
<S> <C>
Net asset value, beginning of period $ 19.91
----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.00 (b)
Net realized and unrealized gain (loss) 0.51
----------
Total from investment operations 0.51
----------
Net asset value, end of period $ 20.42
==========
TOTAL RETURN (c) 2.56%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 2,042
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets 0.75% (d)
Ratio of net investment income (loss) to
average net assets 1.62% (d)
Portfolio turnover rate (e) 0%
</TABLE>
(a) Inception date is April 26, 2023, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
(b) Amount is less than $0.01
(c) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The return presented does not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year.
(d) Annualized.
(e) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
Page 12 See Notes to Financial Statements
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FT CBOE VEST DJIA(R) DOGS 10 TARGET INCOME ETF (DOGG)
APRIL 30, 2023 (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 fourteen funds that are offering shares. This
report covers the FT Cboe Vest DJIA(R) Dogs 10 Target Income ETF (the "Fund"),
which trades under the ticker "DOGG" 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 is an actively managed exchange-traded fund. The Fund's investment
objective seeks to provide current income with a secondary objective of
providing capital appreciation. Under normal market conditions, the Fund will
pursue its investment objectives by investing primarily in common stocks,
exchange-traded options (including FLexible EXchange options ("FLEX Options"))
and short-term U.S. Treasury securities. The Fund seeks to provide exposure to
the "Dogs of the Dow," the ten highest dividend-yielding stocks in the Dow Jones
Industrial Average ("DJIA") on an annual basis. The Fund will purchase
securities comprising the Dogs of the Dow and gain synthetic exposure to the
price movements of the securities comprising the Dogs of the Dow through the use
of a combination of puts, calls and U.S. Treasury securities (the "Synthetic
Replication"), as described in greater detail below. The Fund will invest at
least 80% of its net assets (plus any borrowings for investment purposes) in
securities comprising the Dogs of the Dow or in options contracts that utilize
Dogs of the Dow constituents as the reference asset.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund is considered an investment company and follows accounting and
reporting guidance under Financial Accounting Standards Board Accounting
Standards Codification Topic 946, "Financial Services-Investment Companies." The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of the financial statements. The preparation of
the financial statements in accordance with accounting principles generally
accepted in the United States of America ("U.S. GAAP") requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
The Fund's NAV is determined daily as of the close of regular trading on the New
York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the
NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV
is determined as of that time. The Fund's NAV is calculated by dividing the
value of all assets of the Fund (including accrued interest and dividends), less
all liabilities (including accrued expenses and dividends declared but unpaid),
by the total number of shares outstanding.
The Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent readily available market quotations such as last sale or
official closing prices from a national or foreign exchange (i.e., a regulated
market) and are primarily obtained from third-party pricing services. Fair value
prices represent any prices not considered market value prices and are either
obtained from a third-party pricing service or are determined by the Pricing
Committee of the Fund's investment advisor, First Trust Advisors L.P. ("First
Trust" or the "Advisor"), in accordance with valuation procedures approved by
the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act
and rules thereunder. Investments valued by the Advisor's Pricing Committee, if
any, are footnoted as such in the footnotes to the Portfolio of Investments. The
Fund's investments are valued as follows:
Common stocks and other equity securities listed on any national or
foreign exchange (excluding 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 primary exchange for such securities.
Exchange-traded options contracts (other than FLEX Option 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 valued at the mean of their most recent bid and
asked price, if available, and otherwise at their closing bid price.
Over-the-counter options contracts are valued at the mean of their most
recent bid and asked price, if available, and otherwise at their last
trade price. FLEX Option contracts are normally valued using a model-based
price provided by a third-party pricing vendor. On days when a trade in a
FLEX Option contract occurs, the trade price will be used to value such
FLEX Option contracts in lieu of the model price.
Page 13
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST DJIA(R) DOGS 10 TARGET INCOME ETF (DOGG)
APRIL 30, 2023 (UNAUDITED)
Securities traded in an over-the-counter market are valued at the mean of
their most recent bid and asked price, if available, and otherwise at
their last trade price.
