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)
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: October 31, 2020
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-1090. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Report to Stockholders.
The registrant’s 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) Annual Report For the Year Ended October 31, 2020 Energy Income Partners, LLC --------------------------- <PAGE> --------------------------------------------------------------------------------TABLE OF CONTENTS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV ANNUAL REPORT OCTOBER 31, 2020 Shareholder Letter........................................................... 1 Fund Performance Overview First Trust North American Energy Infrastructure Fund (EMLP).............. 2 First Trust EIP Carbon Impact ETF (ECLN).................................. 4 Notes to Fund Performance Overview........................................... 6 Portfolio Commentary......................................................... 7 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 Statements of Assets and Liabilities......................................... 15 Statements of Operations..................................................... 16 Statements of Changes in Net Assets.......................................... 17 Financial Highlights......................................................... 18 Notes to Financial Statements................................................ 19 Report of Independent Registered Public Accounting Firm...................... 26 Additional Information....................................................... 27 Board of Trustees and Officers............................................... 34 Privacy Policy............................................................... 36 CAUTION REGARDING FORWARD-LOOKING STATEMENTS This report contains certain forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding the goals, beliefs, plans or current expectations of First Trust Advisors L.P. ("First Trust" or the "Advisor") and/or Energy Income Partners, LLC ("EIP" or the "Sub-Advisor") and their respective representatives, taking into account the information currently available to them. Forward-looking statements include all statements that do not relate solely to current or historical fact. For example, forward-looking statements include the use of words such as "anticipate," "estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or other words that convey uncertainty of future events or outcomes. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of any series of First Trust Exchange-Traded Fund IV (the "Trust") described in this report (each such series is referred to as a "Fund" and collectively, as the "Funds") to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. When evaluating the information included in this report, you are cautioned not to place undue reliance on these forward-looking statements, which reflect the judgment of the Advisor and/or Sub-Advisor and their respective representatives only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events and circumstances that arise after the date hereof. PERFORMANCE AND RISK DISCLOSURE There is no assurance that any Fund described in this report will achieve its investment objective. Each Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the Fund's shares may therefore be less than what you paid for them. Accordingly, you can lose money investing in a Fund. See "Risk Considerations" in the Additional Information section of this report for a discussion of other risks of investing in the Funds. Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. For the most recent month-end performance figures, please visit www.ftportfolios.com or speak with your financial advisor. Investment returns, net asset value and share price will fluctuate and Fund shares, when sold, may be worth more or less than their original cost. The Advisor may also periodically provide additional information on Fund performance on each Fund's webpage at www.ftportfolios.com. HOW TO READ THIS REPORT This report contains information that may help you evaluate your investment. It includes details about each Fund and presents data and analysis that provide insight into each Fund's performance and investment approach. By reading the portfolio commentary from the portfolio management team of the Funds, you may obtain an understanding of how the market environment affected each Fund's performance. The statistical information that follows may help you understand each Fund's performance compared to that of relevant market benchmarks. It is important to keep in mind that the opinions expressed by personnel of the Advisor and/or Sub-Advisor are just that: informed opinions. They should not be considered to be promises or advice. The opinions, like the statistics, cover the period through the date on the cover of this report. The material risks of investing in each Fund are spelled out in the prospectus, the statement of additional information, and other Fund regulatory filings. <PAGE> -------------------------------------------------------------------------------- SHAREHOLDER LETTER -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV ANNUAL LETTER FROM THE CHAIRMAN AND CEO OCTOBER 31, 2020 Dear Shareholders: First Trust is pleased to provide you with the annual report for the First Trust North American Energy Infrastructure Fund and the First Trust EIP Carbon Impact ETF (the "Funds"), which contains detailed information about the Funds for the twelve months ended October 31, 2020. As I was collecting my thoughts for this annual roundup it occurred to me that my message this year should touch on the tone of the markets and the investing climate rather than belabor all the news and events that brought us to this juncture. We all know how tumultuous our lives have become over the past eight or so months. The phrase "shelter-at-home" says it all. I would rather talk about why I believe investors should be optimistic about where we could be headed. Having said that, allow me to at least acknowledge the two elephants in the room: the coronavirus ("COVID-19") and the election. In the first 12 days of November, we learned the following: that we likely have a new president-elect (Joe Biden), though it may not be official for some time because it is being contested by President Donald Trump and some of his loyal backers in the Republican Party citing voter fraud in certain states; that we still do not know which political party will have control of the Senate due to a couple of run-offs in Georgia to be held on January 5, 2021; and, that it looks as though we may be fortunate enough to have an FDA-approved COVID-19 vaccine by either the end of 2020 or the start of 2021, though that too is not yet official. It could be a game-changer in the COVID-19 battle. And, we may gain access to additional vaccines as well. The key to getting the economy back to running on all cylinders is to fully reopen, and a vaccine is "what the doctor ordered." With respect to the tone of the markets and investment climate, to say that I am encouraged about what has transpired in 2020 would be an understatement. Despite the extraordinary challenges so far this year, the S&P 500(R) Index posted a total return of 2.77% over the first 10 months of 2020, this despite plunging 33.8% into bear market territory from February 19, 2020 through March 23, 2020, according to Bloomberg. As impressive as that feat is, the future looks even brighter. While Bloomberg's consensus earnings growth rate estimate for the S&P 500(R) Index for 2020 was -16.51%, as of November 13, 2020, its 2021 and 2022 estimates were 21.74% and 16.95%, respectively. That is a strong take on the prospects for a rebound in Corporate America over the next 24 months. One of the tailwinds that is providing a good deal of support to the economy and markets is the decision by the Federal Reserve (the "Fed") to keep interest rates artificially low for as long as need be to meet both its employment and inflation targets. By keeping rates lower for longer, the Fed is essentially inviting investors to assume more risk to generate higher returns. Brian Wesbury, Chief Economist at First Trust, believes that the Fed could need until 2024 to accomplish its goals. That is a lot of runway for investors to reposition their portfolios, if needed, and a very generous, and perhaps unprecedented, amount of guidance from the Fed, in our opinion. Those investors with cash on the sidelines earning next to nothing have options if they choose to act. We are encouraged about the prospects for the economy and the markets, but investors should be prepared to weather some volatility until the COVID-19 pandemic is better contained. As always, we encourage investors to stay the course! Thank you for giving First Trust the opportunity to play a role in your financial future. We value our relationship with you and will report on the Funds again in six months. Sincerely, /s/ James A. Bowen James A. Bowen Chairman of the Board of Trustees Chief Executive Officer of First Trust Advisors L.P. Page 1 <PAGE> --------------------------------------------------------------------------------FUND PERFORMANCE OVERVIEW (UNAUDITED) -------------------------------------------------------------------------------- FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP) <TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL CUMULATIVE TOTAL RETURNS TOTAL RETURNS 1 Year Ended 5 Years Ended Inception (6/20/12) 5 Years Ended Inception (6/20/12) 10/31/20 10/31/20 to 10/31/20 10/31/20 to 10/31/20 <S> <C> <C> <C> <C> <C> FUND PERFORMANCE NAV -16.69% 1.06% 3.64% 5.42% 34.87% Market Price -16.76% 1.02% 3.63% 5.18% 34.78% INDEX PERFORMANCE Blended Benchmark(1) -18.29% 0.74% 2.70% 3.76% 24.93% S&P 500(R) Index 9.71% 11.71% 13.41% 73.97% 186.45% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> (See Notes to Fund Performance Overview on page 6.) ----------------------------- (1) The Blended Benchmark consists of the following two indices: 50% of the PHLX Utility Sector Index which is a market capitalization weighted index composed of geographically diverse public U.S. utility stocks; and 50% of the Alerian MLP Total Return Index which is a float-adjusted, capitalization-weighted composite of the 50 most prominent energy Master Limited Partnerships (MLPs). Indices are unmanaged and an investor cannot invest directly in an index. All index returns assume that distributions are reinvested when they are received. The Blended Benchmark returns are calculated by using the monthly return of the two indices during each period shown above. At the beginning of each month the two indices are rebalanced to a 50-50 ratio to account for divergence from that ratio that occurred during the course of each month. The monthly returns are then compounded for each period shown above, giving the performance for the Blended Benchmark for each period shown above. Page 2 <PAGE> --------------------------------------------------------------------------------FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP) (CONTINUED) ----------------------------------------------------------- % OF TOTAL LONG-TERM INDUSTRY CLASSIFICATION INVESTMENTS ----------------------------------------------------------- Electric Power & Transmission 47.15% Natural Gas Transmission 28.64 Petroleum Product Transmission 16.79 Crude Oil Transmission 4.12 Other 3.30 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL LONG-TERM TOP TEN HOLDINGS INVESTMENTS ----------------------------------------------------------- Enterprise Products Partners, L.P. 7.74% NextEra Energy Partners, L.P. 7.67 TC Energy Corp. 7.48 Magellan Midstream Partners, L.P. 6.98 Public Service Enterprise Group, Inc. 5.74 TC PipeLines, L.P. 5.43 Sempra Energy 4.63 NextEra Energy, Inc. 4.53 Williams (The) Cos., Inc. 2.77 Alliant Energy Corp. 2.77 ------- Total 55.74% ======= <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT JUNE 20, 2012 - OCTOBER 31, 2020 First Trust North American Blended S&P 500(R) Energy Infrastructure Fund Benchmark Index <S> <C> <C> <C> 6/20/12 $10,000 $10,000 $10,000 10/31/12 10,690 10,582 10,495 4/30/13 12,379 12,241 12,008 10/31/13 12,138 12,064 13,347 4/30/14 13,341 13,381 14,463 10/31/14 14,861 14,383 15,652 4/30/15 15,005 13,803 16,341 10/31/15 12,793 12,040 16,467 4/30/16 13,004 12,531 16,538 10/31/16 14,330 13,087 17,209 4/30/17 14,896 14,126 19,501 10/31/17 14,768 13,897 21,276 4/30/18 13,914 13,586 22,089 10/31/18 14,171 14,142 22,840 4/30/19 15,869 15,241 25,068 10/31/19 16,188 15,288 26,111 4/30/20 13,590 12,513 25,286 10/31/20 13,487 12,493 28,645 </TABLE> Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 3 <PAGE> --------------------------------------------------------------------------------FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EIP CARBON IMPACT ETF (ECLN) <TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL CUMULATIVE TOTAL RETURNS TOTAL RETURNS 1 Year Ended Inception (8/19/19) Inception (8/19/19) 10/31/20 to 10/31/20 to 10/31/20 <S> <C> <C> <C> FUND PERFORMANCE NAV 5.69% 7.36% 8.90% Market Price 5.64% 7.37% 8.90% INDEX PERFORMANCE PHLX Utility Sector Index 2.69% 6.39% 7.71% S&P 500(R) Index 9.71% 11.83% 14.36% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> (See Notes to Fund Performance Overview on page 6.) Page 4 <PAGE> --------------------------------------------------------------------------------FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EIP CARBON IMPACT ETF (ECLN) (CONTINUED) ----------------------------------------------------------- % OF TOTAL LONG-TERM INDUSTRY CLASSIFICATION INVESTMENTS ----------------------------------------------------------- Electric Power & Transmission 73.22% Natural Gas Transmission 20.55 Petroleum Product Transmission 1.25 Other 4.98 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL LONG-TERM TOP TEN HOLDINGS INVESTMENTS ----------------------------------------------------------- NextEra Energy Partners, L.P. 8.94% NextEra Energy, Inc. 6.69 Sempra Energy 5.82 Alliant Energy Corp. 5.42 Xcel Energy, Inc. 5.19 TC PipeLines, L.P. 5.12 Public Service Enterprise Group, Inc. 4.26 CMS Energy Corp. 4.04 WEC Energy Group, Inc. 3.94 American Water Works Co., Inc. 3.92 ------- Total 53.34% ======= <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT AUGUST 19, 2019 - OCTOBER 31, 2020 First Trust EIP PHLX Utility S&P 500(R) Carbon Impact ETF Sector Index Index <S> <C> <C> <C> 8/19/19 $10,000 $10,000 $10,000 10/31/19 10,304 10,489 10,424 4/30/20 9,818 9,586 10,095 10/31/20 10,890 10,771 11,436 </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 <PAGE> -------------------------------------------------------------------------------- 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 was calculated. Since shares of each Fund did not trade in the secondary market until after the Fund's inception, for the period from inception to the first day of secondary market trading in shares of the Fund, the NAV of each Fund is used as a proxy for the secondary market trading price to calculate market returns. NAV and market returns assume that all distributions have been reinvested in each Fund at NAV and Market Price, respectively. An index is a statistical composite that tracks a specified financial market or sector. Unlike each Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by each Fund. These expenses negatively impact the performance of each Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The total returns presented reflect the reinvestment of dividends on securities in the indices. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of each Fund will vary with changes in market conditions. Shares of each Fund may be worth more or less than their original cost when they are redeemed or sold in the market. Each Fund's past performance is no guarantee of future performance. Page 6 <PAGE> -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV ANNUAL REPORT OCTOBER 31, 2020 (UNAUDITED) ADVISOR First Trust Advisors, L.P. ("First Trust") is the investment advisor to the First Trust North American Energy Infrastructure Fund ("EMLP") and the First Trust EIP Carbon Impact ETF ("ECLN") (each a "Fund"). First Trust is responsible for the ongoing monitoring of each Fund's investment portfolio, managing each Fund's business affairs and providing certain administrative services necessary for the management of each Fund. SUB-ADVISOR ENERGY INCOME PARTNERS, LLC Energy Income Partners, LLC ("EIP"), located in Westport, CT, was founded in 2003 to provide professional asset management services in publicly traded energy-related infrastructure companies with above average dividend payout ratios operating pipelines and related storage and handling facilities, electric power transmission and distribution as well as long contracted or regulated power generation from renewables and other sources. The corporate structure of the portfolio companies include C-corporations, partnerships and energy infrastructure real estate investment trusts. EIP mainly focuses on investments in assets that receive steady fee-based or regulated income from their corporate and individual customers. EIP manages or supervises approximately $3.7 billion of assets as of October 31, 2020. 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, EIP serves as a sub-advisor to four closed-end management investment companies, two actively managed exchange-traded funds, a sleeve of an actively managed exchange-traded fund and a sleeve of a series of variable insurance trust. EIP is a registered investment advisor with the Securities and Exchange Commission. PORTFOLIO MANAGEMENT TEAM JAMES J. MURCHIE -- CO-PORTFOLIO MANAGER, FOUNDER, CEO AND PRINCIPAL OF ENERGY INCOME PARTNERS, LLC EVA PAO -- CO-PORTFOLIO MANAGER AND PRINCIPAL OF ENERGY INCOME PARTNERS, LLC JOHN TYSSELAND -- CO-PORTFOLIO MANAGER AND PRINCIPAL OF ENERGY INCOME PARTNERS, LLC The portfolio managers are primarily and jointly responsible for the day-to-day management of the Fund. COMMENTARY FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND The Fund's investment objective is to seek total return. The Fund pursues its investment objective by investing, under normal market conditions, at least 80% of its net assets (including investment borrowings) in equity securities of companies deemed by EIP to be engaged in the energy infrastructure sector. These companies principally include publicly traded master limited partnerships and limited liability companies taxed as partnerships ("MLPs"), MLP affiliates, pipeline companies, utilities, and other companies that derive the majority of their revenues from operating or providing services in support of infrastructure assets such as pipelines, power transmission and petroleum and natural gas storage in the petroleum, natural gas and power generation industries (collectively, "Energy Infrastructure Companies"). The Fund will invest principally in Energy Infrastructure Companies. Under normal market conditions, the Fund will invest at least 80% of its net assets (including investment borrowings) in equity securities of companies headquartered or incorporated in the United States and Canada. There can be no assurance that the Fund's investment objective will be achieved. The Fund may not be appropriate for all investors. MARKET RECAP As measured by the Alerian MLP Total Return Index (the "MLP Index") and the PHLX Utility Sector Index (the "UTY Index"), the total return for energy-related MLPs and utilities for the 12-month period ended October 31, 2020 was -42.52% and 2.69%, respectively. These figures are according to data collected from Alerian Capital Management and Bloomberg. As measured by the S&P 500(R) Index (the "Index"), the broader equity market over the same period returned 9.71%. PERFORMANCE ANALYSIS On a net asset value ("NAV") basis for the 12-month period ended October 31, 2020, the Fund provided a total return of -16.69%, including the reinvestment of dividends. This compares, according to collected data, to a total return of -18.29%(1) for the compounded average of the two indices (the "Blended Benchmark") (-42.52% for the MLP Index and 2.69% for the UTY Index), and 9.71% for the S&P 500(R) Index. ----------------------------- (1) The total return is the monthly rebalanced return for the MLP Index and UTY Index. Page 7 <PAGE> -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV ANNUAL REPORT OCTOBER 31, 2020 (UNAUDITED) The Fund declared quarterly distributions during the fiscal year as follows: $0.2595 per share in December 2019; $0.2584 per share in March 2020; $0.2813 per share in June 2020; and $0.2168 per share in September 2020. The Fund's NAV total return of -16.69% outperformed the -18.29% average return of the Blended Benchmark. The Fund's outperformance was driven by overweight positions in utilities and pipeline C-Corporations ("C-Corps ") that were not as affected by volatile oil prices. The Fund also benefited from its lower overall MLP exposure compared to the Blended Benchmark that has a 50% weight of MLPs that underperformed during the period. EIP has sought to consistently run a more conservative portfolio compared to the Blended Benchmark. This conservatism is reflected in holding a more diversified set of higher quality companies that themselves have more conservative balance sheets, more stable cash flows and lower dividend payout ratios. This more conservative approach to investing in North American energy infrastructure was the primary driver to the Fund's outperformance in a volatile market. MARKET AND FUND OUTLOOK The first calendar quarter of 2020 was dominated by the dramatic price declines in the crude oil market due to Saudi and Russian production decisions coupled with the demand shock related to the coronavirus ("COVID-19") pandemic. These weak market conditions drove a -21% decline in the Alerian MLP Index between January 1 and February 28 of 2020, then panic took hold in March driving another -59% decline by March 18. (Source: Bloomberg) Our analysis indicates that forced selling by levered closed-end MLP funds was approximately $4.3 billion and outflows from open-end funds were approximately $0.9 billion in a four-week period. This is nearly $1 billion more than the selling that occurred over a 9-month period in 2015-2016 due to outflows and de-leveraging when oil prices corrected from over $100 per barrel, but on assets that were nearly three times as large as today. Despite a second quarter rally off the lows of the first quarter, stock price performance of the Alerian MLP Index and the energy companies in the S&P 500(R) Index turned negative again in the third quarter of 2020 as near-term fundamentals for crude oil remained uncertain. At the end of the third quarter of 2020 the price of crude oil was still down -34% year-to-date and drilling activity remained near the all-time lows set in August of 2020. Crude oil production was trending