U.S. Treasuries are valued on the basis of valuations provided by a
third-party pricing service approved by the Trust's Board of Trustees.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Advisor's Pricing Committee at
fair value. These securities generally include, but are not limited to,
restricted securities (securities which may not be publicly sold without
registration under the Securities Act of 1933, as amended) for which a
third-party pricing service is unable to provide a market price; securities
whose trading has been formally suspended; a security whose market or fair value
price is not available from a pre-established pricing source; a security with
respect to which an event has occurred that is likely to materially affect the
value of the security after the market has closed but before the calculation of
the Fund's NAV or make it difficult or impossible to obtain a reliable market
quotation; and a security whose price, as provided by the third-party pricing
service, does not reflect the security's fair value. As a general principle, the
current fair value of a security would appear to be the amount which the owner
might reasonably expect to receive for the security upon its current sale. When
fair value prices are used, generally they will differ from market quotations or
official closing prices on the applicable exchanges. A variety of factors may be
considered in determining the fair value of such securities, including, but not
limited to, the following:
1) the last sale price on the exchange on which they are
principally traded or, for Nasdaq and AIM securities, the
official closing price;
2) the type of security;
3) the size of the holding;
4) the initial cost of the security;
5) transactions in comparable securities;
6) price quotes from dealers and/or third-party pricing services;
7) relationships among various securities;
8) information obtained by contacting the issuer, analysts, or
the appropriate stock exchange;
9) an analysis of the issuer's financial statements;
10) the existence of merger proposals or tender offers that might
affect the value of the security; and
11) other relevant factors.
The Fund is subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
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, 2023, 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.
Page 14
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST DJIA(R) DOGS 10 TARGET INCOME ETF (DOGG)
APRIL 30, 2023 (UNAUDITED)
C. OPTIONS CONTRACTS AND FLEX OPTIONS
When the Fund sells call options as a means to generate income to achieve the
Target Income Level, the Fund will employ a covered call strategy that seeks to
sell call options having a strike price roughly equal to the value of each
equity security held by the Fund (such options are said to be "at-the-money") on
some or all of the equity securities purchased by the Fund.
When utilizing Synthetic Replication, the Fund may utilize FLEX Options. FLEX
Options are customized equity or index option contracts that trade on an
exchange but provide investors with the ability to customize key contract terms
like exercise prices, styles and expiration dates that are otherwise
standardized in typical listed options contract. The Synthetic Replication is
achieved through the combination of a purchasing a call and selling a put
generally at the same strike price which synthetically creates the upside and
downside participation in the price returns of the Dogs of the Dow.
When the Fund purchases a call or put option, the premium paid represents the
cost of the call or put option, which is included in "Options contracts
purchased, at value" on the Statement of Assets and Liabilities. 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. Gain or loss on purchased
options, if any, is included in "Net realized gain (loss) on purchased options
contracts" on the Statement of Operations. Gain or loss on written options, if
any, is presented separately as "Net realized gain (loss) on written options
contracts" 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 gains earned by the Fund, if any, are distributed
at least annually. The Fund may also designate a portion of the amount paid to
redeeming shareholders as a distribution for tax purposes.
Distributions from net investment income and realized capital gains are
determined in accordance with federal income tax regulations, which may differ
from U.S. GAAP. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These permanent differences are primarily due to the varying
treatment of income and gain/loss on 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.
E. INCOME TAXES
The Fund intends to qualify as a regulated investment company by complying with
the requirements under Subchapter M of the Internal Revenue Code of 1986, as
amended, which includes distributing substantially all of its net investment
income and net realized gains to shareholders. Accordingly, no provision has
been made for federal and state income taxes. However, due to the timing and
amount of distributions, the Fund may be subject to an excise tax of 4% of the
amount by which approximately 98% of the Fund's taxable income exceeds the
distributions from such taxable income for the calendar year.
The Fund is subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. As of April 30, 2023, management
has evaluated the application of these standards to the Fund and has determined
that no provision for income tax is required in the Fund's financial statements
for uncertain tax positions.
The Fund intends to utilize provisions of the federal income tax laws, which
allow it to carry a realized capital loss forward indefinitely following the
year of the loss and offset such loss against any future realized capital gains.
The Fund is subject to certain limitations under U.S. tax rules on the use of
capital loss carryforwards and net unrealized built-in losses. These limitations
apply when there has been a 50% change in ownership.
Certain losses realized during the current fiscal period may be deferred and
treated as occurring on the first day of the following fiscal year for federal
income tax purposes.