lower in most basins by the end of the third quarter despite rebounding in the second quarter as shut-in production was brought back online. Second quarter announcements by oil and gas producers to cut spending and lay off staff was followed by several third quarter merger announcements. Slowing investment and negative sentiment in upstream energy, driven by COVID-related declines in demand, have given rise to a narrative that all conventional energy businesses are in decline; this is simply wrong, in our opinion. It is true that coal will likely continue to decline, we believe. In our view, crude oil and refined products demand will be slow to fully recover from the pandemic and their long-term growth is threatened by electrification of large parts of the transportation system, but these businesses represent the minority of our portfolio. And, the companies exposed to these businesses are trading at dividend yields and valuations that make their expected rates of return the highest in our portfolio. On the other hand, in EIP's opinion, the outlook for electricity and natural gas, which is the majority of the portfolio, remains strong and is increasingly aligned with public sentiment and environmental policy. Cheaper sources of cleaner electricity continue to substitute for coal which is likely to continue to decline as an energy source, in our view, and to which we have no portfolio earnings exposure. EIP believes electric and natural gas utilities are experiencing attractive rates of earnings growth as they invest capital to incorporate cheaper, cleaner, safer, and more reliable sources of energy. In our view, the network utilities can increase the value of these new technologies by integrating them into an intelligent system of shared resources much the way information networks like cloud computing and the new retail intermediaries like Amazon and eBay are doing for those parts of the economy. We believe the transition to a shared resource network favors their incumbency and existing rights of way, which provides energy cheaper to customers than disconnecting from these networks by "cutting the cord". EIP is optimistic about the technological breakthroughs in energy and invests in companies like renewable developers and network utilities that benefit from the lower cost and higher performance of renewables, batteries, and other new grid-related innovations. But EIP is not a venture capitalist; companies in the Fund's portfolio must have a track record of profitability and a willingness to share some portion of that profitability through dividends. While the names in the portfolio change over time, the strategy and the sources of earnings stability and growth remain the same: investing in monopoly infrastructure that provides the low-cost way of shipping the lowest cost form of energy. Page 8 <PAGE> -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV ANNUAL REPORT OCTOBER 31, 2020 (UNAUDITED) FIRST TRUST EIP CARBON IMPACT ETF The First Trust EIP Carbon Impact ETF's (the "Fund") inception date was August 19, 2019. The Fund's investment objective is to seek to achieve a competitive risk-adjusted total return balanced between dividends and capital appreciation. The Fund pursues its investment objective by investing, under normal market conditions, at least 80% of its net assets (including investment borrowings) in equity securities of companies identified by EIP as having or seeking to have a positive carbon impact. EIP 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 ("GHG") emissions from the production, transportation, conversion, storage and use of energy. The Fund's investments will be concentrated in the industries constituting the energy infrastructure sector. These companies 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. The Fund will generally not invest in companies comprising the following industries: coal production, oil exploration and production, or crude oil storage, transportation and delivery. The Fund's portfolio will be principally composed of equity securities, including common stock, depositary receipts, and units issued by master limited partnerships ("MLPs"). Such securities may be issued by small, mid and large capitalization companies operating in developed market countries. MARKET RECAP As measured by the S&P 500(R) Index (the "Index") and the PHLX Utility Sector Index (the "UTY Index"), the total return for energy-related MLPs and utilities for the 12-month period ended October 31, 2020 was 9.71% and 2.69%, respectively. These figures are according to data collected from Bloomberg. PERFORMANCE ANALYSIS On a net asset value ("NAV") basis for the 12-month period ended October 31, 2020, the Fund provided a total return of 5.69%, including the reinvestment of dividends. The Fund's NAV total return of 5.69% underperformed the Index by 402 basis points ("bps") and outperformed the UTY Index by 300 bps. The Fund declared quarterly distributions during the fiscal year as follows: $0.15 per share in December 2019; $0.0599 per share in March 2020; $0.1142 per share in June 2020; and $0.1224 per share in September 2020. Outperformance of the Fund relative to the UTY was partially driven by stronger earnings expectations relative to the UTY. EIP believes that rapidly evolving state and federal energy policies and regulations, paired with technological innovation, continue to drive the transition to an energy system that is safer, cleaner and more reliable. EIP also believes investors in regulated utilities, renewable developers and other energy infrastructure companies have an opportunity to participate in these dramatic changes. EIP is optimistic that companies involved in activities aimed at reducing carbon and other Greenhouse Gas (GHG) emissions have good growth potential. MARKET AND FUND OUTLOOK In EIP's opinion, the outlook for electricity and natural gas, which is the majority of the portfolio, remains strong and is increasingly aligned with public sentiment and environmental policy. Cheaper sources of cleaner electricity continue to substitute for coal which is likely to continue to decline as an energy source, in our view, and to which we have no portfolio earnings exposure. EIP believes electric and natural gas utilities are experiencing attractive rates of earnings growth as they invest capital to incorporate cheaper, cleaner, safer, and more reliable sources of energy. In our view, the network utilities can increase the value of these new technologies by integrating them into an intelligent system of shared resources much the way information networks like cloud computing and the new retail intermediaries like Amazon and eBay are doing for those parts of the economy. We believe the transition to a shared resource network favors their incumbency and existing rights of way, which provides energy cheaper to customers than disconnecting from these networks by "cutting the cord". EIP is optimistic about the technological breakthroughs in energy and invests in companies like renewable developers and network utilities that benefit from the lower cost and higher performance of renewables, batteries, and other new grid-related innovations. But EIP is not a venture capitalist; companies in the Fund's portfolio must have a track record of profitability and a willingness to share some portion of that profitability through dividends. While the names in the portfolio change over time, the strategy and the sources of earnings stability and growth remain the same: investing in monopoly infrastructure that provides the low-cost way of shipping the lowest cost form of energy. Page 9 <PAGE> FIRST TRUST EXCHANGE-TRADED FUND IV UNDERSTANDING YOUR FUND EXPENSES OCTOBER 31, 2020 (UNAUDITED) As a shareholder of First Trust North American Energy Infrastructure Fund or First Trust EIP Carbon Impact ETF (each a "Fund" and collectively, the "Funds"), you incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, if any, and other Fund expenses. This Example is intended to help you understand your ongoing costs of investing in the Funds and to compare these costs with the ongoing costs of investing in other funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held through the six-month period ended October 31, 2020. ACTUAL EXPENSES The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Six-Month Period" to estimate the expenses you paid on your account during this six-month period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the following table provides information about hypothetical account values and hypothetical expenses based on each Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not each Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as brokerage commissions. Therefore, the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.<TABLE> <CAPTION> ---------------------------------------------------------------------------------------------------------------------------- ANNUALIZED EXPENSE RATIO EXPENSES PAID BEGINNING ENDING BASED ON THE DURING THE ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH MAY 1, 2020 OCTOBER 31, 2020 PERIOD PERIOD (a) ---------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP) Actual $1,000.00 $ 992.40 0.95% $4.76 Hypothetical (5% return before expenses) $1,000.00 $1,020.36 0.95% $4.82 FIRST TRUST EIP CARBON IMPACT ETF (ECLN) Actual $1,000.00 $1,109.30 0.95% $5.04 Hypothetical (5% return before expenses) $1,000.00 $1,020.36 0.95% $4.82 </TABLE> (a) Expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (May 1, 2020 through October 31, 2020), multiplied by 184/366 (to reflect the six-month period). Page 10 <PAGE>FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP) PORTFOLIO OF INVESTMENTS OCTOBER 31, 2020 SHARES DESCRIPTION VALUE ------------------------------------------------------------ COMMON STOCKS -- 65.6% CONSTRUCTION & ENGINEERING -- 2.2% 586,973 Quanta Services, Inc. $ 36,644,724 -------------- ELECTRIC UTILITIES -- 22.8% 829,665 Alliant Energy Corp. 45,863,881 446,778 American Electric Power Co., Inc. 40,178,746 107,153 Duke Energy Corp. 9,869,863 218,270 Emera, Inc. (CAD) 8,707,536 312,068 Eversource Energy 27,234,174 435,875 Exelon Corp. 17,387,054 499,080 Fortis, Inc. (CAD) 19,715,215 504,176 IDACORP, Inc. 44,231,360 1,026,998 NextEra Energy, Inc. 75,186,524 37,700 Orsted A/S, ADR 1,996,969 1,248,650 PPL Corp. 34,337,875 493,716 Southern (The) Co. 28,363,984 466,428 Xcel Energy, Inc. 32,663,953 -------------- 385,737,134 -------------- GAS UTILITIES -- 6.2% 2,323,792 AltaGas Ltd. (CAD) 29,459,466 429,078 Atmos Energy Corp. 39,333,580 10,795 Chesapeake Utilities Corp. 1,049,382 773,456 New Jersey Resources Corp. 22,569,446 178,795 ONE Gas, Inc. 12,344,007 -------------- 104,755,881 -------------- MULTI-UTILITIES -- 18.7% 578,625 ATCO Ltd., Class I (CAD) 16,108,385 668,976 Canadian Utilities Ltd., Class A (CAD) 15,636,053 456,782 CMS Energy Corp. 28,928,004 369,265 Dominion Energy, Inc. 29,666,750 302,536 DTE Energy Co. 37,338,993 1,637,059 Public Service Enterprise Group, Inc. 95,194,981 611,836 Sempra Energy 76,699,761 164,164 WEC Energy Group, Inc. 16,506,690 -------------- 316,079,617 -------------- OIL, GAS & CONSUMABLE FUELS -- 15.3% 791,898 Enbridge, Inc. 21,824,709 1,231,346 Equitrans Midstream Corp. 8,939,572 1,497,246 Keyera Corp. (CAD) 21,251,161 2,593,746 Kinder Morgan, Inc. 30,865,578 173,018 ONEOK, Inc. 5,017,522 3,144,533 TC Energy Corp. 124,083,272 2,395,496 Williams (The) Cos., Inc. 45,969,568 -------------- 257,951,382 -------------- WATER UTILITIES -- 0.4% 43,879 American Water Works Co., Inc. 6,604,228 -------------- TOTAL COMMON STOCKS -- 65.6% 1,107,772,966 (Cost $1,042,722,260) -------------- SHARES/ UNITS DESCRIPTION VALUE ------------------------------------------------------------ MASTER LIMITED PARTNERSHIPS -- 32.6% CHEMICALS -- 0.7% 634,917 Westlake Chemical Partners, L.P. $ 11,504,696 -------------- INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 7.5% 2,024,671 NextEra Energy Partners, L.P. (a) 127,149,339 -------------- OIL, GAS & CONSUMABLE FUELS -- 24.4% 36,948 BP Midstream Partners, L.P. 358,396 352,036 Cheniere Energy Partners, L.P. 12,690,898 324,801 Energy Transfer, L.P. 1,672,725 7,748,796 Enterprise Products Partners, L.P. 128,397,550 1,441,905 Holly Energy Partners, L.P. 16,524,231 3,258,463 Magellan Midstream Partners, L.P. 115,805,775 676,483 Phillips 66 Partners, L.P. 15,877,056 2,727,939 Plains GP Holdings, L.P., Class A (a) 17,431,530 1,458,587 Shell Midstream Partners, L.P. 12,762,636 3,201,009 TC PipeLines, L.P. 90,108,404 -------------- 411,629,201 -------------- TOTAL MASTER LIMITED PARTNERSHIPS -- 32.6% 550,283,236 (Cost $650,203,045) -------------- MONEY MARKET FUNDS -- 1.4% 22,781,093 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 0.01% (b) 22,781,093 (Cost $22,781,093) -------------- TOTAL INVESTMENTS -- 99.6% 1,680,837,295 (Cost $1,715,706,398) (c) NET OTHER ASSETS AND LIABILITIES -- 0.4% 7,059,347 -------------- NET ASSETS -- 100.0% $1,687,896,642 ============== (a) This security is taxed as a "C" corporation for federal income tax purposes. (b) Rate shown reflects yield as of October 31, 2020. (c) Aggregate cost for federal income tax purposes is $1,727,589,444. As of October 31, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $192,989,372 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $239,741,521. The net unrealized depreciation was $46,752,149. ADR - American Depositary Receipt Currency Abbreviations: CAD - Canadian Dollar See Notes to Financial Statements Page 11 <PAGE> FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 -----------------------------VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of October 31, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT QUOTED OBSERVABLE UNOBSERVABLE PRICES INPUTS INPUTS ------------------------------------------ Common Stocks* $1,107,772,966 $ -- $ -- Master Limited Partnerships* 550,283,236 -- -- Money Market Funds 22,781,093 -- -- ------------------------------------------ Total Investments $1,680,837,295 $ -- $ -- ========================================== * See Portfolio of Investments for industry breakout.Page 12 See Notes to Financial Statements <PAGE> FIRST TRUST EIP CARBON IMPACT ETF (ECLN) PORTFOLIO OF INVESTMENTS OCTOBER 31, 2020 SHARES DESCRIPTION VALUE ------------------------------------------------------------ COMMON STOCKS -- 72.9% CONSTRUCTION & ENGINEERING -- 0.9% 320 Quanta Services, Inc. $ 19,978 -------------- ELECTRIC UTILITIES -- 33.7% 1,857 Alliant Energy Corp. 102,655 527 American Electric Power Co., Inc. 47,393 164 Edison International 9,191 223 Emera, Inc. (CAD) 8,896 2,880 Enel S.p.A., ADR 22,838 654 Eversource Energy 57,075 1,644 Fortis, Inc. (CAD) 64,943 906 Iberdrola S.A., ADR 42,944 554 IDACORP, Inc. 48,602 1,732 NextEra Energy, Inc. 126,800 256 Orsted A/S (DKK) (a) (b) 40,631 1,838 PPL Corp. 50,545 1,405 Xcel Energy, Inc. 98,392 -------------- 720,905 -------------- GAS UTILITIES -- 9.0% 2,200 AltaGas Ltd. (CAD) 27,890 515 Atmos Energy Corp. 47,210 465 Chesapeake Utilities Corp. 45,203 1,181 New Jersey Resources Corp. 34,461 553 ONE Gas, Inc. 38,179 -------------- 192,943 -------------- INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 4.6% 203 Brookfield Renewable Corp., Class A (CAD) 13,564 350 Clearway Energy, Inc., Class A 9,173 2,802 EDP Renovaveis S.A. (EUR) (c) 53,268 700 Northland Power, Inc. (CAD) 22,640 -------------- 98,645 -------------- MULTI-UTILITIES -- 19.3% 1,208 CMS Energy Corp. 76,503 470 Dominion Energy, Inc. 37,760 170 DTE Energy Co. 20,981 190 National Grid PLC, ADR 11,296 1,389 Public Service Enterprise Group, Inc. 80,770 879 Sempra Energy 110,191 742 WEC Energy Group, Inc. 74,608 -------------- 412,109 -------------- OIL, GAS & CONSUMABLE FUELS -- 1.9% 504 Cheniere Energy, Inc. (d) 24,127 896 Williams (The) Cos., Inc. 17,194 -------------- 41,321 -------------- WATER UTILITIES -- 3.5% 494 American Water Works Co., Inc. 74,352 -------------- TOTAL COMMON STOCKS -- 72.9% 1,560,253 (Cost $1,466,773) -------------- SHARES/ UNITS DESCRIPTION VALUE ------------------------------------------------------------ MASTER LIMITED PARTNERSHIPS -- 15.6% INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 10.0% 815 Brookfield Renewable Partners, L.P. (CAD) $ 44,166 2,697 NextEra Energy Partners, L.P. (e) 169,372 -------------- 213,538 -------------- OIL, GAS & CONSUMABLE FUELS -- 5.6% 655 Cheniere Energy Partners, L.P. 23,613 3,444 TC PipeLines, L.P. 96,949 -------------- 120,562 -------------- TOTAL MASTER LIMITED PARTNERSHIPS -- 15.6% 334,100 (Cost $277,948) -------------- MONEY MARKET FUNDS -- 12.3% 262,732 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 0.01% (f) 262,732 (Cost $262,732) -------------- TOTAL INVESTMENTS -- 100.8% 2,157,085 (Cost $2,007,453) (g) NET OTHER ASSETS AND LIABILITIES -- (0.8)% (17,482) -------------- NET ASSETS -- 100.0% $ 2,139,603 ============== (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 adopted by the Trust's Board of Trustees, and in accordance with provisions of the Investment Company Act of 1940, as amended. At October 31, 2020, securities noted as such are valued at $53,268 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 ("NYSE") close exceeding a certain threshold. On days when this threshold is not exceeded, these securities are typically valued at the last sale price on the exchange on which they are principally traded. (d) Non-income producing security. See Notes to Financial Statements Page 13 <PAGE>FIRST TRUST EIP CARBON IMPACT ETF (ECLN) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 (e) This security is taxed as a "C" corporation for federal income tax purposes. (f) Rate shown reflects yield as of October 31, 2020. (g) Aggregate cost for federal income tax purposes is $2,007,974. As of October 31, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $220,595 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $71,484. The net unrealized appreciation was $149,111.ADR - American Depositary Receipt Currency Abbreviations: CAD - Canadian Dollar DKK - Danish Krone EUR - Euro ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of October 31, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 10/31/2020 PRICES INPUTS INPUTS ------------------------------------------------- Common Stocks: Independent Power and Renewable Electricity Producers $ 98,645 $ 45,377 $ 53,268 $ -- Other Industries* 1,461,608 1,461,608 -- -- Master Limited Partnerships* 334,100 334,100 -- -- Money Market Funds 262,732 262,732 -- -- ------------------------------------------------- Total Investments $2,157,085 $2,103,817 $ 53,268 $ -- ================================================= * See Portfolio of Investments for industry breakout.Page 14 See Notes to Financial Statements <PAGE> FIRST TRUST EXCHANGE-TRADED FUND IV STATEMENTS OF ASSETS AND LIABILITIES OCTOBER 31, 2020 <TABLE> <CAPTION> FIRST TRUST NORTH FIRST TRUST AMERICAN ENERGY EIP CARBON INFRASTRUCTURE FUND IMPACT ETF (EMLP) (ECLN) --------------------- --------------------- ASSETS: <S> <C> <C> Investments, at value.................................................. $ 1,680,837,295 $ 2,157,085 Receivables: Investment securities sold.......................................... 13,693,701 10,325 Dividends........................................................... 8,692,212 3,204 Reclaims............................................................ -- 41 ----------------- ----------------- Total Assets..................................................... 1,703,223,208 2,170,655 ----------------- ----------------- LIABILITIES: Due to custodian....................................................... -- 3 Payables: Capital shares redeemed............................................. 13,909,149 -- Investment securities purchased..................................... -- 29,312 Investment advisory fees............................................ 1,417,417 1,737 ----------------- ----------------- Total Liabilities................................................ 15,326,566 31,052 ----------------- ----------------- NET ASSETS............................................................. $ 1,687,896,642 $ 2,139,603 ================= ================= NET ASSETS CONSIST OF: Paid-in capital........................................................ $ 2,179,132,791 $ 1,997,105 Par value.............................................................. 857,550 1,000 Accumulated distributable earnings (loss).............................. (492,093,699) 141,498 ----------------- ----------------- NET ASSETS............................................................. $ 1,687,896,642 $ 2,139,603 ================= ================= NET ASSET VALUE, per share............................................. $ 19.68 $ 21.40 ================= ================= Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share).............................. 85,755,000 100,002 ================= ================= Investments, at cost................................................... $ 1,715,706,398 $ 2,007,453 ================= ================= Foreign currency, at cost (proceeds)................................... $ -- $ (3) ================= ================= </TABLE> See Notes to Financial Statements Page 15 <PAGE>FIRST TRUST EXCHANGE-TRADED FUND IV STATEMENTS OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 2020 <TABLE> <CAPTION> FIRST TRUST NORTH FIRST TRUST AMERICAN ENERGY EIP CARBON INFRASTRUCTURE FUND IMPACT ETF (EMLP) (ECLN) --------------------- --------------------- INVESTMENT INCOME: <S> <C> <C> Dividends.............................................................. $ 48,318,775 $ 50,637 Foreign withholding tax................................................ (3,388,074) (1,511) ----------------- ----------------- Total investment income............................................. 44,930,701 49,126 ----------------- ----------------- EXPENSES: Investment advisory fees............................................... 20,532,156 19,462 ----------------- ----------------- Total expenses...................................................... 20,532,156 19,462 ----------------- ----------------- NET INVESTMENT INCOME (LOSS)........................................... 24,398,545 29,664 ----------------- ----------------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments......................................................... (254,865,222) (7,866) In-kind redemptions................................................. 79,610,234 -- Foreign currency transactions....................................... (201,348) (334) ----------------- ----------------- Net realized gain (loss)............................................... (175,456,336) (8,200) ----------------- ----------------- Net change in unrealized appreciation (depreciation) on: Investments......................................................... (338,516,614) 92,447 Foreign currency translation........................................ (2,139) -- ----------------- ----------------- Net change in unrealized appreciation (depreciation)................... (338,518,753) 92,447 ----------------- ----------------- NET REALIZED AND UNREALIZED GAIN (LOSS)................................ (513,975,089) 84,247 ----------------- ----------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS..................................................... $ (489,576,544) $ 113,911 ================= ================= </TABLE> Page 16 See Notes to Financial Statements <PAGE> FIRST TRUST EXCHANGE-TRADED FUND IV STATEMENTS OF CHANGES IN NET ASSETS <TABLE> <CAPTION> FIRST TRUST FIRST TRUST NORTH AMERICAN ENERGY EIP CARBON INFRASTRUCTURE FUND IMPACT ETF (EMLP) (ECLN) -------------------------------- --------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED 10/31/2020 10/31/2019 10/31/2020 10/31/2019 (a) -------------- -------------- -------------- --------------- <S> <C> <C> <C> <C> OPERATIONS: Net investment income (loss)............................. $ 24,398,545 $ 36,342,647 $ 29,664 $ 4,870 Net realized gain (loss)................................. (175,456,336) (51,786,622) (8,200) (1,680) Net change in unrealized appreciation (depreciation)..... (338,518,753) 317,830,513 92,447 57,185 -------------- -------------- -------------- --------------- Net increase (decrease) in net assets resulting from operations....................................... (489,576,544) 302,386,538 113,911 60,375 -------------- -------------- -------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations.................................... (68,217,610) (28,709,335) (32,791) -- Return of capital........................................ (31,788,050) (67,709,012) (11,860) -- -------------- -------------- -------------- --------------- Total distributions to shareholders...................... (100,005,660) (96,418,347) (44,651) -- -------------- -------------- -------------- --------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................ 234,222,012 392,227,615 -- 2,009,968 Cost of shares redeemed.................................. (522,103,189) (150,641,145) -- -- -------------- -------------- -------------- --------------- Net increase (decrease) in net assets resulting from shareholder transactions......................... (287,881,177) 241,586,470 -- 2,009,968 -------------- -------------- -------------- --------------- Total increase (decrease) in net assets.................. (877,463,381) 447,554,661 69,260 2,070,343 NET ASSETS: Beginning of period...................................... 2,565,360,023 2,117,805,362 2,070,343 -- -------------- -------------- -------------- --------------- End of period............................................ $1,687,896,642 $2,565,360,023 $ 2,139,603 $ 2,070,343 ============== ============== ============== =============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period.................. 103,305,000 93,555,000 100,002 -- Shares sold.............................................. 9,650,000 16,250,000 -- 100,002 Shares redeemed.......................................... (27,200,000) (6,500,000) -- -- -------------- -------------- -------------- --------------- Shares outstanding, end of period........................ 85,755,000 103,305,000 100,002 100,002 ============== ============== ============== =============== </TABLE> (a) Inception date is August 19, 2019, which is consistent with the commencement of investment operations and is the date the initial creation units were established. See Notes to Financial Statements Page 17 <PAGE>FIRST TRUST EXCHANGE-TRADED FUND IV FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD <TABLE> <CAPTION> FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP) YEAR ENDED OCTOBER 31, ------------------------------------------------------------------------ 2020 2019 2018 2017 2016 ------------ ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Net asset value, beginning of period $ 24.83 $ 22.64 $ 24.55 $ 24.76 $ 23.03 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.20 0.36 0.35 0.44 0.30 Net realized and unrealized gain (loss) (4.33) 2.81 (1.33) 0.32 2.37 ---------- ---------- ---------- ---------- ---------- Total from investment operations (4.13) 3.17 (0.98) 0.76 2.67 ---------- ---------- ---------- ---------- ---------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.70) (0.29) (0.45) (0.48) (0.30) Return of capital (0.32) (0.69) (0.48) (0.49) (0.64) ---------- ---------- ---------- ---------- ---------- Total distributions (1.02) (0.98) (0.93) (0.97) (0.94) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 19.68 $ 24.83 $ 22.64 $ 24.55 $ 24.76 ========== ========== ========== ========== ========== TOTAL RETURN (a) (16.69)% 14.22% (4.03)% 3.06% 12.01% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $1,687,897 $2,565,360 $2,117,805 $1,910,977 $1,379,029 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.95% 0.95% 0.95% 0.95% 0.95% Ratio of net investment income (loss) to average net assets 1.13% 1.52% 1.40% 1.59% 1.44% Portfolio turnover rate (b) 46% 33% 35% 24% 40% </TABLE> <TABLE> <CAPTION> FIRST TRUST EIP CARBON IMPACT ETF (ECLN) YEAR ENDED PERIOD ENDED 10/31/2020 10/31/2019 (c) ------------ -------------- <S> <C> <C> Net asset value, beginning of period $ 20.70 $ 20.09 ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.30 0.05 Net realized and unrealized gain (loss) 0.85 0.56 ---------- ---------- Total from investment operations 1.15 0.61 ---------- ---------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.33) -- Return of capital (0.12) -- ---------- ---------- Total distributions (0.45) -- ---------- ---------- Net asset value, end of period $ 21.40 $ 20.70 ========== ========== TOTAL RETURN (a) 5.69% 3.04% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 2,140 $ 2,070 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.95% 0.95% (d) Ratio of net investment income (loss) to average net assets 1.45% 1.18% (d) Portfolio turnover rate (b) 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) 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. (c) 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. (d) Annualized.Page 18 See Notes to Financial Statements <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV OCTOBER 31, 2020 1. ORGANIZATION First Trust Exchange-Traded Fund IV (the "Trust") is an open-end management investment company organized as a Massachusetts business trust on September 15, 2010, and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust currently consists of nine funds that are offering shares. This report covers the two funds listed below. The shares of each fund are listed and traded on the NYSE Arca, Inc. ("NYSE Arca"). First Trust North American Energy Infrastructure Fund - (NYSE Arca ticker "EMLP") First Trust EIP Carbon Impact ETF - (NYSE Arca ticker "ECLN") Each fund represents a separate series of shares of beneficial interest in the Trust (each a "Fund" and collectively, the "Funds"). Unlike conventional mutual funds, each Fund issues and redeems shares on a continuous basis, at net asset value ("NAV"), only in large specified blocks consisting of 50,000 shares called a "Creation Unit." Each Fund's Creation Units are generally issued and redeemed in-kind for securities in which the Fund invests and, in certain circumstances, for cash, and only to and from broker-dealers and large institutional investors that have entered into participation agreements. Except when aggregated in Creation Units, each Fund's shares are not redeemable securities. Each Fund is an actively managed exchange-traded fund. EMLP's investment objective is to seek total return. EMLP will invest, under normal market conditions, at least 80% of its net assets (including investment borrowings) in equity securities of companies deemed by Energy Income Partners, LLC ("EIP" or the "Sub-Advisor") to be engaged in the energy infrastructure sector, which principally include publicly-traded master limited partnerships and limited liability companies taxed as partnerships ("MLPs"), MLP affiliates, pipeline companies, utilities, and other companies that derive the majority of their revenues from operating or providing services in support of infrastructure assets such as pipelines, power transmission and petroleum and natural gas storage in the petroleum, natural gas and power generation industries (collectively, "Energy Infrastructure Companies"). In addition, under normal market conditions, the Fund will invest at least 80% of its net assets (including investment borrowings) in equity securities of companies headquartered or incorporated in the United States and Canada. ECLN's investment objective is to seek to achieve a competitive risk-adjusted total return balanced between dividends and capital appreciation. ECLN will invest, under normal market conditions, at least 80% of its net assets (including investment borrowings) in equity securities of companies identified by EIP as having or seeking to have a positive carbon impact, defined as companies that reduce, have a publicly available plan to reduce, or enable the reduction of carbon and other greenhouse gas emissions from the production, transportation, conversion, storage and use of energy. ECLN's investments will be concentrated in the industries constituting the energy infrastructure sector, which principally include utilities, natural gas pipeline companies, manufacturers, contracted developers and/or owners of renewable energy, and other companies that derive the majority of their earnings from manufacturing, operating or providing services in support of infrastructure assets and/or infrastructure activities such as renewable energy equipment, energy storage, carbon capture and sequestration, fugitive methane abatement and energy transmission and distribution equipment. 2. SIGNIFICANT ACCOUNTING POLICIES The Funds are each considered an investment company and follow accounting and reporting guidance under Financial Accounting Standards Board Accounting Standards Codification Topic 946, "Financial Services-Investment Companies." The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of the financial statements. The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. PORTFOLIO VALUATION Each Fund's NAV is determined daily as of the close of regular trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV is determined as of that time. Foreign securities are priced using data reflecting the earlier closing of the principal markets for those securities. Each Fund's NAV is calculated by dividing the value of all assets of each Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding. Page 19 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV OCTOBER 31, 2020 Each Fund's investments are valued daily at market value or, in the absence of the market value with respect to any portfolio securities, at fair value. Market value prices represent last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Pricing Committee of the Funds' investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"), in accordance with valuation procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act. Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. Each Fund's investments are valued as follows: Common stocks, MLPs and other equity securities listed on any national or foreign exchange (excluding The Nasdaq Stock Market LLC ("Nasdaq") and the London Stock Exchange Alternative Investment Market ("AIM")) are valued at the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price. Securities traded on more than one securities exchange are valued at the last sale price or official closing price, as applicable, at the close of the securities exchange representing the principal market for such securities. Securities traded in an over-the-counter market are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price. Shares of open-end funds are valued at fair value which is based on NAV per share. Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Trust's Board of Trustees or its delegate, the Advisor's Pricing Committee, at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of a Fund's NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security's fair value. As a general principle, the current fair value of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities, including, but not limited to, the following: 1) the type of security; 2) the size of the holding; 3) the initial cost of the security; 4) transactions in comparable securities; 5) price quotes from dealers and/or third-party pricing services; 6) relationships among various securities; 7) information obtained by contacting the issuer, analysts, or the appropriate stock exchange; 8) an analysis of the issuer's financial statements; and 9) the existence of merger proposals or tender offers that might affect the value of the security. If the securities in question are foreign securities, the following additional information may be considered: 1) the value of similar foreign securities traded on other foreign markets; 2) ADR trading of similar securities; 3) closed-end fund or exchange-traded fund trading of similar securities; 4) foreign currency exchange activity; 5) the trading prices of financial products that are tied to baskets of foreign securities; 6) factors relating to the event that precipitated the pricing problem; 7) whether the event is likely to recur; and 8) whether the effects of the event are isolated or whether they affect entire markets, countries or regions. Because foreign markets may be open on different days than the days during which investors may transact in the shares of a Fund, the value of the Fund's securities may change on the days when investors are not able to transact in the shares of the Fund. The value of securities denominated in foreign currencies is converted into U.S. dollars using exchange rates determined daily as of the close of regular trading on the NYSE. Page 20 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV OCTOBER 31, 2020 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 October 31, 2020, is included with each Fund's Portfolio of Investments. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis. Distributions received from a Fund's investments in MLPs generally are comprised of return of capital and investment income. A Fund records estimated return of capital and investment income based on historical information available from each MLP. These estimates may subsequently be revised based on information received from the MLPs after their tax reporting periods are concluded. C. FOREIGN CURRENCY The books and records of the Funds are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at the exchange rates prevailing at the end of the period. Purchases and sales of investments and items of income and expense are translated on the respective dates of such transactions. Unrealized gains and losses on assets and liabilities, other than investments in securities, which result from changes in foreign currency exchange rates have been included in "Net change in unrealized appreciation (depreciation) on foreign currency translation" on the Statements of Operations. Unrealized gains and losses on investments in securities which result from changes in foreign exchange rates are included with fluctuations arising from changes in market price and are shown in "Net change in unrealized appreciation (depreciation) on investments" on the Statements of Operations. Net realized foreign currency gains and losses include the effect of changes in exchange rates between trade date and settlement date on investment security transactions, foreign currency transactions and interest and dividends received and is included in "Net realized gain (loss) on foreign currency transactions" on the Statements of Operations. The portion of foreign currency gains and losses related to fluctuations in exchange rates between the initial purchase settlement date and subsequent sale trade date is included in "Net realized gain (loss) on investments" on the Statements of Operations. D. DIVIDENDS AND DISTRIBUTION TO SHAREHOLDERS Dividends from net investment income of each Fund, if any, are declared and paid quarterly, or as the Board of Trustees may determine from time to time. Distributions of net realized gains earned by each Fund, if any, are distributed at least annually. Distributions from net investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on significantly modified portfolio securities held by the Funds and have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will reverse at some time in the future. Page 21 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV OCTOBER 31, 2020 The tax character of distributions paid by each Fund during the fiscal year ended October 31, 2020 was as follows: <TABLE> <CAPTION> Distributions Distributions Distributions paid from paid from paid from Ordinary Income Capital Gains Return of Capital --------------- ------------- ----------------- <S> <C> <C> <C> First Trust North American Energy Infrastructure Fund $ 68,217,610 $ -- $ 31,788,050 First Trust EIP Carbon Impact ETF 32,791 -- 11,860 </TABLE> The tax character of distributions paid by each Fund during the fiscal period ended October 31, 2019 was as follows:<TABLE> <CAPTION> Distributions Distributions Distributions paid from paid from paid from Ordinary Income Capital Gains Return of Capital --------------- ------------- ----------------- <S> <C> <C> <C> First Trust North American Energy Infrastructure Fund $ 28,709,335 $ -- $ 67,709,012 First Trust EIP Carbon Impact ETF -- -- -- </TABLE> As of October 31, 2020, the components of distributable earnings on a tax basis for each Fund were as follows:<TABLE> <CAPTION> Accumulated Undistributed Capital and Net Unrealized Ordinary Other Appreciation Income Gain (Loss) (Depreciation) --------------- ------------- ----------------- <S> <C> <C> <C> First Trust North American Energy Infrastructure Fund $ -- $(445,337,693) $ (46,756,006) First Trust EIP Carbon Impact ETF -- (7,613) 149,111 </TABLE> E. INCOME TAXES Each Fund intends to continue to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, which includes distributing substantially all of its net investment income and net realized gains to shareholders. Accordingly, no provision has been made for federal and state income taxes. However, due to the timing and amount of distributions, each Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of each Fund's taxable income exceeds the distributions from such taxable income for the calendar year. Each Fund intends to utilize provisions of the federal income tax laws, which allow it to carry a realized capital loss forward indefinitely following the year of the loss and offset such loss against any future realized capital gains. Each Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. At October 31, 2020, EMLP and ECLN had non-expiring capital loss carryforwards available for federal income tax purposes of $445,337,693 and $7,613, respectively. The Funds are subject to accounting standards that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. For EMLP, the taxable years ended 2017, 2018, 2019, and 2020 remain open to federal and state audit. For ECLN, the taxable years ended 2019 and 2020 remain open to federal and state audit. As of October 31, 2020, management has evaluated the application of these standards to the Funds and has determined that no provision for income tax is required in the Funds' financial statements for uncertain tax positions. Certain losses realized during the current fiscal year may be deferred and treated as occurring on the first day of the following fiscal year for federal income tax purposes. For the fiscal year ended October 31, 2020, the Funds had no net late year ordinary capital losses. In order to present paid-in capital and accumulated distributable earnings (loss) (which consists of accumulated net investment income (loss), accumulated net realized gain (loss) on investments and net unrealized appreciation (depreciation) on investments) on the Statements of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to paid-in capital, accumulated net investment income (loss) and accumulated net Page 22 <PAGE> --------------------------------------------------------------------------------NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV OCTOBER 31, 2020 realized gain (loss) on investments. These adjustments are primarily due to the difference between book and tax treatments of income and gains on various investment securities held by the Funds and in-kind transactions. The results of operations and net assets were not affected by these adjustments. For the fiscal year ended October 31, 2020, the adjustments for each Fund were as follows: <TABLE> <CAPTION> Accumulated Accumulated Net Realized Net Investment Gain (Loss) Income (Loss) on Investments Paid-in Capital --------------- -------------- --------------- <S> <C> <C> <C> First Trust North American Energy Infrastructure Fund $ 35,885,365 $ (63,976,159) $ 28,090,794 First Trust EIP Carbon Impact ETF (752) 755 (3) </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. Each Fund has agreed to pay First Trust an annual unitary management fee equal to 0.95% of its average daily net assets. EIP receives a sub-advisory fee for EMLP from First Trust equal to 45% of any remaining monthly investment management fee paid to First Trust after the Fund's average Fund expenses accrued during the most recent twelve months are subtracted from the investment management fee in a given month. EIP receives a sub-advisory fee for ECLN from First Trust equal to an annual rate of 0.475% of the Fund's average daily net assets less one-half of the Fund's expenses, for which EIP is responsible. First Trust Capital Partners, LLC ("FTCP"), an affiliate of First Trust, owns, through a wholly-owned subsidiary, a 15% ownership interest in each of EIP and EIP Partners, LLC, an affiliate of EIP. The Trust has multiple service agreements with The Bank of New York Mellon ("BNYM"). Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services, and transfer agency services for each Fund. As custodian, BNYM is responsible for custody of each Fund's assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of each Fund's securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for each Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company. Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, a defined-outcome fund or is an index fund. Additionally, the Lead Independent Trustee and the Chairmen of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and Committee Chairmen rotate every three years. The officers and "Interested" Trustee receive no compensation from the Trust for acting in such capacities. Page 23 <PAGE> --------------------------------------------------------------------------------NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV OCTOBER 31, 2020 4. PURCHASES AND SALES OF SECURITIES For the fiscal year ended October 31, 2020, the cost of purchases and proceeds from sales of investments for each Fund, excluding short-term investments and in-kind transactions, were as follows: <TABLE> <CAPTION> Purchases Sales --------------- --------------- <S> <C> <C> First Trust North American Energy Infrastructure Fund $ 1,014,057,658 $ 957,364,373 First Trust EIP Carbon Impact ETF 413,081 519,031 </TABLE> For the fiscal year ended October 31, 2020, the cost of in-kind purchases and proceeds from in-kind sales for each Fund were as follows:<TABLE> <CAPTION> Purchases Sales --------------- --------------- <S> <C> <C> First Trust North American Energy Infrastructure Fund $ 227,072,427 $ 507,038,198 First Trust EIP Carbon Impact ETF -- -- </TABLE> 5. CREATIONS, REDEMPTIONS AND TRANSACTION FEES Shares are created and redeemed by each Fund only in Creation Unit size aggregations of 50,000 shares in transactions with broker-dealers or large institutional investors that have entered into a participation agreement (an "Authorized Participant"). In order to purchase Creation Units of each Fund, an Authorized Participant must deposit (i) a designated portfolio of equity securities determined by First Trust (the "Deposit Securities") and generally make or receive a cash payment referred to as the "Cash Component," which is an amount equal to the difference between the NAV of the Fund Shares (per Creation Unit Aggregation) and the market value of the Deposit Securities, and/or (ii) cash in lieu of all or a portion of the Deposit Securities. If the Cash Component is a positive number (i.e., the NAV per Creation Unit Aggregation exceeds the Deposit Amount), the Authorized Participant will deliver the Cash Component. If the Cash Component is a negative number (i.e., the NAV per Creation Unit Aggregation is less than the Deposit Amount), the Authorized Participant will receive the Cash Component. Authorized Participants purchasing Creation Units must pay to BNYM, as transfer agent, a creation transaction fee (the "Creation Transaction Fee") regardless of the number of Creation Units purchased in the transaction. The Creation Transaction Fee may increase or decrease with changes in each Fund's portfolio. The price for each Creation Unit will equal the daily NAV per share times the number of shares in a Creation Unit plus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees or stamp taxes. When a Fund permits an Authorized Participant to substitute cash or a different security in lieu of depositing one or more of the requisite Deposit Securities, the Authorized Participant may also be assessed an amount to cover the cost of purchasing the Deposit Securities and/or disposing of the substituted securities, including operational processing and brokerage costs, transfer fees, stamp taxes, and part or all of the spread between the expected bid and offer side of the market related to such Deposit Securities and/or substitute securities. Authorized Participants redeeming Creation Units must pay to BNYM, as transfer agent, a redemption transaction fee (the "Redemption Transaction Fee"), regardless of the number of Creation Units redeemed in the transaction. The Redemption Transaction Fee may increase or decrease with changes in each Fund's portfolio. Each Fund reserves the right to effect redemptions in cash. An Authorized Participant may request cash redemption in lieu of securities; however, a Fund may, in its discretion, reject any such request. 6. DISTRIBUTION PLAN The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Funds are authorized to pay an amount up to 0.25% of their average daily net assets each year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the Funds, for amounts expended to finance activities primarily intended to result in the sale of Creation Units or the provision of investor services. FTP may also use this amount to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and educational and promotional services. No 12b-1 fees are currently paid by the Funds, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before March 31, 2022 for EMLP, and August 14, 2021 for ECLN. Page 24 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV OCTOBER 31, 2020 7. INDEMNIFICATION The Trust, on behalf of the Funds, has a variety of indemnification obligations under contracts with its service providers. The Trust's maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 8. SUBSEQUENT EVENTS Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued, and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements that have not already been disclosed. Page 25 <PAGE> --------------------------------------------------------------------------------REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED FUND IV: OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS We have audited the accompanying statements of assets and liabilities of First Trust North American Energy Infrastructure Fund and First Trust EIP Carbon Impact ETF (the "Funds"), each a series of the First Trust Exchange-Traded Fund IV, including the portfolios of investments, as of October 31, 2020, the related statements of operations for the year then ended, the statements of changes in net assets and the financial highlights for the periods indicated in the table below, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of each of the Funds as of October 31, 2020, and the results of their operations for the year then ended, and the changes in their net assets and the financial highlights for the periods listed in the table below in conformity with accounting principles generally accepted in the United States of America. <TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------ INDIVIDUAL FUNDS INCLUDED STATEMENTS OF CHANGES FINANCIAL IN THE TRUST IN NET ASSETS HIGHLIGHTS ------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> First Trust North American Energy For the years ended October 31, 2020 and For the years ended October 31, 2020, Infrastructure Fund 2019 2019, 2018, 2017 and 2016 ------------------------------------------------------------------------------------------------------------------------------ First Trust EIP Carbon Impact ETF For the year ended October 31, 2020 and for the period from August 19, 2019 (commencement of operations) through October 31, 2019. ------------------------------------------------------------------------------------------------------------------------------ </TABLE> BASIS FOR OPINION These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on the Funds' financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Funds' internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2020, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP Chicago, Illinois December 18, 2020 We have served as the auditor of one or more First Trust investment companies since 2001. Page 26 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV OCTOBER 31, 2020 (UNAUDITED) PROXY VOTING POLICIES AND PROCEDURES A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how each Fund voted proxies relating to its portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on each Fund's website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov. PORTFOLIO HOLDINGS Each Fund files portfolio holdings information for each month in a fiscal quarter within 60 days after the end of the relevant fiscal quarter on Form N-PORT. Portfolio holdings information for the third month of each fiscal quarter will be publicly available on the SEC's website at www.sec.gov. Each Fund's complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year is included in the semi-annual and annual reports to shareholders, respectively, and is filed with the SEC on Form N-CSR. The semi-annual and annual report for each Fund is available to investors within 60 days after the period to which it relates. Each Fund's Forms N-PORT and Forms N-CSR are available on the SEC's website listed above.FEDERAL TAX INFORMATION For the taxable year ended October 31, 2020, the following percentages of income dividend paid by the Funds qualify for the dividends received deduction available to corporations: <TABLE> <CAPTION> Dividends Received Deduction ---------------------------- <S> <C> First Trust North American Energy Infrastructure Fund 37.32% First Trust EIP Carbon Impact ETF 100.00% </TABLE> For the taxable year ended October 31, 2020, the following percentages of income dividend paid by the Funds are hereby designated as qualified dividend income:<TABLE> <CAPTION> Qualified Dividend Income ---------------------------- <S> <C> First Trust North American Energy Infrastructure Fund 68.47% First Trust EIP Carbon Impact ETF 100.00% </TABLE> A portion of each of the Funds' 2020 ordinary dividends (including short-term capital gains) paid to its shareholders during the fiscal year ended October 31, 2020, may be eligible for the Qualified Business Income Deduction (QBI) under Internal Revenue Code Section 199A for the aggregate dividends each Fund received from the underlying Real Estate Investment Trusts (REITs) these Funds invest in. RISK CONSIDERATIONS RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE, RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND. CONCENTRATION RISK. To the extent that a fund is able to invest a large percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund's investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund's corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is not concentrated. CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer's ability to make such payments. Page 27 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV OCTOBER 31, 2020 (UNAUDITED) CYBER SECURITY RISK. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. In addition, cyber security breaches of a fund's third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or issuers in which the fund invests, can also subject a fund to many of the same risks associated with direct cyber security breaches. DERIVATIVES RISK. To the extent a fund uses derivative instruments such as futures contracts, options contracts and swaps, the fund may experience losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivative. These risks are heightened when a fund's portfolio managers use derivatives to enhance the fund's return or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the fund. EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the value of the fund's shares will fluctuate with changes in the value of the equity securities. Equity securities prices fluctuate for several reasons, including changes in investors' perceptions of the financial condition of an issuer or the general condition of the relevant stock market, such as market volatility, or when political or economic events affecting the issuers occur. In addition, common stock prices may be particularly sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase. Equity securities may decline significantly in price over short or extended periods of time, and such declines may occur in the equity market as a whole, or they may occur in only a particular country, company, industry or sector of the market. ETF RISK. The shares of an ETF trade like common stock and represent an interest in a portfolio of securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities, although lack of liquidity in an ETF could result in it being more volatile and ETFs have management fees that increase their costs. Shares of an ETF trade on an exchange at market prices rather than net asset value, which may cause the shares to trade at a price greater than net asset value (premium) or less than net asset value (discount). In times of market stress, decisions by market makers to reduce or step away from their role of providing a market for an ETF's shares, or decisions by an ETF's authorized participants that they are unable or unwilling to proceed with creation and/or redemption orders of an ETF's shares, could result in shares of the ETF trading at a discount to net asset value and in greater than normal intraday bid-ask spreads. FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income securities, the fund will be subject to credit risk, income risk, interest rate risk, liquidity risk and prepayment risk. Income risk is the risk that income from a fund's fixed income investments could decline during periods of falling interest rates. Interest rate risk is the risk that the value of a fund's fixed income securities will decline because of rising interest rates. Liquidity risk is the risk that a security cannot be purchased or sold at the time desired, or cannot be purchased or sold without adversely affecting the price. Prepayment risk is the risk that the securities will be redeemed or prepaid by the issuer, resulting in lower interest payments received by the fund. In addition to these risks, high yield securities, or "junk" bonds, are subject to greater market fluctuations and risk of loss than securities with higher ratings, and the market for high yield securities is generally smaller and less liquid than that for investment grade securities. INDEX CONSTITUENT RISK. Certain funds may be a constituent of one or more indices. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could significantly increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, a fund's net asset value could be negatively impacted and the fund's market price may be significantly below its net asset value during certain periods. INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject to Index Provider Risk. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, maintained, constructed, reconstituted, rebalanced, composed, calculated or disseminated accurately. To correct any such error, the Index Provider may carry out an unscheduled rebalance or other modification of the Index constituents or weightings, which may increase the fund's costs. The Index Provider does not provide any representation or warranty in relation to the quality, accuracy or completeness of data in the Index, and it does not guarantee that the Index will be calculated in accordance with its stated methodology. Losses or costs associated with any Index Provider errors generally will be borne by the fund and its shareholders. Page 28 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV OCTOBER 31, 2020 (UNAUDITED) INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of other investment vehicles, the fund will incur additional fees and expenses that would not be present in a direct investment in those investment vehicles. Furthermore, the fund's investment performance and risks are directly related to the investment performance and risks of the investment vehicles in which the fund invests. LIBOR RISK. To the extent a fund invests in floating or variable rate obligations that use the London Interbank Offered Rate ("LIBOR") as a reference interest rate, it is subject to LIBOR Risk. In 2017, the United Kingdom's Financial Conduct Authority announced that LIBOR will cease to be available for use after 2021. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition away from LIBOR on the fund or on certain instruments in which the fund invests can be difficult to ascertain, and they may vary depending on a variety of factors. Any such effects of the transition away from LIBOR, as well as other unforeseen effects, could result in losses to the fund. MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund's investment portfolio, the fund's portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective. MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than others. The outbreak of the respiratory disease designated as COVID-19 in December 2019 has caused significant volatility and declines in global financial markets, which have caused losses for investors. The COVID-19 pandemic may last for an extended period of time and will continue to impact the economy for the foreseeable future. NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic issuers. Non-U.S. securities are subject to higher volatility than securities of domestic issuers due to: possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries. PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets. NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE ADVISORY AND SUB-ADVISORY AGREEMENTS BOARD CONSIDERATIONS REGARDING APPROVAL OF CONTINUATION OF INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND The Board of Trustees of First Trust Exchange-Traded Fund IV (the "Trust"), including the Independent Trustees, unanimously approved the continuation of the Investment Management Agreement (the "Advisory Agreement") with First Trust Advisors L.P. (the "Advisor") on behalf of the First Trust North American Energy Infrastructure Fund (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"). The Board approved the continuation of the Agreements for a one-year period ending June 30, 2021 at a meeting held on June 8, 2020. The Board determined that the continuation of the Agreements is in the best interests of the Fund in light of the nature, extent and quality of the services provided and such other matters as the Board considered to be relevant in the exercise of its reasonable business judgment. Page 29 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV OCTOBER 31, 2020 (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. At meetings held on May 11, 2020 and June 8, 2020, the Board, including the Independent Trustees, reviewed materials provided by the Advisor and the Sub-Advisor 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 provided by the Advisor and the Sub-Advisor to the Fund (including the relevant personnel responsible for these services and their experience); the unitary fee rate payable by the Fund as compared to fees charged to a peer group of funds (the "Expense Group") and a broad peer universe of funds (the "Expense Universe"), each assembled by Broadridge Financial Solutions, Inc. ("Broadridge"), an independent source, and as compared to fees charged to other clients of the Advisor, including other exchange-traded funds ("ETFs") managed by the Advisor; the sub-advisory fee rate as compared to fees charged to other clients of the Sub-Advisor; the expense ratio of the Fund as compared to expense ratios of the funds in the Fund's Expense Group and Expense Universe; performance information for the Fund, including comparisons of the Fund's performance to that of one or more relevant benchmark indexes and to that of a performance group of funds and a broad performance universe of funds (the "Performance Universe"), each assembled by Broadridge; the nature of expenses incurred in providing services to the Fund and the potential for the Advisor and the Sub-Advisor to realize economies of scale, if any; profitability and other financial data for the Advisor; financial data for the Sub-Advisor; any fall-out benefits to the Advisor and its affiliates, First Trust Portfolios L.P. ("FTP") and First Trust Capital Partners, LLC ("FTCP"), and the Sub-Advisor; and information on the Advisor's and the Sub-Advisor's compliance programs. The Board reviewed initial materials with the Advisor at the meeting held on May 11, 2020, prior to which the Independent Trustees and their counsel met separately to discuss the information provided by the Advisor and the Sub-Advisor. Following the May meeting, counsel to the Independent Trustees, on behalf of the Independent Trustees, requested certain clarifications and supplements to the materials provided, and the information provided in response to those requests was considered at an executive session of the Independent Trustees and their counsel held prior to the June 8, 2020 meeting, as well as at the meeting held that day. The Board considered supplemental information provided by the Advisor and the Sub-Advisor on the operations of the Advisor and the Sub-Advisor, respectively, and the performance of the Fund since the onset of the COVID-19 pandemic. 