Page 15
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST DJIA(R) DOGS 10 TARGET INCOME ETF (DOGG)
APRIL 30, 2023 (UNAUDITED)
As of April 30, 2023, the aggregate cost, gross unrealized appreciation, gross
unrealized depreciation, and net unrealized appreciation/(depreciation) on
investments (including short positions and derivatives, if any) for federal
income tax purposes were as follows:
<TABLE>
<CAPTION>
Gross Gross Net Unrealized
Unrealized Unrealized Appreciation
Tax Cost Appreciation (Depreciation) (Depreciation)
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
$ 1,940,639 $ 51,632 $ (1,204) $ 50,428
</TABLE>
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 annual
unitary management fee payable by the Fund to First Trust for these services
will be reduced at certain levels of the Fund's net assets ("breakpoints") and
calculated pursuant to the schedule below:
<TABLE>
<CAPTION>
Breakpoints
-------------------------------------------------------------------------
<S> <C>
Fund net assets up to and including $2.5 billion 0.75000%
Fund net assets greater than $2.5 billion up to and including $5 billion 0.73125%
Fund net assets greater than $5 billion up to and including $7.5 billion 0.71250%
Fund net assets greater than $7.5 billion up to and including $10 billion 0.69375%
Fund net assets greater than $10 billion 0.67500%
</TABLE>
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 sub-advisor. Cboe Vest receives a sub-advisory fee equal to 0.20% of the
average daily net assets of the Fund. 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,
target outcome fund or an index fund.
Additionally, the Lead Independent Trustee and the Chairs 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 Chairs
rotate every three years. The officers and "Interested" Trustee receive no
compensation from the Trust for acting in such capacities.
Page 16
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST DJIA(R) DOGS 10 TARGET INCOME ETF (DOGG)
APRIL 30, 2023 (UNAUDITED)
4. PURCHASES AND SALES OF SECURITIES
For the period ended April 30, 2023, the cost of purchases and proceeds from
sales of investments, excluding short-term investments and in-kind transactions,
were $0 and $0, respectively.
For the period ended April 30, 2023, the cost of in-kind purchases and proceeds
from in-kind sales were $987,532 and $0, respectively.
5. DERIVATIVE TRANSACTIONS
The following table presents the types of derivatives held by the Fund at April
30, 2023, 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>
Options Equity Risk Options contracts purchased, at value $ 3,597 Options contracts written, at value $ 461,567
</TABLE>
The following table presents the amount of net realized gain (loss) and change
in net unrealized appreciation (depreciation) recognized for the period ended
April 30, 2023, on derivative instruments, as well as the primary underlying
risk exposure associated with the instruments.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS LOCATION
--------------------------------------------------------------------------------
<S> <C>
EQUITY RISK EXPOSURE
Net change in unrealized appreciation (depreciation) on
Purchased options contracts $ 282
Written options contracts 25,133
</TABLE>
During the period ended April 30, 2023, the premiums for purchased options
contracts opened were $3,315 and the premiums for purchased options contracts
closed, exercised and expired were $0.
During the period ended April 30, 2023, the premiums for written options
contracts opened were $486,700 and the premiums for written options contracts
closed, exercised and expired were $0.
The Fund does not have the right to offset financial assets and financial
liabilities related to 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 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.
Page 17
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST DJIA(R) DOGS 10 TARGET INCOME ETF (DOGG)
APRIL 30, 2023 (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 April 24, 2025.
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 was
the following subsequent event:
On May 23, 2023, the Advisor's Pricing Committee approved changes to the
Advisor's Valuation Procedures for the First Trust Funds, including
clarifications to certain pricing methodologies. These changes will be reflected
in future reports' Notes to Financial Statements.
Page 18
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FT CBOE VEST DJIA(R) DOGS 10 TARGET INCOME ETF (DOGG)
APRIL 30, 2023 (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
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
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 significant
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
more broadly diversified.
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.
DEFINED OUTCOME FUNDS RISK. To the extent a fund's investment strategy is
designed to deliver returns tied to the price performance of an underlying ETF,
an investor may not realize the returns the fund seeks to achieve if that
investor does not hold shares for the entire target outcome period. In the event
an investor purchases shares after the first day of the target outcome period or
sells shares prior to the end of the target outcome period, the buffer that the
fund seeks to provide against a decline in the value of the underlying ETF may
not be available, the enhanced returns that the fund seeks to provide (if any)
may not be available and the investor may not participate in a gain in the value
of the underlying ETF up to the cap for the investor's investment period.