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 continue to be reasonable business arrangements from the Fund's perspective. The Board determined that, given the totality of the information provided with respect to the Agreements, the Board had received sufficient information to renew the Agreements. The Board considered that shareholders chose to invest or remain invested in the Fund knowing that the Advisor and the Sub-Advisor manage the Fund and knowing the Fund's unitary fee. In reviewing the Agreements, the Board considered the nature, extent and quality of the services provided by the Advisor and the Sub-Advisor under the Agreements. With respect to the Advisory Agreement, the Board considered that the Advisor is responsible for the overall management and administration of the Trust and the Fund and reviewed all of the services 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 noted that the Advisor oversees the Sub-Advisor's day-to-day management of the Fund's investments, including portfolio risk monitoring and performance review. In reviewing the services 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 also considered a report from the Advisor with respect to its risk management functions related to the operation of the Fund. Finally, as part of the Board's consideration of the Advisor's services, the Advisor, in its written materials and at the May 11, 2020 meeting, described to the Board the scope of its ongoing investment in additional infrastructure and personnel to maintain and improve the quality of services provided to the Fund and the other funds in the First Trust Fund Complex. With respect to the Sub-Advisory Agreement, the Board noted that the Fund is an actively-managed ETF and the Sub-Advisor actively manages the Fund's investments. In addition to the written materials provided by the Sub-Advisor, at the June 8, 2020 meeting, the Board also received a presentation from representatives of the Sub-Advisor discussing the services that the Sub-Advisor provides to the Fund, including the Sub-Advisor's day-to-day management of the Fund's investments. In considering the Sub-Advisor's management of the Fund, the Board noted the background and experience of the Sub-Advisor's portfolio management team. In light of the information presented and the considerations made, the Board concluded that the nature, extent and quality of the services provided to the Trust and the Fund by the Advisor and the Sub-Advisor under the Agreements have been and are expected to remain satisfactory and that the Sub-Advisor, under the oversight of the Advisor, has managed the Fund consistent with its investment objective, policies and restrictions. Page 30 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV OCTOBER 31, 2020 (UNAUDITED) The Board considered the unitary fee rate payable by the Fund under the Advisory Agreement for the services provided. The Board noted that the sub-advisory fee is paid by the Advisor from the unitary fee. The Board considered that as part of the unitary fee the Advisor is 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, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses, if any. The Board received and reviewed information showing the advisory 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 ETFs) and non-fund clients, as applicable. Because the Fund pays 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, at the May 11, 2020 meeting, discussed with Broadridge its methodology for assembling peer groups and discussed with the Advisor limitations in creating peer groups for actively-managed ETFs, including that the Expense Group contained both actively-managed ETFs and open-end mutual funds, and different business models that may affect the pricing of services among ETF sponsors. The Board also noted that not all peer funds employ an advisor/sub-advisor management structure. The Board took these limitations and differences into account in considering the peer data. With respect to fees charged to other non-ETF clients, the Board considered differences between the Fund and other non-ETF clients that limited their comparability. In considering the unitary fee rate overall, the Board also considered the Advisor's statement that it seeks to meet investor needs through innovative and value-added investment solutions and the Advisor's demonstrated long-term commitment to the Fund and the other funds in the First Trust Fund Complex. The Board considered performance information for the Fund. The Board noted the process it has established for monitoring the Fund's performance and portfolio risk on an ongoing basis, which includes quarterly performance reporting from the Advisor and Sub-Advisor for the Fund. The Board determined that this process continues to be effective for reviewing the Fund's performance. The Board received and reviewed information comparing the Fund's performance for periods ended December 31, 2019 to the performance of the funds in the Performance Universe and to that of a blended benchmark index. Based on the information provided, the Board noted that the Fund outperformed the Performance Universe median for the one-, three- and five-year periods ended December 31, 2019. The Board also noted that the Fund outperformed the blended benchmark index for the one- and five-year periods ended December 31, 2019 but underperformed the blended benchmark for the three-year period ended December 31, 2019. On the basis of all the information provided on the unitary fee and performance of the Fund and the ongoing oversight by the Board, the Board concluded that the unitary fee for the Fund (out of which the Sub-Advisor is compensated) continues to be reasonable and appropriate in light of the nature, extent and quality of the services provided by the Advisor and the Sub-Advisor to the Fund under the Agreements. The Board considered information and discussed with the Advisor whether there were any economies of scale in connection with providing advisory services to the Fund and noted the Advisor's statement that it believes its expenses will likely increase over the next twelve months as the Advisor continues to hire personnel and build infrastructure, including technology, to improve the services to the Fund. The Board noted that any reduction in fixed costs associated with the management of the Fund would benefit the Advisor, but that the unitary fee structure provides a level of certainty in expenses for the Fund. The Board considered the revenues and allocated costs (including the allocation methodology) of the Advisor in serving as investment advisor to the Fund for the twelve months ended December 31, 2019 and the estimated profitability level for the Fund calculated by the Advisor based on such data, as well as complex-wide and product-line profitability data, for the same period. The Board noted the inherent limitations in the profitability analysis and concluded that, based on the information provided, the Advisor's profitability level for the Fund was not unreasonable. In addition, the Board considered fall-out benefits described by the Advisor that may be realized from its relationship with the Fund. The Board noted that FTCP has an ownership interest in the Sub-Advisor and considered potential fall-out benefits to the Advisor from such ownership interest. The Board also considered that the Advisor had identified as a fall-out benefit to the Advisor and FTP their exposure to investors and brokers who, absent their exposure to the Fund, may have had no dealings with the Advisor or FTP. The Board concluded that the character and amount of potential fall-out benefits to the Advisor were not unreasonable. The Board considered that the Sub-Advisor's investment services expenses are primarily fixed in nature, and that the Sub-Advisor has made recent investments in personnel and infrastructure and anticipates that its expenses will continue to rise due to additions to personnel and system upgrades. The Board did not review the profitability of the Sub-Advisor with respect to the Fund. The Board noted that the Advisor pays the Sub-Advisor from the unitary fee and its understanding that the Fund's sub-advisory fee rate was the product of an arm's Page 31 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV OCTOBER 31, 2020 (UNAUDITED) length negotiation. The Board concluded that the profitability analysis for the Advisor was more relevant. The Board considered fall-out benefits that may be realized by the Sub-Advisor from its relationship with the Fund, including soft-dollar arrangements, and considered a summary of such arrangements. The Board also considered the potential fall-out 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 fall-out benefits to the Sub-Advisor were not unreasonable. Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, unanimously determined that the terms of the Agreements continue to be fair and reasonable and that the continuation of the Agreements is in the best interests of the Fund. No single factor was determinative in the Board's analysis. REMUNERATION First Trust Advisors L.P. ("First Trust") is authorised and regulated by the U.S. Securities and Exchange Commission and is entitled to market shares of certain First Trust Exchanged-Traded Fund IV funds it manages (the "Funds"), in certain member states in the European Economic Area in accordance with the cooperation arrangements in Article 42 of the Alternative Investment Fund Managers Directive (the "Directive"). First Trust is required under the Directive to make disclosures in respect of remuneration. The following disclosures are made in line with First Trust's interpretation of currently available regulatory guidance on remuneration disclosures. During the year ended December 31, 2019, the amount of remuneration paid (or to be paid) by First Trust Advisors L.P. in respect of the Funds is $957,969. This figure is comprised of $59,477 paid (or to be paid) in fixed compensation and $898,492 paid (or to be paid) in variable compensation. There were a total of 15 beneficiaries of the remuneration described above. Those amounts include $559,433 paid (or to be paid) to senior management of First Trust Advisors L.P. and $398,536 paid (or to be paid) to other employees whose professional activities have a material impact on the risk profiles of First Trust Advisors L.P. or the Funds (collectively, "Code Staff"). Code Staff included in the aggregated figures disclosed above are rewarded in line with First Trust's remuneration policy (the "Remuneration Policy") which is determined and implemented by First Trust's senior management. The Remuneration Policy reflects First Trust's ethos of good governance and encapsulates the following principal objectives: i. to provide a clear link between remuneration and performance of First Trust and to avoid rewarding for failure; ii. to promote sound and effective risk management consistent with the risk profiles of the funds managed by First Trust; and iii. to remunerate staff in line with the business strategy, objectives, values and interests of First Trust and the funds managed by First Trust in a manner that avoids conflicts of interest. First Trust assesses various risk factors which it is exposed to when considering and implementing remuneration for Code Staff and considers whether any potential award to such person(s) would give rise to a conflict of interest. First Trust does not reward failure, or consider the taking of risk or failure to take risk in its remuneration of Code Staff. First Trust assesses performance for the purposes of determining payments in respect of performance-related remuneration of Code Staff by reference to a broad range of measures including (i) individual performance (using financial and non-financial criteria), and (ii) the overall performance of First Trust. Remuneration is not based upon the performance of the Funds. The elements of remuneration are balanced between fixed and variable and the senior management sets fixed salaries at a level sufficient to ensure that variable remuneration incentivises and rewards strong individual performance but does not encourage excessive risk taking. No individual is involved in setting his or her own remuneration. Page 32 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV OCTOBER 31, 2020 (UNAUDITED) 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 May 11, 2020 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 June 1, 2019 (the initial compliance date for certain requirements of Rule 22e-4) through the Liquidity Committee's annual meeting held on March 20, 2020 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, no fund breached the 15% limitation on illiquid investments, no fund with a highly liquid investment minimum breached that minimum and no fund filed a Form N-LIQUID. The Advisor concluded that each fund's investment strategy is appropriate for an open-end fund; that the Program operated effectively in all material respects during the review period; and that the Program is reasonably designed to assess and manage the liquidity risk of each fund and to maintain compliance with Rule 22e-4. Page 33 <PAGE> --------------------------------------------------------------------------------BOARD OF TRUSTEES AND OFFICERS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV OCTOBER 31, 2020 (UNAUDITED) The following tables identify the Trustees and Officers of the Trust. Unless otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite 400, Wheaton, IL 60187. The Trust's statement of additional information includes additional information about the Trustees and is available, without charge, upon request, by calling (800) 988-5891. <TABLE> <CAPTION> NUMBER OF OTHER PORTFOLIOS IN TRUSTEESHIPS OR THE FIRST TRUST DIRECTORSHIPS NAME, TERM OF OFFICE AND FUND COMPLEX HELD BY TRUSTEE YEAR OF BIRTH AND YEAR FIRST ELECTED PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST POSITION WITH THE TRUST OR APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ INDEPENDENT TRUSTEES ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 189 None (1951) Limited Partner, Gundersen Real Estate o Since Inception Limited Partnership (June 1992 to December 2016); Member, Sportsmed LLC (April 2007 to November 2015) Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 189 Director of ADM (1957) (Futures Commission Merchant) Investor Services, o Since Inception Inc., ADM Investor Services International, Futures Industry Association, and National Futures Association Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 189 Director of Trust (1956) and Management Consulting) Company of o Since Inception Illinois Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 189 None (1954) Managing Director and Chief Operating o Since Inception Officer (January 2015 to August 2018), Pelita Harapan Educational Foundation (Educational Product and Services) ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED TRUSTEE ------------------------------------------------------------------------------------------------------------------------------------ James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 189 None Chairman of the Board Advisors L.P. and First Trust Portfolios (1955) o Since Inception L.P., Chairman of the Board of Directors, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) </TABLE> ----------------------------- (1) Mr. Bowen is deemed an "interested person" of the Trust due to his position as Chief Executive Officer of First Trust Advisors L.P., investment advisor of the Trust. Page 34 <PAGE> --------------------------------------------------------------------------------BOARD OF TRUSTEES AND OFFICERS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV OCTOBER 31, 2020 (UNAUDITED) <TABLE> <CAPTION> NAME AND POSITION AND OFFICES TERM OF OFFICE AND PRINCIPAL OCCUPATIONS YEAR OF BIRTH WITH TRUST LENGTH OF SERVICE DURING PAST 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS(2) ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> James M. Dykas President and Chief Executive o Indefinite Term Managing Director and Chief Financial Officer (1966) Officer (January 2016 to Present), Controller (January 2011 o Since January 2016 to January 2016), Senior Vice President (April 2007 to January 2016), First Trust Advisors L.P. and First Trust Portfolios L.P.; Chief Financial Officer (January 2016 to Present), BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President (July 2016 to Present), Vice (1972) Officer and Chief President (April 2012 to July 2016), First Trust Accounting Officer o Since January 2016 Advisors L.P. and First Trust Portfolios L.P. W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and First (1960) Legal Officer Trust Portfolios L.P.; Secretary and General o Since Inception Counsel, BondWave LLC; Secretary, Stonebridge Advisors LLC Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and (1970) First Trust Portfolios L.P. o Since Inception Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P. (1966) and Assistant Secretary and First Trust Portfolios L.P. o Since Inception Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. (1966) and First Trust Portfolios L.P. o Since Inception Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. (1970) and First Trust Portfolios L.P. o Since Inception </TABLE> ----------------------------- (2) The term "officer" means the president, vice president, secretary, treasurer, controller or any other officer who performs a policy making function. Page 35 <PAGE> -------------------------------------------------------------------------------- PRIVACY POLICY -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND IV OCTOBER 31, 2020 (UNAUDITED) PRIVACY POLICY First Trust values our relationship with you and considers your privacy an important priority in maintaining that relationship. We are committed to protecting the security and confidentiality of your personal information. SOURCES OF INFORMATION We collect nonpublic personal information about you from the following sources: o Information we receive from you and your broker-dealer, investment advisor or financial representative through interviews, applications, agreements or other forms; o Information about your transactions with us, our affiliates or others; o Information we receive from your inquiries by mail, e-mail or telephone; and o Information we collect on our website through the use of "cookies". For example, we may identify the pages on our website that your browser requests or visits. INFORMATION COLLECTED The type of data we collect may include your name, address, social security number, age, financial status, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, investment objectives, marital status, family relationships and other personal information. DISCLOSURE OF INFORMATION We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. In addition to using this information to verify your identity (as required under law), the permitted uses may also include the disclosure of such information to unaffiliated companies for the following reasons: o In order to provide you with products and services and to effect transactions that you request or authorize, we may disclose your personal information as described above to unaffiliated financial service providers and other companies that perform administrative or other services on our behalf, such as transfer agents, custodians and trustees, or that assist us in the distribution of investor materials such as trustees, banks, financial representatives, proxy services, solicitors and printers. o We may release information we have about you if you direct us to do so, if we are compelled by law to do so, or in other legally limited circumstances (for example to protect your account from fraud). In addition, in order to alert you to our other financial products and services, we may share your personal information within First Trust. USE OF WEBSITE ANALYTICS We currently use third party analytics tools, Google Analytics and AddThis, to gather information for purposes of improving First Trust's website and marketing our products and services to you. These tools employ cookies, which are small pieces of text stored in a file by your web browser and sent to websites that you visit, to collect information, track website usage and viewing trends such as the number of hits, pages visited, videos and PDFs viewed and the length of user sessions in order to evaluate website performance and enhance navigation of the website. We may also collect other anonymous information, which is generally limited to technical and web navigation information such as the IP address of your device, internet browser type and operating system for purposes of analyzing the data to make First Trust's website better and more useful to our users. The information collected does not include any personal identifiable information such as your name, address, phone number or email address unless you provide that information through the website for us to contact you in order to answer your questions or respond to your requests. To find out how to opt-out of these services click on: Google Analytics and AddThis. CONFIDENTIALITY AND SECURITY With regard to our internal security procedures, First Trust restricts access to your nonpublic personal information to those First Trust employees who need to know that information to provide products or services to you. We maintain physical, electronic and procedural safeguards to protect your nonpublic personal information. POLICY UPDATES AND INQUIRIES As required by federal law, we will notify you of our privacy policy annually. We reserve the right to modify this policy at any time, however, if we do change it, we will tell you promptly. For questions about our policy, or for additional copies of this notice, please go to www.ftportfolios.com, or contact us at 1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust Advisors). March 2019 Page 36 <PAGE> FIRST TRUST First Trust Exchange-Traded Fund IV INVESTMENT ADVISOR First Trust Advisors L.P. 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 INVESTMENT SUB-ADVISOR Energy Income Partners, LLC 10 Wright Street Westport, CT 06880 ADMINISTRATOR, CUSTODIAN, FUND ACCOUNTANT & TRANSFER AGENT The Bank of New York Mellon 240 Greenwich Street New York, NY 10286 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deloitte & Touche LLP 111 S. Wacker Drive Chicago, IL 60606 LEGAL COUNSEL Chapman and Cutler LLP 111 W. Monroe Street Chicago, IL 60603 <PAGE> [BLANK BACK COVER] <PAGE>
FIRST TRUST First Trust Exchange-Traded Fund IV -------------------------------------------------------------------------------- First Trust Senior Loan Fund (FTSL) Annual Report For the Year Ended October 31, 2020 <PAGE> --------------------------------------------------------------------------------TABLE OF CONTENTS -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) ANNUAL REPORT OCTOBER 31, 2020 Shareholder Letter........................................................... 1 Fund Performance Overview.................................................... 2 Portfolio Commentary......................................................... 5 Understanding Your Fund Expenses............................................. 7 Portfolio of Investments..................................................... 8 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 Report of Independent Registered Public Accounting Firm...................... 29 Additional Information....................................................... 30 Board of Trustees and Officers............................................... 36 Privacy Policy............................................................... 38 CAUTION REGARDING FORWARD-LOOKING STATEMENTS This report contains certain forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding the goals, beliefs, plans or current expectations of First Trust Advisors L.P. ("First Trust" or the "Advisor") and its representatives, taking into account the information currently available to them. Forward-looking statements include all statements that do not relate solely to current or historical fact. For example, forward-looking statements include the use of words such as "anticipate," "estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or other words that convey uncertainty of future events or outcomes. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the series of First Trust Exchange-Traded Fund IV (the "Trust") described in this report (First Trust Senior Loan Fund; hereinafter referred to as the "Fund") to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. When evaluating the information included in this report, you are cautioned not to place undue reliance on these forward-looking statements, which reflect the judgment of the Advisor and its representatives only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events and circumstances that arise after the date hereof. PERFORMANCE AND RISK DISCLOSURE There is no assurance that the Fund will achieve its investment objectives. The Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the Fund's shares may therefore be less than what you paid for them. Accordingly, you can lose money investing in the Fund. See "Risk Considerations" in the Additional Information section of this report for a discussion of other risks of investing in the Fund. Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. For the most recent month-end performance figures, please visit www.ftportfolios.com or speak with your financial advisor. Investment returns, net asset value and share price will fluctuate and Fund shares, when sold, may be worth more or less than their original cost. The Advisor may also periodically provide additional information on Fund performance on the Fund's webpage at www.ftportfolios.com. HOW TO READ THIS REPORT This report contains information that may help you evaluate your investment in the Fund. It includes details about the Fund and presents data and analysis that provide insight into the Fund's performance and investment approach. By reading the portfolio commentary from the portfolio management team of the Fund, you may obtain an understanding of how the market environment affected the Fund's performance. The statistical information that follows may help you understand the Fund's performance compared to that of relevant market benchmarks. It is important to keep in mind that the opinions expressed by personnel of the Advisor are just that: informed opinions. They should not be considered to be promises or advice. The opinions, like the statistics, cover the period through the date on the cover of this report. The material risks of investing in the Fund are spelled out in the prospectus, the statement of additional information, and other Fund regulatory filings. <PAGE> -------------------------------------------------------------------------------- SHAREHOLDER LETTER -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) ANNUAL LETTER FROM THE CHAIRMAN AND CEO OCTOBER 31, 2020 Dear Shareholders: First Trust is pleased to provide you with the annual report for the First Trust Senior Loan Fund (the "Fund"), which contains detailed information about the Fund for the twelve months ended October 31, 2020. As I was collecting my thoughts for this annual roundup it occurred to me that my message this year should touch on the tone of the markets and the investing climate rather than belabor all the news and events that brought us to this juncture. We all know how tumultuous our lives have become over the past eight or so months. The phrase "shelter-at-home" says it all. I would rather talk about why I believe investors should be optimistic about where we could be headed. Having said that, allow me to at least acknowledge the two elephants in the room: the coronavirus ("COVID-19") and the election. In the first 12 days of November, we learned the following: that we likely have a new president-elect (Joe Biden), though it may not be official for some time because it is being contested by President Donald Trump and some of his loyal backers in the Republican Party citing voter fraud in certain states; that we still do not know which political party will have control of the Senate due to a couple of run-offs in Georgia to be held on January 5, 2021; and, that it looks as though we may be fortunate enough to have an FDA-approved COVID-19 vaccine by either the end of 2020 or the start of 2021, though that too is not yet official. It could be a game-changer in the COVID-19 battle. And, we may gain access to additional vaccines as well. The key to getting the economy back to running on all cylinders is to fully reopen, and a vaccine is "what the doctor ordered." With respect to the tone of the markets and investment climate, to say that I am encouraged about what has transpired in 2020 would be an understatement. Despite the extraordinary challenges so far this year, the S&P 500(R) Index posted a total return of 2.77% over the first 10 months of 2020, this despite plunging 33.8% into bear market territory from February 19, 2020 through March 23, 2020, according to Bloomberg. As impressive as that feat is, the future looks even brighter. While Bloomberg's consensus earnings growth rate estimate for the S&P 500(R) Index for 2020 was -16.51%, as of November 13, 2020, its 2021 and 2022 estimates were 21.74% and 16.95%, respectively. That is a strong take on the prospects for a rebound in Corporate America over the next 24 months. One of the tailwinds that is providing a good deal of support to the economy and markets is the decision by the Federal Reserve (the "Fed") to keep interest rates artificially low for as long as need be to meet both its employment and inflation targets. By keeping rates lower for longer, the Fed is essentially inviting investors to assume more risk to generate higher returns. Brian Wesbury, Chief Economist at First Trust, believes that the Fed could need until 2024 to accomplish its goals. That is a lot of runway for investors to reposition their portfolios, if needed, and a very generous, and perhaps unprecedented, amount of guidance from the Fed, in our opinion. Those investors with cash on the sidelines earning next to nothing have options if they choose to act. We are encouraged about the prospects for the economy and the markets, but investors should be prepared to weather some volatility until the COVID-19 pandemic is better contained. As always, we encourage investors to stay the course! Thank you for giving First Trust the opportunity to play a role in your financial future. We value our relationship with you and will report on the Fund again in six months. Sincerely, /s/ James A. Bowen James A. Bowen Chairman of the Board of Trustees Chief Executive Officer of First Trust Advisors L.P. Page 1 <PAGE> -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) The First Trust Senior Loan Fund's (the "Fund") primary investment objective is to provide high current income. The Fund's secondary investment objective is the preservation of capital. Under normal market conditions, the Fund seeks to outperform each of the S&P/LSTA U.S. Leveraged Loan 100 Index and the Markit iBoxx USD Liquid Leveraged Loan Index by investing at least 80% of its net assets (including investment borrowings) in first lien senior floating rate bank loans ("Senior Loans"). The S&P/LSTA U.S. Leveraged Loan 100 Index (the "Primary Index") is a market value-weighted index designed to measure the performance of the largest segment of the U.S. syndicated leveraged loan market. The Primary Index consists of 100 loan facilities drawn from a larger benchmark, the S&P/LSTA Leveraged Loan Index. The Markit iBoxx USD Liquid Leveraged Loan Index (the "Secondary Index") selects the 100 most liquid Senior Loans in the market. The Fund does not seek to track either the Primary or Secondary Index, but rather seeks to outperform each of the Indices. It is anticipated that the Fund, in accordance with its principal investment strategy, will invest approximately 50% to 75% of its net assets in Senior Loans that are eligible for inclusion in and meet the liquidity thresholds of the Primary and/or the Secondary Indices at the time of investment. A Senior Loan is an advance or commitment of funds made by one or more banks or similar financial institutions to one or more corporations, partnerships or other business entities and typically pays interest at a floating or adjusting rate that is determined periodically at a designated premium above a base lending rate, most commonly the London Interbank Offered Rate ("LIBOR"). The Fund invests primarily in Senior Loans that are below investment grade quality at the time of investment. Securities rated below investment grade, commonly referred to as "junk" or "high-yield" securities, include securities that are rated Ba1/BB+/BB+ or below by Moody's Investors Service, Inc., Fitch, Inc., or Standard & Poor's Ratings Group, respectively. The Fund invests in Senior Loans made predominantly to businesses operating in North America, but may also invest in Senior Loans made to businesses operating outside of North America. The Senior Loans included in the Fund's portfolio often maintain a duration of less than 90 days; however, the inclusion of LIBOR floors on certain Senior Loans or other factors may cause interest rate duration to be longer than 90 days. The Fund may also invest up to 20% of its net assets in (1) non-Senior Loan debt securities, which may be fixed-rate or floating-rate income-producing securities (including, without limitation, U.S. government debt securities and corporate debt securities which may include convertible bonds), (2) warrants, U.S. and non U.S. equity and equity-like positions and interests and other securities issued by or with respect to a borrower or its affiliates, and/or (3) securities of other investment companies.<TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL CUMULATIVE TOTAL RETURNS TOTAL RETURNS 1 Year Ended 5 Years Ended Inception (5/1/13) 5 Years Ended Inception (5/1/13) 10/31/20 10/31/20 to 10/31/20 10/31/20 to 10/31/20 <S> <C> <C> <C> <C> <C> FUND PERFORMANCE NAV 0.90% 3.03% 2.76% 16.08% 22.66% Market Price 0.95% 2.93% 2.73% 15.52% 22.43% INDEX PERFORMANCE Markit iBoxx USD Liquid Leveraged Loan Index -0.90% 2.79% 2.23% 14.75% 17.97% S&P/LSTA U.S. Leveraged Loan 100 Index 1.52% 4.06% 3.05% 22.01% 25.29% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> Total returns for the period since inception are calculated from the inception date of the Fund. "Average Annual Total Returns" represent the average annual change in value of an investment over the period indicated. "Cumulative Total Returns" represent the total change in value of an investment over the period indicated. The Fund's per share net asset value ("NAV") is the value of one share of the Fund and is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of outstanding shares. The price used to calculate market return ("Market Price") is determined by using the midpoint of the national best bid and offer price ("NBBO") as of the time that the Fund's NAV is calculated. Under SEC rules, the NBBO consists of the highest displayed buy and lowest sell prices among the various exchanges trading the Fund at the time the Fund's NAV is calculated. Prior to January 1, 2019, the price used was the midpoint between the highest bid and the lowest offer on the stock exchange on which shares of the Fund were listed for trading as of the time that the Fund's NAV was calculated. Since shares of the Fund did not trade in the secondary market until after the Fund's inception, for the period from inception to the first day of secondary market trading in shares of the Fund, the NAV of the Fund is used as a proxy for the secondary market trading price to calculate market returns. NAV and market returns assume that all distributions have been reinvested in the Fund at NAV and Market Price, respectively. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The total returns presented reflect the reinvestment of dividends on securities in the indices. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future performance. Page 2 <PAGE> --------------------------------------------------------------------------------FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) ------------------------------------------------------- % OF SENIOR LOANS AND OTHER INDUSTRY CLASSIFICATION SECURITIES(1) ------------------------------------------------------- Software 19.5% Health Care Providers & Services 16.9 Insurance 10.8 Pharmaceuticals 9.9 Hotels, Restaurants & Leisure 8.5 Media 7.2 Diversified Telecommunication Services 4.4 Health Care Technology 3.2 Diversified Financial Services 3.2 Diversified Consumer Services 3.0 Entertainment 2.5 Containers & Packaging 1.8 Auto Components 1.5 Professional Services 1.5 Aerospace & Defense 1.3 Electric Utilities 1.3 Commercial Services & Supplies 1.0 Communications Equipment 0.4 Technology Hardware, Storage & Peripherals 0.4 Household Durables 0.4 Food & Staples Retailing 0.3 Oil, Gas & Consumable Fuels 0.3 Machinery 0.2 Food Products 0.2 Wireless Telecommunication Services 0.2 IT Services 0.1 Real Estate Management & Development 0.0* Airlines 0.0* Trading Companies & Distributors 0.0* Life Sciences Tools & Services 0.0* -------- Total 100.0% ======== * Amount is less than 0.1%.------------------------------------------------------- % OF SENIOR LOANS AND OTHER ASSET CLASSIFICATION SECURITIES(1) ------------------------------------------------------- Senior Floating-Rate Loan Interests 91.8% Corporate Bonds and Notes 7.6 Foreign Corporate Bonds and Notes 0.4 Common Stocks 0.2 Rights 0.0* -------- Total 100.0% ======== ------------------------------------------------------- % OF SENIOR LOANS AND OTHER CREDIT QUALITY (S&P RATINGS)(2) DEBT SECURITIES(1) ------------------------------------------------------- BBB- 0.1% BB+ 0.1 BB 5.4 BB- 9.3 B+ 27.1 B 35.2 B- 15.3 CCC+ 1.5 CCC 2.2 CCC- 1.0 D 2.4 NR 0.4 -------- Total 100.0% ======== ------------------------------------------------------- % OF SENIOR LOANS AND OTHER TOP 10 ISSUERS SECURITIES(1) ------------------------------------------------------- Alliant Holdings I LLC 3.3% HUB International Ltd. 3.2 Asurion LLC 2.9 Bausch Health Cos., Inc. (Valeant) 2.9 AmWINS Group, Inc. 2.5 CHG Healthcare Services, Inc. 2.3 Caesars Resort Collection LLC 2.3 Micro Focus International (MA Financeco LLC) 2.2 Multiplan, Inc. (MPH) 2.2 Refinitiv US Holdings, Inc. 2.0 -------- Total 25.8% ======== (1) Percentages are based on long-term positions. Money market funds are excluded. (2) The ratings are by Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc. A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO) of the creditworthiness of an issuer with respect to debt obligations except for those debt obligations that are privately rated. Ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). Investment grade is defined as those issuers that have a long-term credit rating of BBB- or higher. The credit ratings shown relate to the credit worthiness of the issuers of the underlying securities in the Fund, and not to the Fund or its shares. Credit ratings are subject to change. Page 3 <PAGE> --------------------------------------------------------------------------------FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT MAY 1, 2013 - OCTOBER 31, 2020 First Trust Senior Markit iBoxx USD Liquid S&P/LSTA U.S. Leveraged Loan Fund Leveraged Loan Index Loan 100 Index <S> <C> <C> <C> 5/1/13 $10,000 $10,000 $10,000 10/31/13 10,092 10,103 10,122 4/30/14 10,275 10,323 10,338 10/31/14 10,385 10,389 10,434 4/30/15 10,637 10,594 10,589 10/31/15 10,567 10,280 10,268 4/30/16 10,763 10,484 10,527 10/31/16 11,034 10,826 10,968 4/30/17 11,247 11,026 11,260 10/31/17 11,414 11,161 11,452 4/30/18 11,592 11,404 11,708 10/31/18 11,760 11,602 11,929 4/30/19 12,044 11,877 12,262 10/31/19 12,156 11,905 12,339 4/30/20 11,619 11,122 11,765 10/31/20 12,266 11,797 12,529 </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 <PAGE> -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) ANNUAL REPORT OCTOBER 31, 2020 (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 October 31, 2020, the First Trust Leveraged Finance Team managed or supervised approximately $5.43 billion in senior secured bank loans and high-yield bonds. These assets are managed across various strategies, including three closed-end funds, an open-end fund, three exchange-traded funds, and a series of unit investment trusts on behalf of retail and institutional clients. PORTFOLIO MANAGEMENT TEAM WILLIAM HOUSEY, CFA - MANAGING DIRECTOR OF FIXED INCOME, SENIOR PORTFOLIO MANAGER JEFFREY SCOTT, CFA - SENIOR VICE PRESIDENT, DEPUTY CREDIT OFFICER AND PORTFOLIO MANAGER ORLANDO PURPURA, CFA, CMT - SENIOR VICE PRESIDENT, CHIEF CREDIT OFFICER AND PORTFOLIO MANAGER COMMENTARY The First Trust Senior Loan Fund (the "Fund") is an actively managed exchanged-traded fund ("ETF"). The Fund's primary investment objective is to provide high current income, with a secondary objective of preservation of capital. MARKET RECAP As we ended 2019, the Federal Reserve (the "Fed") had cut interest rates for the last time in October 2019 and in December indicated that no action would be likely in 2020 given the persistently low inflation environment. In January 2020, the United States and China signed "Phase One" of a trade agreement, and U.S. economic data remained strong. The combination of a patient Fed, improving U.S.- China trade relations, and a robust domestic economy propelled the S&P 500(R) Index to new highs in late February 2020. Shortly after, as the coronavirus ("COVID-19") pandemic gripped the world's attention, the financial market implications from the onset of the resulting global economic shutdown became clear. Equities experienced their most rapid sell-off since the global financial crisis in 2008. By March 23, 2020 the S&P 500(R) Index was down nearly 34% from its all-time high set on February 19, 2020. Policy makers then took unprecedented steps to stabilize the markets. Central Banks around the world cut interest rates and governments announced aggressive monetary stimulus packages. Domestically, the CARES Act was passed and signed into law on March 27. The bill included a historic $2 trillion stimulus package aimed at sending financial aid to struggling U.S. citizens and businesses affected by COVID-19. The Fed also cut the target Fed Funds rate by 150 basis points ("bps") during the month of March. As fears subsided, and optimism that the combination of a re-opening of the U.S. economy and aggressive fiscal and monetary stimulus would result in a quicker than expected recovery, markets surpassed pre-pandemic levels before a resurgence in COVID-19 infections tempered investor optimism at the end of the 12-month period ended October 31, 2020. Senior Loan Market Senior loan spreads over 3-month London Interbank Offered Rate ("LIBOR") increased 70 bps during the 12-month period ended October 31, 2020, to L+585 bps. This is above the long-term average spread of L+518 (December 1997 - October 2020). Retail senior loan funds have experienced 25 consecutive monthly outflows with demand impacted by the dramatic decrease of the 3-month LIBOR rate during the same period. Single-B rated senior loans outperformed both higher and lower quality senior loans during the same period, returning 3.13% while BB rated issues returned -0.60%. Single Bs also outperformed CCC rated issues which returned -1.41% during the same period. The average price of senior loans in the market decreased from $95.42 in the beginning of the period to $93.17 at the end of the period. Default Rates During the 12-month period ended October 31, 2020, default rates increased within the S&P/LSTA Leveraged Loan Index. The senior loan market default rate ended the period at 4.11% compared to the 1.43% rate at the beginning of the period. The default rate in the senior loan market is above the long-term average default rate of 2.90%. Looking forward, we anticipate senior loan market default rates to remain above the long-term averages through 2021 but anticipate a decline in the default rate as the economy recovers and the introduction of a vaccine brings a recovery to the industries most impacted by COVID-19. Page 5 <PAGE> -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) ANNUAL REPORT OCTOBER 31, 2020 (UNAUDITED) FUND PERFORMANCE The Fund returned 0.90% on a net asset value ("NAV") basis and 0.95% on a market price basis over the 12-month period ended October 31, 2020. The S&P/LSTA U.S. Leveraged Loan 100 Index ("the Index") returned 1.52% over the same period. The Fund held 149 individual positions diversified across 29 industries at the end of the reporting period. Software (19.51%), Health Care Providers & Services (16.92%), and Insurance (10.84%) were the Fund's top three industry exposures at the end of the period. By comparison, the Fund held 194 individual positions across 33 industries as of October 31, 2019. The Fund modestly decreased its allocation to high-yield bonds from 8.89% to 8.03% throughout the period, an 86 bps decrease. The Fund's duration remained low throughout the period and modestly increased from 0.39 years at the beginning of the period to 0.43 years at the end of the period. During the last twelve months ("LTM") the Fund's performance significantly benefited from its overweight position and asset selection in the healthcare industry. Within the healthcare industry, the Fund's overweight position in a healthcare cost management solutions company and a healthcare services company both outperformed the broader healthcare industry. The healthcare industry is expected to benefit from a divided government, which we believe will result in no major healthcare legislation or significant changes to the regulatory environment. Moreover, we anticipate a continued recovery to healthcare volumes, which are based on billable patient encounters, as the economy continues to recover from COVID-19. In addition, the Fund benefited from not having an allocation to the oil & gas industry. The oil & gas industry was one of the worst performing industries in the Index during the period. The average weight of the industry in the Index during the LTM period was 2.80%. The underweight allocation during a period of declining energy prices was significantly accretive to relative returns. The Fund's overweight position in the pharmaceutical industry and asset selection in the electronics/electrical (technology) industry were also notable contributors to the Fund's performance during the LTM period. Primarily driving the Fund's pharmaceutical industry contribution was the Fund's overweight position in several pharmaceutical companies that significantly outperformed the broader pharmaceutical industry during the LTM period. Finally, primarily driving the Fund's electronics/electrical (technology) industry outperformance was the Fund's overweight position in a software services company that outperformed the broader electronics/electrical (technology) industry during the LTM period. The Fund's underweight position in a travel technology company that had a large negative return during the LTM period due to the pandemic's ramifications on the travel industry also contributed to the Fund's outperformance during the LTM period. Modestly offsetting these contributors were the Fund's holdings within the leisure, chemicals & plastics, and building & development industries, due to asset selection. The primary driver of the leisure industry underperformance was the Fund's overweight exposure to movie theaters. Movie theaters continue to face headwinds as new movie releases have been pushed further out on the calendar as the industry awaits a COVID-19 vaccine. The Fund's most recent monthly distribution of $0.127 per share is $0.043 per share lower than the distribution paid in October 2019. Over the LTM period, 3-month LIBOR dropped 168 bps from 1.90% to 0.22% at the end of October 2020, and distributions followed suit. At the end of the period, the effective yield based on the distributions for the trailing twelve months was 3.71% based on NAV. The Fund experienced two defaults during the LTM period. This compared to 53 defaults within the S&P/LSTA Leveraged Loan Index during the LTM period. Since inception, the Fund has experienced nine defaults, which compares to 139 within the broad S&P/LSTA Leveraged Loan Index during the same period. The Fund's LTM default rate was 1.63% at October 31, 2020. The S&P/LSTA Leveraged Loan Index default rate was 4.11%. MARKET AND FUND OUTLOOK We believe senior loans are supported by spreads that remain in line with the long-term average, opportunistic pockets of value across ratings and industries, a low interest rate environment and an improving U.S. economy. Moreover, while the default rate has increased during the period, we believe individual credits that came into the 2020 recession with too much leverage, and sectors most impacted by COVID-19, will face a higher likelihood of default including, but not limited to energy, travel, leisure and retail, in no particular order. However, generally, businesses that haven't been impacted by COVID-19 continue to perform well, in our opinion. We remain confident that improving economic conditions, unprecedented support from the Fed, and the potential for additional stimulus will provide a backdrop for continued recovery in senior loans, in our view. As we evaluate new investment opportunities, decisions will continue to be rooted in our rigorous bottom-up credit analysis and our focus will remain on identifying the opportunities that we believe offer the best risk and reward balance. Page 6 <PAGE> FIRST TRUST SENIOR LOAN FUND (FTSL) UNDERSTANDING YOUR FUND EXPENSES OCTOBER 31, 2020 (UNAUDITED) As a shareholder of First Trust Senior Loan Fund (the "Fund"), you incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, if any, and other Fund expenses. This Example is intended to help you understand your ongoing costs of investing in the Fund and to compare these costs with the ongoing costs of investing in other funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held through the six-month period ended October 31, 2020. ACTUAL EXPENSES The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Six-Month Period" to estimate the expenses you paid on your account during this six-month period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the following table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as brokerage commissions. Therefore, the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.