Additionally, the fund will not participate in gains of the underlying ETF above
the cap and a shareholder may lose their entire investment. If the fund seeks
enhanced returns, there are certain time periods when the value of the fund may
fall faster than the value of the underlying ETF, and it is very unlikely that,
on any given day during which the underlying ETF share price increases in value,
the fund's share price will increase at the same rate as the enhanced returns
sought by the fund, which is designed for an entire target outcome period.
Trading flexible exchange options involves risks different from, or possibly
greater than, the risks associated with investing directly in securities, such
as less liquidity and correlation and valuation risks. A fund may experience
substantial downside from specific flexible exchange option positions and
certain positions may expire worthless.
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FT CBOE VEST DJIA(R) DOGS 10 TARGET INCOME ETF (DOGG)
APRIL 30, 2023 (UNAUDITED)
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
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 OR MODEL CONSTITUENT RISK. Certain funds may be a constituent of one or
more indices or ETF models. 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 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. In addition, index rebalances may potentially result in increased
trading activity in a fund's shares.
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.
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FT CBOE VEST DJIA(R) DOGS 10 TARGET INCOME ETF (DOGG)
APRIL 30, 2023 (UNAUDITED)
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 has ceased making LIBOR available as a
reference rate over a phase-out period that began December 31, 2021. There is no
assurance that any alternative reference rate, including the Secured Overnight
Financing Rate ("SOFR") will be similar to or produce the same value or economic
equivalence as LIBOR or that instruments using an alternative rate will have the
same volume or liquidity. 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. Market risk is the risk that a particular security, or shares of a
fund in general, may fall in value. 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. In February
2022, Russia invaded Ukraine which has caused and could continue to cause
significant market disruptions and volatility within the markets in Russia,
Europe, and the United States. The hostilities and sanctions resulting from
those hostilities could have a significant impact on certain fund investments as
well as fund performance. The COVID-19 global pandemic and the ensuing policies
enacted by governments and central banks have caused and may continue to cause
significant volatility and uncertainty in global financial markets. While the
U.S. has resumed "reasonably" normal business activity, many countries continue
to impose lockdown measures. Additionally, there is no guarantee that vaccines
will be effective against emerging variants of the disease. These events also
adversely affect the prices and liquidity of a fund's portfolio securities or
other instruments and could result in disruptions in the trading markets. Any of
such circumstances could have a materially negative impact on the value of a
fund's shares and result in increased market volatility. During any such events,
a fund's shares may trade at increased premiums or discounts to their net asset
value and the bid/ask spread on a fund's shares may widen.
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;
capital controls; lack of liquidity; currency exchange rates; excessive
taxation; government seizure of assets; the imposition of sanctions by foreign
governments; 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. Each fund relies on third-parties for a range of services, including
custody. Any delay or failure relating to engaging or maintaining such service
providers may affect a fund's ability to meet its investment objective. Although
the funds and the funds' investment 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.
PREFERRED SECURITIES RISK. Preferred securities combine some of the
characteristics of both common stocks and bonds. Preferred securities are
typically subordinated to bonds and other debt securities in a company's capital
structure in terms of priority to corporate income, subjecting them to greater
credit risk than those debt securities. Generally, holders of preferred
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FT CBOE VEST DJIA(R) DOGS 10 TARGET INCOME ETF (DOGG)
APRIL 30, 2023 (UNAUDITED)
securities have no voting rights with respect to the issuing company unless
preferred dividends have been in arrears for a specified number of periods, at
which time the preferred security holders may obtain limited rights. In certain
circumstances, an issuer of preferred securities may defer payment on the
securities and, in some cases, redeem the securities prior to a specified date.
Preferred securities may also be substantially less liquid than other
securities, including common stock.
VALUATION RISK. The valuation of certain securities may carry more risk than
that of common stock. Uncertainties in the conditions of the financial markets,
unreliable reference data, lack of transparency and inconsistency of valuation
models and processes may lead to inaccurate asset pricing. A fund may hold
investments in sizes smaller than institutionally sized round lot positions
(sometimes referred to as odd lots). However, third-party pricing services
generally provide evaluations on the basis of institutionally-sized round lots.
If a fund sells certain of its investments in an odd lot transaction, the sale
price may be less than the value at which such securities have been held by the
fund. Odd lots often trade at lower prices than institutional round lots. There
is no assurance that the fund will be able to sell a portfolio security at the
price established by the pricing service, which could result in a loss to the
fund.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
ADVISORY AND SUB-ADVISORY AGREEMENTS
BOARD CONSIDERATIONS REGARDING APPROVAL OF INVESTMENT MANAGEMENT AND
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 DJIA(R) Dogs 10 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 Financial LLC (the "Sub-Advisor"), for an
initial two-year term at a meeting held on March 6, 2023. 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
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 schedule payable by the Fund as
compared to fees charged to a peer group of funds (the "Expense Group") and a
broad peer universe of funds (the "Expense Universe"), each assembled by
Broadridge Financial Solutions, Inc. ("Broadridge"), an independent source, and
as compared to fees charged to other exchange-traded funds ("ETFs") managed by
the Advisor; the proposed sub-advisory fee 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 indirect benefits to the Advisor and its affiliates, First
Trust Portfolios L.P. ("FTP") and First Trust Capital Partners, LLC ("FTCP"),
and the Sub-Advisor; and information on the Advisor's and the Sub-Advisor's
compliance programs. The 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. 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 be an
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FT CBOE VEST DJIA(R) DOGS 10 TARGET INCOME ETF (DOGG)
APRIL 30, 2023 (UNAUDITED)
actively-managed ETF and 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 objectives, 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 written materials provided by the Sub-Advisor, at the March 6, 2023 meeting,
the Board also received a presentation from representatives of the Sub-Advisor,
who discussed 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 noted the background and experience of the Sub-Advisor's
portfolio management team and the Sub-Advisor's investment style. Because the
Fund had yet to commence investment operations, the Board could not consider the
historical investment performance of the Fund. In light of the information
presented and the considerations made, the Board concluded that the nature,
extent and quality of the services to be provided to the Fund by the Advisor and
the Sub-Advisor under the Agreements are expected to be satisfactory.
The Board considered the proposed unitary fee rate schedule 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 starting at an annual rate of 0.75% of its average daily net assets,
subject to a breakpoint schedule pursuant to which the unitary fee rate would be
reduced as assets of the Fund meet certain thresholds. 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 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 below 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 the Fund will be unique to the market and the First
Trust Fund Complex, but will be most similar to two other ETFs in the First
Trust Fund Complex that are managed by the Advisor and sub-advised by the
Sub-Advisor and employ options-based strategies, each of which has a unitary fee
rate schedule starting at an annual rate of 0.75% of its average daily net
assets. 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 considered whether there are any potential economies of scale to be
achieved in connection with the Advisor providing investment advisory services
to the Fund and whether the Fund may benefit from any economies of scale. The
Board noted that the proposed unitary fee rate schedule for the Fund includes
breakpoints pursuant to which the unitary fee rate would be reduced as assets of
the Fund meet certain thresholds. The Board considered that the Advisor has
continued to build infrastructure and add new staff to improve the services to
the funds in the First Trust Fund Complex. The Board also noted that under the
unitary fee structure, any reduction in expenses associated with the management
and operations of the Fund generally would benefit the Advisor and the
Sub-Advisor, but that the unitary fee structure provides a level of certainty in
expenses for shareholders of the Fund. The Board concluded that the proposed
unitary fee rate schedule for the Fund reflects an appropriate level of sharing
of any economies of scale that may be realized in the management of the Fund at
reasonably foreseeable future asset levels. 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 for the Fund was the product of an arm's
length negotiation. 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 and the Advisor's estimate of the
profitability of the Advisory Agreement if the Fund's assets reach $100 million.
The Board noted the inherent limitations in the profitability analysis and
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FT CBOE VEST DJIA(R) DOGS 10 TARGET INCOME ETF (DOGG)
APRIL 30, 2023 (UNAUDITED)
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 concluded that the profitability analysis for the Advisor was more
relevant. The Board considered indirect benefits described by the Advisor that
may be realized from its relationship with the Fund. The Board noted that FTCP
has a controlling ownership interest in the Sub-Advisor's parent company and
considered potential indirect benefits to the Advisor from such ownership
interest. The Board also considered that the Advisor had identified as an
indirect benefit to the Advisor and FTP their exposure to investors and brokers
who, absent their exposure to the Fund, may have had no dealings with the
Advisor or FTP. The Board also considered the potential indirect 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 indirect 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 indirect 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 17, 2023 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 17, 2022 through the Liquidity Committee's annual meeting held
on March 23, 2023 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 any
highly liquid investment minimum.