<TABLE> <CAPTION> ----------------------------------------------------------------------------------------------------------------------- ANNUALIZED EXPENSE RATIO EXPENSES PAID BEGINNING ENDING BASED ON THE DURING THE ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH MAY 1, 2020 OCTOBER 31, 2020 PERIOD (a) PERIOD (a) (b) ----------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> FIRST TRUST SENIOR LOAN FUND (FTSL) Actual $1,000.00 $1,055.70 0.85% $4.39 Hypothetical (5% return before expenses) $1,000.00 $1,020.86 0.85% $4.32 </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 (May 1, 2020 through October 31, 2020), multiplied by 184/366 (to reflect the six-month period). Page 7 <PAGE>FIRST TRUST SENIOR LOAN FUND (FTSL) PORTFOLIO OF INVESTMENTS OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED VALUE DESCRIPTION RATE (a) MATURITY (b) VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> SENIOR FLOATING-RATE LOAN INTERESTS -- 88.6% AEROSPACE & DEFENSE -- 1.3% $ 2,693,286 Spirit Aerosystems, Inc., Term Loan B, 1 Mo. LIBOR + 5.25%, 0.75% Floor.................................................. 6.00% 01/30/25 $ 2,686,552 2,878,250 Transdigm, Inc., Tranche E Refinancing TL, 1 Mo. LIBOR + 2.25%, 0.00% Floor........................................... 2.40% 05/30/25 2,703,569 11,390,705 Transdigm, Inc., Tranche G Refinancing Term Loan, 1 Mo. LIBOR + 2.25%, 0.00% Floor................................... 2.40% 08/22/24 10,697,125 --------------- 16,087,246 --------------- AIRLINES -- 0.0% 516,482 Delta Air Lines, Inc., Term Loan B, 3 Mo. LIBOR + 3.75%, 1.00% Floor.................................................. 4.75% 09/16/27 514,008 --------------- APPLICATION SOFTWARE -- 14.1% 4,649,290 CCC Information Services, Inc. (Cypress), Term Loan B, 1 Mo. LIBOR + 3.00%, 1.00% Floor................................... 4.00% 04/26/24 4,594,103 9,014,115 Epicor Software Corp., Term Loan B, 1 Mo. LIBOR + 4.25%, 1.00% Floor.................................................. 5.25% 07/30/27 8,971,298 11,469,429 Greeneden U.S. Holdings II LLC (Genesys Telecommunications Laboratories, Inc.), Initial Dollar Term Loan, 1 Mo. LIBOR + 4.00%, 0.75% Floor........................................... 4.75% 11/30/27 11,275,939 24,285,257 Hyland Software, Inc., 2018 Refinancing Term Loan, 1 Mo. LIBOR + 3.50%, 0.75% Floor................................... 4.25% 07/01/24 23,903,736 9,181,234 Internet Brands, Inc. (WebMD/MH Sub I LLC), 2020 June New Term Loan, 1 Mo. LIBOR + 3.75%, 1.00% Floor.................. 4.75% 09/15/24 9,014,870 11,063,040 Internet Brands, Inc. (WebMD/MH Sub I LLC), Initial Term Loan, 1 Mo. LIBOR + 3.50%, 0.00% Floor....................... 3.65% 09/13/24 10,681,033 12,997,518 LogMeIn, Inc. (Logan), Term Loan B, 1 Mo. LIBOR + 4.75%, 0.00% Floor.................................................. 4.89% 08/31/27 12,583,287 22,607,260 McAfee LLC, Term Loan B, 1 Mo. LIBOR + 3.75%, 0.00% Floor........................................................ 3.89% 09/30/24 22,355,867 3,187,522 Micro Focus International (MA Financeco LLC), Miami Escrow Term Loan B3, 1 Mo. LIBOR + 2.50%, 0.00% Floor............... 2.65% 06/21/24 2,996,270 21,525,638 Micro Focus International (MA Financeco LLC), Seattle Spinco Term Loan B, 1 Mo. LIBOR + 2.50%, 0.00% Floor................ 2.65% 06/21/24 20,234,099 4,363,920 Micro Focus International (MA Financeco LLC), Term Loan B4, 3 Mo. LIBOR + 4.25%, 1.00% Floor............................. 5.25% 06/05/25 4,336,645 5,244,701 Milano Acquisition Corp., Term Loan B, 3 Mo. LIBOR + 4.00%, 0.75% Floor.................................................. 4.75% 10/01/27 5,148,565 2,283,278 Qlik Technologies (Project Alpha Intermediate Holding, Inc.), 2019 Incremental Term Loan B, 3 Mo. LIBOR + 4.25%, 0.00% Floor.................................................. 4.48% 04/26/24 2,240,467 11,669,741 Qlik Technologies (Project Alpha Intermediate Holding, Inc.), Term Loan B, 3 Mo. LIBOR + 3.50%, 1.00% Floor................ 4.50% 04/26/24 11,430,511 21,677,361 SolarWinds Holdings, Inc., 2018 Refinancing Term Loan, 1 Mo. LIBOR + 2.75%, 0.00% Floor................................... 2.90% 02/05/24 21,243,814 3,660,395 Solera Holdings, Inc., Term Loan B, 2 Mo. LIBOR + 2.75%, 0.00% Floor.................................................. 2.92% 03/03/23 3,556,477 777,423 TIBCO Software, Inc., Term Loan B-3, 1 Mo. LIBOR + 3.75%, 0.00% Floor.................................................. 3.90% 06/30/26 752,156 693,806 Ultimate Software Group, Inc., 2020 Incremental Term Loan, 3 Mo. LIBOR + 4.00%, 0.75% Floor............................. 4.75% 05/03/26 689,040 3,640,298 Veeam Software Holdings Ltd. (VS Buyer LLC), Term Loan B, 1 Mo. LIBOR + 3.25%, 0.00% Floor............................. 3.40% 02/28/27 3,549,290 --------------- 179,557,467 --------------- </TABLE> Page 8 See Notes to Financial Statements <PAGE> FIRST TRUST SENIOR LOAN FUND (FTSL) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED VALUE DESCRIPTION RATE (a) MATURITY (b) VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED) AUTO PARTS & EQUIPMENT -- 1.5% $ 15,028,493 Gates Global LLC, Initial B-2 Dollar Term Loan, 1 Mo. LIBOR + 2.75%, 1.00% Floor............................... 3.75% 03/31/24 $ 14,715,450 8,473,331 Lumileds (Bright Bidco B.V.), Term Loan B, 6 Mo. LIBOR + 3.50%, 1.00% Floor........................................... 4.50% 06/30/24 3,945,776 --------------- 18,661,226 --------------- BROADCASTING -- 3.1% 1,739,414 E.W. Scripps Co., Term Loan B-2, 1 Mo. LIBOR + 2.50%, 0.00% Floor........................................................ 2.65% 05/01/26 1,677,456 2,970,807 iHeartCommunications, Inc., Incremental Term Loan B, 1 Mo. LIBOR + 4.00%, 0.75% Floor................................... 4.75% 05/01/26 2,858,154 21,899,146 iHeartCommunications, Inc., Term Loan B, 1 Mo. LIBOR + 3.00%, 0.00% Floor........................................... 3.15% 04/29/26 20,526,508 11,739,563 Nexstar Broadcasting, Inc., Incremental Term Loan B-4, 1 Mo. LIBOR + 2.75%, 0.00% Floor................................... 2.90% 09/19/26 11,422,594 3,622,287 Nexstar Broadcasting, Inc., Nexstar Term Loan B-3, 1 Mo. LIBOR + 2.25%, 0.00% Floor................................... 2.40% 01/17/24 3,522,095 --------------- 40,006,807 --------------- CABLE & SATELLITE -- 0.9% 11,238,817 Cablevision (aka CSC Holdings LLC), October 2018 Incremental Term Loan B-3, 1 Mo. LIBOR + 2.25%, 0.00% Floor.............. 2.40% 01/15/26 10,841,975 --------------- CASINOS & GAMING -- 5.8% 991,775 Boyd Gaming Corp., Term Loan B, 1 Wk. LIBOR + 2.25%, 0.00% Floor.................................................. 2.34% 09/15/23 962,329 27,498,459 Caesars Resort Collection LLC, Term Loan B, 1 Mo. LIBOR + 2.75%, 0.00% Floor........................................... 2.90% 12/22/24 25,718,759 1,497,996 Caesars Resort Collection LLC, Term Loan B-1, 1 Mo. LIBOR + 4.50%, 0.00% Floor........................................... 4.65% 06/30/25 1,448,846 748,998 Caesars Resort Collection LLC, Term Loan B-1, 3 Mo. LIBOR + 4.50%, 0.00% Floor........................................... 4.65% 06/30/25 724,423 21,353,186 CityCenter Holdings LLC, Term Loan B, 1 Mo. LIBOR + 2.25%, 0.75% Floor.................................................. 3.00% 04/18/24 20,045,303 14,407,681 Golden Nugget, Inc., Term Loan B, 2 Mo. LIBOR + 2.50%, 0.75% Floor.................................................. 3.25% 10/04/23 12,660,750 7,787,376 Station Casinos, Inc. (Red Rocks), Term Loan B, 1 Mo. LIBOR + 2.25%, 0.25% Floor........................................... 2.50% 01/31/27 7,443,408 5,187,455 Twin River Worldwide Holdings, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%, 0.00% Floor................................... 2.90% 05/10/26 4,924,191 --------------- 73,928,009 --------------- COMMERCIAL SERVICES & SUPPLIES-- 0.1% 1,677,652 TruGreen L.P., Second Refinancing Term Loan, 1 Mo. LIBOR + 4.00%, 0.75% Floor........................................... 4.75% 11/02/27 1,665,070 --------------- COMMUNICATIONS EQUIPMENT -- 0.4% 5,249,090 Commscope, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%, 0.00% Floor........................................................ 3.40% 04/06/26 5,056,921 --------------- DATA PROCESSING & OUTSOURCED SERVICES -- 0.1% 1,396,587 Cardtronics USA, Inc., Term Loan B, 1 Mo. LIBOR + 4.00%, 1.00% Floor.................................................. 5.00% 06/30/27 1,391,350 --------------- ELECTRIC UTILITIES -- 1.2% 15,538,419 PG&E Corp., Exit Term Loan, 3 Mo. LIBOR + 4.50%, 1.00% Floor........................................................ 5.50% 06/23/25 15,344,189 --------------- </TABLE> See Notes to Financial Statements Page 9 <PAGE>FIRST TRUST SENIOR LOAN FUND (FTSL) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED VALUE DESCRIPTION RATE (a) MATURITY (b) VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED) ENVIRONMENTAL & FACILITIES SERVICES -- 0.9% $ 11,588,391 Packers Holdings LLC, Term Loan B, 1 Mo. LIBOR + 3.00%, 1.00% Floor.................................................. 4.00% 12/04/24 $ 11,383,161 --------------- FOOD DISTRIBUTORS -- 0.2% 2,246,936 US Foods, Inc., 2019 Incremental Term Loan B, 1 Mo. LIBOR + 2.00%, 0.00% Floor......................................... 2.15% 08/31/26 2,130,388 --------------- HEALTH CARE FACILITIES -- 0.6% 7,520,719 Gentiva Health Services, Inc. (Kindred at Home), Term Loan B, 1 Mo. LIBOR + 3.25%, 0.00% Floor............................. 3.44% 07/02/25 7,351,503 662,255 Select Medical Corp., Term Loan B, 6 Mo. LIBOR + 2.50%, 0.00% Floor.................................................. 2.78% 03/06/25 644,248 --------------- 7,995,751 --------------- HEALTH CARE SERVICES -- 11.7% 6,892,915 Air Methods Corp. (a/k/a ASP AMC Intermediate Holdings, Inc.), Term Loan B, 3 Mo. LIBOR + 3.50%, 1.00% Floor......... 4.50% 04/21/24 5,871,316 24,817,750 Athenahealth, Inc. (VVC Holding Corp.), Term Loan B, 3 Mo. LIBOR + 4.50%, 0.00% Floor................................... 4.75% 02/15/26 24,259,350 28,841,944 CHG Healthcare Services, Inc., Term Loan, 6 Mo. LIBOR + 3.00%, 1.00% Floor........................................... 4.00% 06/07/23 28,120,895 8,536,350 DuPage Medical Group (Midwest Physician Admin. Services LLC), Repricing Term Loan, 1 Mo. LIBOR + 2.75%, 0.75% Floor........................................................ 3.50% 08/15/24 8,301,600 23,556,748 Envision Healthcare Corp., Initial Term Loan, 1 Mo. LIBOR + 3.75%, 0.00% Floor........................................... 3.90% 10/10/25 16,742,488 798,953 Global Medical Response, Inc. (fka Air Medical), 2018 New Term Loan, 6 Mo. LIBOR + 4.25%, 1.00% Floor.................. 5.25% 03/14/25 771,237 11,223,630 Global Medical Response, Inc. (fka Air Medical), 2020 Refinancing Term Loan, 3 Mo. LIBOR + 4.75%, 1.00% Floor...... 5.75% 10/15/25 10,862,341 3,284,274 Help at Home (HAH Group Holding Co. LLC), Initial Term Loans, 3 Mo. LIBOR + 5.00%, 1.00% Floor............................. 6.00% 10/31/27 3,226,799 3,317,719 Packaging Coordinators, Inc. (PCI Pharma), Term Loan B, 6 Mo. LIBOR + 3.75%, 0.75% Floor................................... 4.50% 11/30/27 3,257,602 995,000 Surgery Centers Holdings, Inc., 2020 Incremental Term Loan, 1 Mo. LIBOR + 8.00%, 1.00% Floor............................. 9.00% 08/31/24 1,006,612 9,259,577 Surgery Centers Holdings, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%, 1.00% Floor........................................... 4.25% 08/31/24 8,760,394 8,166,985 Team Health, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%, 1.00% Floor........................................................ 3.75% 02/06/24 6,635,676 10,572,385 U.S. Renal Care, Inc., Term Loan B, 1 Mo. LIBOR + 5.00%, 0.00% Floor.................................................. 5.19% 06/28/26 10,146,212 22,157,925 Verscend Technologies, Inc., Term Loan B, 1 Mo. LIBOR + 4.50%, 0.00% Floor........................................... 4.65% 08/27/25 21,707,897 --------------- 149,670,419 --------------- HEALTH CARE TECHNOLOGY -- 3.1% 1,244,108 Change Healthcare Holdings LLC, Closing Date Term Loan, 1 Mo. LIBOR + 2.50%, 1.00% Floor............................. 3.50% 03/01/24 1,212,856 17,085,331 Change Healthcare Holdings LLC, Closing Date Term Loan, 3 Mo. LIBOR + 2.50%, 1.00% Floor............................. 3.50% 03/01/24 16,656,147 6,208,731 Press Ganey (Azalea TopCo, Inc.), Term Loan B, 1 Mo. LIBOR + 3.50%, 0.00% Floor......................................... 3.65% 07/25/26 5,975,903 </TABLE> Page 10 See Notes to Financial Statements <PAGE> FIRST TRUST SENIOR LOAN FUND (FTSL) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED VALUE DESCRIPTION RATE (a) MATURITY (b) VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED) HEALTH CARE TECHNOLOGY (CONTINUED) $ 15,931,500 Zelis Payments Buyer, Inc., Initial Term Loan, 1 Mo. LIBOR + 4.75%, 0.00% Floor........................................... 4.90% 09/30/26 $ 15,814,881 --------------- 39,659,787 --------------- HOUSEHOLD APPLIANCES -- 0.4% 3,804,264 Traeger Grills (TGP Holdings III LLC), 2018 Refinancing Term Loan, 1 Mo. LIBOR + 4.00%, 1.00% Floor....................... 5.00% 09/25/24 3,636,230 1,000,000 Weber-Stephen Products LLC, Term Loan B, 1 Mo. LIBOR + 3.25%, 0.75% Floor........................................... 4.00% 10/31/27 989,380 --------------- 4,625,610 --------------- HUMAN RESOURCE & EMPLOYMENT SERVICES -- 0.9% 11,721,550 Alight, Inc. (fka Tempo Acq.), Non Extended Term Loan, 1 Mo. LIBOR + 2.75%, 0.00% Floor................................... 2.90% 05/01/24 11,322,314 --------------- INDUSTRIAL MACHINERY -- 0.2% 2,653,563 Thyssenkrupp Elevator (Vertical U.S. Newco, Inc.), Term Loan B, 6 Mo. LIBOR + 4.25%, 0.00% Floor............................. 4.57% 07/31/27 2,612,114 --------------- INSURANCE BROKERS -- 9.9% 1,645,327 Alliant Holdings I LLC, 2019 New Term Loan, 1 Mo. LIBOR + 3.25%, 0.00% Floor........................................... 3.40% 05/10/25 1,590,307 33,037,883 Alliant Holdings I LLC, Initial Term Loan, 1 Mo. LIBOR + 2.75%, 0.00% Floor........................................... 2.90% 05/09/25 31,768,898 31,792,103 AmWINS Group, Inc., Term Loan B (First Lien), 1 Mo. LIBOR + 2.75%, 1.00% Floor........................................... 3.75% 01/25/24 31,331,118 12,754,262 AssuredPartners, Inc., Term Loan B, 1 Mo. LIBOR + 3.50%, 0.00% Floor.................................................. 3.65% 02/15/27 12,291,920 7,453,166 BroadStreet Partners, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%, 0.00% Floor.................................................. 3.40% 01/31/27 7,175,536 2,699,759 Cross Financial Corp., Term Loan B, 1 Mo. LIBOR + 4.50%, 1.00% Floor.................................................. 5.50% 09/15/27 2,686,261 2,884,058 HUB International Ltd., 2019 Incremental Term Loan B2, 3 Mo. LIBOR + 4.00%, 1.00% Floor................................... 5.00% 04/25/25 2,865,686 96,341 HUB International Ltd., Term Loan B, 2 Mo. LIBOR + 3.00%, 0.00% Floor.................................................. 3.19% 04/25/25 92,515 37,573,765 HUB International Ltd., Term Loan B, 3 Mo. LIBOR + 3.00%, 0.00% Floor.................................................. 3.21% 04/25/25 36,081,711 --------------- 125,883,952 --------------- INTEGRATED TELECOMMUNICATION SERVICES -- 4.1% 10,408,944 Frontier Communications Corp., Term Loan B-1, Prime Rate + 2.75%, 0.75% Floor (c)....................................... 6.00% 06/15/24 10,203,159 8,817,716 Numericable (Altice France S.A. or SFR), Term Loan B-11, 1 Mo. LIBOR + 2.75%, 0.00% Floor................................... 2.90% 07/31/25 8,407,251 1,979,592 Numericable (Altice France S.A. or SFR), Term Loan B-12, 1 Mo. LIBOR + 3.69%, 0.00% Floor................................... 3.84% 01/31/26 1,911,058 9,158,962 Numericable (Altice France S.A. or SFR), Term Loan B-13, 3 Mo. LIBOR + 4.00%, 0.00% Floor................................... 4.24% 08/14/26 8,875,584 24,350,611 Zayo Group Holdings, Inc., Initial Dollar Term Loan, 1 Mo. LIBOR + 3.00%, 0.00% Floor................................... 3.15% 03/09/27 23,427,236 --------------- 52,824,288 --------------- INTERACTIVE HOME ENTERTAINMENT -- 0.7% 9,231,641 Playtika Holding Corp., Term Loan B, 3 Mo. LIBOR + 6.00%, 1.00% Floor.................................................. 7.00% 12/10/24 9,225,364 --------------- </TABLE> See Notes to Financial Statements Page 11 <PAGE>FIRST TRUST SENIOR LOAN FUND (FTSL) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED VALUE DESCRIPTION RATE (a) MATURITY (b) VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED) LEISURE FACILITIES -- 0.7% $ 11,198,919 ClubCorp Holdings, Inc., Term Loan B, 3 Mo. LIBOR + 2.75%, 0.00% Floor.................................................. 2.97% 09/18/24 $ 9,380,887 --------------- MANAGED HEALTH CARE -- 2.1% 27,623,874 Multiplan, Inc. (MPH), Term Loan B, 3 Mo. LIBOR + 2.75%, 1.00% Floor.................................................. 3.75% 06/07/23 27,239,073 --------------- MOVIES & ENTERTAINMENT -- 1.3% 22,939,747 Cineworld Group PLC (Crown), Term Loan B, 6 Mo. LIBOR + 2.50%, 0.00% Floor........................................... 2.77% 02/28/25 12,756,335 4,887,699 PUG LLC (Stubhub), Term Loan B, 1 Mo. LIBOR + 3.50%, 0.00% Floor.................................................. 3.65% 02/12/27 4,258,407 --------------- 17,014,742 --------------- OTHER DIVERSIFIED FINANCIAL SERVICES -- 3.0% 14,245,314 AlixPartners, LLP, Term Loan B, 1 Mo. LIBOR + 2.50%, 0.00% Floor........................................................ 2.65% 04/04/24 13,800,148 25,466,818 Refinitiv US Holdings, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%, 0.00% Floor........................................... 3.40% 10/01/25 25,057,057 --------------- 38,857,205 --------------- PACKAGED FOODS & MEATS -- 0.2% 1,242,412 BellRing Brands LLC, Term Loan B, 1 Mo. LIBOR + 5.00%, 1.00% Floor.................................................. 6.00% 10/21/24 1,245,207 1,059,899 Simply Good Foods (Atkins Nutritionals, Inc.), Term Loan B, 1 Mo. LIBOR + 3.75%, 1.00% Floor............................. 4.75% 07/07/24 1,056,592 --------------- 2,301,799 --------------- PAPER PACKAGING -- 1.8% 15,104,899 Graham Packaging Company, L.P., Initial Term Loan, 1 Mo. LIBOR + 3.75%, 0.75% Floor................................... 4.50% 08/04/27 14,966,387 7,853,494 Reynolds Group Holdings, Inc., Tranche B-1 US Term Loan, 1 Mo. LIBOR + 2.75%, 0.00% Floor............................. 2.90% 02/05/23 7,697,524 --------------- 22,663,911 --------------- PHARMACEUTICALS -- 8.7% 2,928,475 Akorn, Inc., Exit Take Back Term Loan, 3 Mo. LIBOR + 7.50%, 1.00% Floor (d) (e).......................................... 8.50% 09/30/25 2,933,365 32,313,203 Bausch Health Cos., Inc. (Valeant), Term Loan B, 1 Mo. LIBOR + 3.00%, 0.00% Floor......................................... 3.15% 06/01/25 31,518,944 23,494,046 Endo LLC, Term Loan B, 3 Mo. LIBOR + 4.25%, 0.75% Floor......... 5.00% 04/29/24 22,260,609 16,419,185 Mallinckrodt International Finance S.A., 2017 Term Loan B, 3 Mo. LIBOR + 4.75%, 0.75% Floor (c)......................... 5.50% 09/24/24 15,113,860 4,260,386 Mallinckrodt International Finance S.A., 2018 Incremental Term Loan, 6 Mo. LIBOR + 5.00%, 0.75% Floor (c)................... 5.75% 02/24/25 3,916,914 11,665,117 Parexel International Corp., Term Loan B, 1 Mo. LIBOR + 2.75%, 0.00% Floor........................................... 2.90% 09/27/24 11,173,549 24,366,218 Pharmaceutical Product Development, Inc. (PPDI/Jaguar), 2018 Term Loan, 1 Mo. LIBOR + 2.50%, 1.00% Floor.................. 3.50% 08/18/22 24,163,978 --------------- 111,081,219 --------------- PUBLISHING -- 0.1% 1,746,041 Meredith Corp., Tranche B-3 Term Loan, 3 Mo. LIBOR + 4.25%, 1.00% Floor.................................................. 5.25% 01/31/25 1,705,306 --------------- </TABLE> Page 12 See Notes to Financial Statements <PAGE> FIRST TRUST SENIOR LOAN FUND (FTSL) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <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 -- 0.4% $ 3,313,046 Clarivate Analytics PLC (Camelot), Amendment No. 2 Incremental Term Loan, 1 Mo. LIBOR + 3.00%, 1.00% Floor...... 4.00% 10/31/26 $ 3,273,025 1,397,727 Clarivate Analytics PLC (Camelot), Term Loan B, 1 Mo. LIBOR + 3.00%, 0.00% Floor......................................... 3.15% 10/31/26 1,358,702 577,903 Nielsen Finance LLC (VNU, Inc.), Term Loan B5, 1 Mo. LIBOR + 3.75%, 1.00% Floor......................................... 4.75% 06/30/25 575,591 --------------- 5,207,318 --------------- RESTAURANTS -- 1.3% 4,043 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........................................... 3.65% 11/14/26 3,873 44,861 IRB Holding Corp. (Arby's/Inspire Brands), Term Loan B, 3 Mo. LIBOR + 2.75%, 1.00% Floor................................... 3.75% 02/05/25 42,568 17,450,961 IRB Holding Corp. (Arby's/Inspire Brands), Term Loan B, 6 Mo. LIBOR + 2.75%, 1.00% Floor................................... 3.75% 02/05/25 16,559,043 --------------- 16,605,484 --------------- SECURITY & ALARM SERVICES -- 0.1% 1,230,679 Garda World Security Corp., Term Loan B, 1 Mo. LIBOR + 4.75%, 0.00% Floor........................................... 4.90% 10/30/26 1,223,910 --------------- SPECIALIZED CONSUMER SERVICES -- 2.9% 10,339,697 Asurion LLC, Replacement B-2 Term Loan (Second Lien), 1 Mo. LIBOR + 6.50%, 0.00% Floor................................... 6.65% 08/04/25 10,339,697 22,030,339 Asurion LLC, Term Loan B6, 1 Mo. LIBOR + 3.00%, 0.00% Floor........................................................ 