As stated in the written report, during the review period, two funds breached
the 15% limitation on illiquid investments for one day each, as a result of an
unscheduled week-long closure of the stock exchange in Istanbul following
devastating earthquakes in February, causing all Turkish equities to be
re-classified as "illiquid" for one day. Each fund filed a Form N-RN on the day
after the breach occurred, and one day later after the breach was cured. No fund
with a highly liquid investment minimum breached that minimum during the
reporting period. 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 24
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 Vest(SM) Financial LLC
8350 Broad Street, Suite 240
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 South Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
320 South Canal Street
Chicago, IL 60606
[BLANK BACK COVER]
| (b) | Not applicable. |
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. |
| (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.
| (a) | Not applicable. |
| (b) | Not applicable. |
Item 13. Exhibits.
| (a)(1) | Not applicable. |
| (a)(2) | Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
| (a)(3) | Not applicable. |
| (a)(4) | Not applicable. |
| (b) | Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| (registrant) | First Trust Exchange-Traded Fund IV |
| By (Signature and Title)* | /s/ James M. Dykas | |
| James M. Dykas, President and Chief Executive Officer (principal executive officer) |
| Date: | July 10, 2023 |
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: | July 10, 2023 |
| By (Signature and Title)* | /s/ Donald P. Swade | |
| Donald P. Swade, Treasurer, Chief Financial Officer and Chief Accounting Officer (principal financial officer) |
| Date: | July 10, 2023 |
* Print the name and title of each signing officer under his or her signature.
| This ‘N-CSRS’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 4/24/25 | ||||
| 10/28/24 | ||||
| 10/18/24 | ||||
| 3/31/24 | ||||
| 3/1/24 | ||||
| 11/12/23 | ||||
| 7/24/23 | ||||
| Filed on / Effective on: | 7/10/23 | |||
| 6/30/23 | ||||
| 6/1/23 | ||||
| 5/23/23 | ||||
| 5/5/23 | 485APOS | |||
| 5/3/23 | 497 | |||
| 5/1/23 | ||||
| For Period end: | 4/30/23 | NPORT-P | ||
| 4/26/23 | 497J, 497K, 8-A12B, CERT | |||
| 4/17/23 | ||||
| 3/23/23 | NPORT-P | |||
| 3/6/23 | ||||
| 3/1/23 | 485BPOS, 497, 497J, 497K | |||
| 2/9/23 | ||||
| 1/3/23 | 497 | |||
| 11/2/22 | 485BXT, 8-A12B, CERT | |||
| 11/1/22 | 497, 497K | |||
| 10/31/22 | 24F-2NT, 497, 497K, N-CEN, N-CSR, NPORT-P | |||
| 10/24/22 | ||||
| 10/19/22 | 497J, 497K, 8-A12B, CERT | |||
| 9/19/22 | 485BXT | |||
| 6/30/22 | N-PX | |||
| 3/17/22 | ||||
| 2/28/22 | 485BPOS, 497, 497J, 497K | |||
| 12/31/21 | ||||
| 11/17/21 | 497, 497K | |||
| 10/31/21 | 24F-2NT, DEF 14A, N-CEN, N-CSR, NPORT-P | |||
| 3/5/21 | ||||
| 12/31/20 | ||||
| 10/31/20 | 24F-2NT, N-CEN, N-CSR, N-CSR/A, NPORT-P, PRE 14A | |||
| 10/31/19 | 24F-2NT, N-CEN, N-CSR, N-CSR/A, NPORT-P | |||
| 8/19/19 | ||||
| 1/22/19 | 497, 497K | |||
| 1/1/19 | ||||
| 10/31/18 | 24F-2NT, N-CEN, N-CEN/A, N-CSR, PRE 14A | |||
| 3/26/18 | ||||
| 11/4/14 | ||||
| 8/13/14 | ||||
| 8/5/14 | ||||
| 5/1/13 | ||||
| 2/25/13 | ||||
| 10/31/12 | 24F-2NT, N-CSR, NSAR-B | |||
| 9/15/10 | ||||
| List all Filings | ||||