3.15% 11/03/23 21,603,611 4,476,129 Asurion LLC, Term Loan B7, 1 Mo. LIBOR + 3.00%, 0.00% Floor........................................................ 3.15% 11/03/24 4,387,412 --------------- 36,330,720 --------------- SYSTEMS SOFTWARE -- 4.8% 20,838,920 Applied Systems, Inc., Term Loan (First Lien), 3 Mo. LIBOR + 3.25%, 1.00% Floor........................................... 4.25% 09/19/24 20,713,470 2,331,175 Applied Systems, Inc., Term Loan (Second Lien), 3 Mo. LIBOR + 7.00%, 1.00% Floor......................................... 8.00% 09/19/25 2,342,831 13,381,953 BMC Software Finance, Inc. (Boxer Parent), Initial Dollar Term Loan, 1 Mo. LIBOR + 4.25%, 0.00% Floor....................... 4.40% 10/02/25 12,985,312 3,920,027 Misys Financial Software Ltd. (Almonde, Inc.) (Finastra), Term Loan B, 6 Mo. LIBOR + 3.50%, 1.00% Floor..................... 4.50% 06/13/24 3,693,528 30,541 Riverbed Technology, Inc., Term Loan B, 2 Mo. LIBOR + 3.25%, 1.00% Floor.................................................. 4.25% 04/24/22 27,213 11,514,020 Riverbed Technology, Inc., Term Loan B, 3 Mo. LIBOR + 3.25%, 1.00% Floor.................................................. 4.25% 04/24/22 10,259,453 10,535,101 Sophos Group PLC (Surf), Term Loan B, 3 Mo. LIBOR + 3.50%, 0.00% Floor.................................................. 3.75% 03/05/27 10,190,076 997,468 SUSE (Marcel Lux IV S.A.R.L.), Facility Term Loan B1 USD, 1 Mo. LIBOR + 3.25%, 0.00% Floor............................. 3.40% 03/15/26 964,432 --------------- 61,176,315 --------------- TOTAL SENIOR FLOATING-RATE LOAN INTERESTS................................................... 1,131,175,305 (Cost $1,179,314,398) --------------- </TABLE> See Notes to Financial Statements Page 13 <PAGE>FIRST TRUST SENIOR LOAN FUND (FTSL) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> CORPORATE BONDS AND NOTES -- 7.3% BROADCASTING -- 2.7% $ 8,978,000 Cumulus Media New Holdings, Inc. (f)............................ 6.75% 07/01/26 $ 8,364,937 8,201,000 Diamond Sports Group LLC / Diamond Sports Finance Co. (f)....... 5.38% 08/15/26 4,807,836 2,848,000 E.W. Scripps (The) Co. (f)...................................... 5.13% 05/15/25 2,721,620 2,148,000 Gray Television, Inc. (f)....................................... 5.88% 07/15/26 2,239,752 10,000,000 Sinclair Television Group, Inc. (f)............................. 5.63% 08/01/24 9,998,493 6,618,000 Univision Communications (f).................................... 5.13% 02/15/25 6,514,594 --------------- 34,647,232 --------------- CABLE & SATELLITE -- 0.1% 1,621,000 CSC Holdings LLC (f)............................................ 5.50% 05/15/26 1,688,677 --------------- CASINOS & GAMING -- 0.3% 4,202,000 Caesars Entertainment, Inc. (f)................................. 6.25% 07/01/25 4,309,668 --------------- COAL & CONSUMABLE FUELS -- 0.2% 4,900,000 Peabody Energy Corp. (f)........................................ 6.00% 03/31/22 2,250,937 2,947,000 Peabody Energy Corp. (f)........................................ 6.38% 03/31/25 913,570 --------------- 3,164,507 --------------- FOOD RETAIL -- 0.2% 2,000,000 Albertsons Cos., Inc. / Safeway, Inc. / New Albertsons LP / Albertsons LLC (f)........................................... 3.50% 02/15/23 2,033,798 --------------- HEALTH CARE FACILITIES -- 1.9% 3,478,000 Acadia Healthcare Co., Inc...................................... 5.63% 02/15/23 3,499,737 2,000,000 HCA, Inc........................................................ 5.88% 05/01/23 2,177,910 6,130,000 Tenet Healthcare Corp. (f)...................................... 4.63% 09/01/24 6,281,411 845,000 Tenet Healthcare Corp........................................... 5.13% 05/01/25 837,353 8,764,000 Tenet Healthcare Corp. (f)...................................... 4.88% 01/01/26 8,901,337 3,008,000 Tenet Healthcare Corp. (f)...................................... 5.13% 11/01/27 3,104,858 --------------- 24,802,606 --------------- HEALTH CARE SERVICES -- 0.1% 869,000 Global Medical Response, Inc. (f)............................... 6.50% 10/01/25 859,224 1,023,000 MEDNAX, Inc. (f)................................................ 5.25% 12/01/23 1,032,590 --------------- 1,891,814 --------------- INSURANCE BROKERS -- 0.6% 7,000,000 Alliant Holdings Intermediate LLC / Alliant Holdings Co-Issuer (f)................................................ 4.25% 10/15/27 6,960,625 893,000 HUB International Ltd. (f)...................................... 7.00% 05/01/26 916,222 --------------- 7,876,847 --------------- INTEGRATED TELECOMMUNICATION SERVICES -- 0.2% 1,430,000 Frontier Communications Corp. (c) (f)........................... 5.88% 10/15/27 1,469,182 469,000 Windstream Escrow LLC / Windstream Escrow Finance Corp. (f).................................................... 7.75% 08/15/28 453,757 --------------- 1,922,939 --------------- MOVIES & ENTERTAINMENT -- 0.4% 8,311,000 AMC Entertainment Holdings, Inc. (f)............................ 0.50% 04/15/25 4,498,329 --------------- REAL ESTATE SERVICES -- 0.0% 250,000 KB Home......................................................... 7.00% 12/15/21 260,469 --------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 0.4% 4,616,000 Dell International LLC / EMC Corp. (f).......................... 5.88% 06/15/21 4,632,895 --------------- </TABLE> Page 14 See Notes to Financial Statements <PAGE> FIRST TRUST SENIOR LOAN FUND (FTSL) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> CORPORATE BONDS AND NOTES (CONTINUED) TRADING COMPANIES & DISTRIBUTORS -- 0.0% $ 250,000 United Rentals North America, Inc............................... 5.88% 09/15/26 $ 263,373 --------------- WIRELESS TELECOMMUNICATION SERVICES -- 0.2% 2,000,000 T-Mobile USA, Inc............................................... 6.00% 03/01/23 2,002,500 --------------- TOTAL CORPORATE BONDS AND NOTES.............................................................. 93,995,654 (Cost $98,996,799) --------------- FOREIGN CORPORATE BONDS AND NOTES -- 0.4% PHARMACEUTICALS -- 0.4% 305,000 Bausch Health Cos., Inc. (f).................................... 5.88% 05/15/23 304,475 4,366,000 Bausch Health Cos., Inc. (f).................................... 6.13% 04/15/25 4,487,157 250,000 Mallinckrodt International Finance S.A. / Mallinckrodt CB LLC (c) (f) (g).............................................. 5.63% 10/15/23 81,250 --------------- 4,872,882 --------------- REAL ESTATE SERVICES -- 0.0% 250,000 Taylor Morrison Communities, Inc. / Taylor Morrison Holdings II, Inc. (f)..................................................... 5.88% 04/15/23 265,309 --------------- TOTAL FOREIGN CORPORATE BONDS AND NOTES...................................................... 5,138,191 (Cost $5,271,174) --------------- </TABLE> <TABLE> <CAPTION> SHARES DESCRIPTION VALUE ---------------- --------------------------------------------------------------------------------------------- --------------- <S> <C> <C> COMMON STOCKS -- 0.2% PHARMACEUTICALS -- 0.2% 249,316 Akorn, Inc. (h) (i).......................................................................... 2,804,805 (Cost $2,858,880) --------------- RIGHTS -- 0.0% ELECTRIC UTILITIES -- 0.0% 4,887 Vistra Energy Corp. (h) (i).................................................................. 5,459 --------------- LIFE SCIENCES TOOLS & SERVICES -- 0.0% 1 New Millennium Holdco, Inc., Corporate Claim Trust (h) (i) (j) (k)........................... 0 1 New Millennium Holdco, Inc., Corporate Claim Trust (h) (i) (j) (k)........................... 0 --------------- 0 --------------- TOTAL RIGHTS................................................................................. 5,459 (Cost $8,491) --------------- MONEY MARKET FUNDS -- 4.9% 62,181,641 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 0.01% (l)............................................... 62,181,641 (Cost $62,181,641) --------------- TOTAL INVESTMENTS -- 101.4%.................................................................. 1,295,301,055 (Cost $1,348,631,383) (m) NET OTHER ASSETS AND LIABILITIES -- (1.4)%................................................... (18,336,754) --------------- NET ASSETS -- 100.0%......................................................................... $ 1,276,964,301 =============== </TABLE> ----------------------------- (a) Senior Floating-Rate Loan Interests ("Senior Loans") in which the Fund invests generally pay interest at rates which are periodically predetermined by reference to a base lending rate plus a premium. These base lending rates are generally (i) the lending rate offered by one or more major European banks, such as the LIBOR, (ii) the prime rate offered by one or more United States banks or (iii) the certificate of deposit rate. Certain Senior Loans are subject to a LIBOR floor that establishes a minimum LIBOR rate. When a range of rates is disclosed, the Fund holds more than one contract within the same tranche with identical LIBOR period, spread and floor, but different LIBOR reset dates. See Notes to Financial Statements Page 15 <PAGE>FIRST TRUST SENIOR LOAN FUND (FTSL) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 (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 issuer has filed for protection in bankruptcy court. (d) The issuer may pay interest on the loans (1) entirely in cash or (2) in the event that both the Payment-In-Kind ("PIK") Toggle Condition has been satisfied and the issuer elects to exercise the PIK interest, 2.50% payable in cash and 7.00% payable as PIK interest. The first interest payment is scheduled for January 4, 2021. (e) On October 1, 2020, Akorn Holding Company LLC completed a Bankruptcy Plan of Reorganization. In connection with the Plan of Reorganization, the Fund received a portion of a new exit term loan and a share of the newly issued common equity shares in the re-organized company. (f) This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A of the Securities Act of 1933, as amended, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Pursuant to procedures adopted by the Trust's Board of Trustees, this security has been determined to be liquid by First Trust Advisors L.P., (the "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 October 31, 2020, securities noted as such amounted to $90,092,503 or 7.1% of net assets. (g) This issuer is in default and interest is not being accrued by the Fund nor paid by the issuer. (h) Pursuant to procedures adopted by the Trust's Board of Trustees, this security has been determined to be illiquid by the Advisor. (i) Non-income producing security. (j) This security's value was determined using significant unobservable inputs (see Note 2A - Portfolio Valuation in the Notes to Financial Statements). (k) This security is fair valued by the Advisor's Pricing Committee in accordance with procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the Investment Company Act of 1940, as amended. At October 31, 2020, securities noted as such are valued at $0 or 0.0% of net assets. (l) Rate shown reflects yield as of October 31, 2020. (m) Aggregate cost for federal income tax purposes is $1,349,340,118. As of October 31, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $3,640,327 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $57,679,390. The net unrealized depreciation was $54,039,063. LIBOR - London Interbank Offered RatePage 16 See Notes to Financial Statements <PAGE> FIRST TRUST SENIOR LOAN FUND (FTSL) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of October 31, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): <TABLE> <CAPTION> LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 10/31/2020 PRICES INPUTS INPUTS -------------- -------------- -------------- -------------- <S> <C> <C> <C> <C> Senior Floating-Rate Loan Interests*.............. $1,131,175,305 $ -- $1,131,175,305 $ -- Corporate Bonds and Notes*........................ 93,995,654 -- 93,995,654 -- Foreign Corporate Bonds and Notes*................ 5,138,191 -- 5,138,191 -- Common Stocks*.................................... 2,804,805 -- 2,804,805 -- Rights: Electric Utilities............................. 5,459 -- 5,459 -- Life Science Tools & Services.................. --** -- -- --** Money Market Funds................................ 62,181,641 62,181,641 -- -- -------------- -------------- -------------- -------------- Total Investments................................. $1,295,301,055 $ 62,181,641 $1,233,119,414 $ --** ============== ============== ============== ============== </TABLE> * See Portfolio of Investments for industry breakout. ** Investment is valued at $0. Level 3 Rights are fair valued by the Advisor's Pricing Committee and are footnoted in the Portfolio of Investments. These values are based on unobservable and non-quantitative inputs. See Notes to Financial Statements Page 17 <PAGE>FIRST TRUST SENIOR LOAN FUND (FTSL) STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 2020 <TABLE> <CAPTION> ASSETS: <S> <C> Investments, at value..................................................... $1,295,301,055 Receivables: Investment securities sold............................................. 36,500,196 Interest............................................................... 3,047,447 Dividends.............................................................. 648 Capital shares sold.................................................... 9,180 -------------- Total Assets........................................................ 1,334,858,526 -------------- LIABILITIES: Due to custodian.......................................................... 1,893,460 Payables: Investment securities purchased........................................ 45,880,635 Capital shares purchased............................................... 9,179,441 Investment advisory fees............................................... 939,653 Unrealized depreciation on unfunded loan commitments...................... 1,036 -------------- Total Liabilities................................................... 57,894,225 -------------- NET ASSETS................................................................ $1,276,964,301 ============== NET ASSETS CONSIST OF: Paid-in capital........................................................... $1,404,687,564 Par value................................................................. 278,500 Accumulated distributable earnings (loss)................................. (128,001,763) -------------- NET ASSETS................................................................ $1,276,964,301 ============== NET ASSET VALUE, per share................................................ $ 45.85 ============== Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share)................................. 27,850,002 ============== Investments, at cost...................................................... $1,348,631,383 ============== </TABLE> Page 18 See Notes to Financial Statements <PAGE> FIRST TRUST SENIOR LOAN FUND (FTSL) STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 2020 <TABLE> <CAPTION> INVESTMENT INCOME: <S> <C> Interest.................................................................. $ 65,060,375 Dividends - Unaffiliated.................................................. 524,037 Dividends - Affiliated.................................................... 215,267 -------------- Total investment income................................................ 65,799,679 -------------- EXPENSES: Investment advisory fees.................................................. 12,483,139 -------------- Total expenses......................................................... 12,483,139 -------------- NET INVESTMENT INCOME (LOSS).............................................. 53,316,540 -------------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments - Unaffiliated............................................. (47,791,805) Investments - Affiliated............................................... 78,316 -------------- Net realized gain (loss).................................................. (47,713,489) -------------- Net change in unrealized appreciation (depreciation) on: Investments - Unaffiliated............................................. (24,555,624) Investments - Affiliated............................................... (64,020) Unfunded loan commitments.............................................. (1,036) -------------- Net change in unrealized appreciation (depreciation)...................... (24,620,680) -------------- NET REALIZED AND UNREALIZED GAIN (LOSS)................................... (72,334,169) -------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................................................ $ (19,017,629) ============== </TABLE> See Notes to Financial Statements Page 19 <PAGE>FIRST TRUST SENIOR LOAN FUND (FTSL) STATEMENTS OF CHANGES IN NET ASSETS <TABLE> <CAPTION> YEAR ENDED YEAR ENDED 10/31/2020 10/31/2019 -------------- -------------- <S> <C> <C> OPERATIONS: Net investment income (loss).............................................. $ 53,316,540 $ 74,073,286 Net realized gain (loss).................................................. (47,713,489) (11,874,050) Net change in unrealized appreciation (depreciation)...................... (24,620,680) (16,779,812) -------------- -------------- Net increase (decrease) in net assets resulting from operations........... (19,017,629) 45,419,424 -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations..................................................... (53,352,275) (74,733,494) Return of capital......................................................... (984,628) (385,786) -------------- -------------- Total distributions to shareholders....................................... (54,336,903) (75,119,280) -------------- -------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................................. 198,707,465 157,940,483 Cost of shares redeemed................................................... (451,536,565) (408,996,170) -------------- -------------- Net increase (decrease) in net assets resulting from shareholder transactions.......................................... (252,829,100) (251,055,687) -------------- -------------- Total increase (decrease) in net assets................................... (326,183,632) (280,755,543) NET ASSETS: Beginning of period....................................................... 1,603,147,933 1,883,903,476 -------------- -------------- End of period............................................................. $1,276,964,301 $1,603,147,933 ============== ============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period................................... 34,000,002 39,450,002 Shares sold............................................................... 4,200,000 3,300,000 Shares redeemed........................................................... (10,350,000) (8,750,000) -------------- -------------- Shares outstanding, end of period......................................... 27,850,002 34,000,002 ============== ============== </TABLE> Page 20 See Notes to Financial Statements <PAGE> FIRST TRUST SENIOR LOAN FUND (FTSL) FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD <TABLE> <CAPTION> YEAR ENDED OCTOBER 31, ------------------------------------------------------------------------ 2020 2019 2018 2017 2016 ------------ ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Net asset value, beginning of period.................. $ 47.15 $ 47.75 $ 48.26 $ 48.32 $ 48.07 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss).......................... 1.67 2.13 1.87 1.68 1.80 Net realized and unrealized gain (loss)............... (1.27) (0.57) (0.43) (0.04) 0.27 ---------- ---------- ---------- ---------- ---------- Total from investment operations...................... 0.40 1.56 1.44 1.64 2.07 ---------- ---------- ---------- ---------- ---------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income................................. (1.67) (2.15) (1.92) (1.70) (1.82) Return of capital..................................... (0.03) (0.01) (0.03) -- -- ---------- ---------- ---------- ---------- ---------- Total distributions paid to shareholders.............. (1.70) (2.16) (1.95) (1.70) (1.82) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period........................ $ 45.85 $ 47.15 $ 47.75 $ 48.26 $ 48.32 ========== ========== ========== ========== ========== TOTAL RETURN (a)...................................... 0.90% 3.37% 3.03% 3.43% 4.43% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's).................. $1,276,964 $1,603,148 $1,883,903 $1,341,599 $ 594,277 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets (b)..... 0.85% 0.85% 0.85% 0.85% 0.85% Ratio of net investment income (loss) to average net assets................................. 3.63% 4.50% 3.94% 3.53% 3.84% Portfolio turnover rate (c)........................... 76% 44% 88% 110% 67% </TABLE> (a) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. (b) The Fund indirectly bears its proportionate share of fees and expenses incurred by the underlying funds in which the Fund invests. This ratio does not include these indirect fees and expenses. (c) 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 <PAGE> --------------------------------------------------------------------------------NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) OCTOBER 31, 2020 1. ORGANIZATION First Trust Exchange-Traded Fund IV (the "Trust") is an open-end management investment company organized as a Massachusetts business trust on September 15, 2010, and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust currently consists of nine funds that are offering shares. This report covers the First Trust Senior Loan Fund (the "Fund"), a diversified series of the Trust, which trades under the ticker "FTSL" on The Nasdaq Stock Market LLC ("Nasdaq"). Unlike conventional mutual funds, the Fund issues and redeems shares on a continuous basis, at net asset value ("NAV"), only in large specified blocks consisting of 50,000 shares called a "Creation Unit." Creation Units are generally issued and redeemed for cash and, in certain circumstances, in-kind for securities in which the Fund invests. Except when aggregated in Creation Units, the shares are not redeemable securities of the Fund. The Fund's primary investment objective is to provide high current income. The Fund's secondary investment objective is the preservation of capital. Under normal market conditions, the Fund seeks to outperform each of the S&P/LSTA U.S. Leveraged Loan 100 Index and the Markit iBoxx USD Liquid Leveraged Loan Index by investing at least 80% of its net assets (including investment borrowings) in first lien senior floating rate bank loans ("Senior Loans")(1). The S&P/LSTA U.S. Leveraged Loan 100 Index (the "Primary Index") is a market value-weighted index designed to measure the performance of the largest segment of the U.S. syndicated leveraged loan market. The Primary Index consists of 100 loan facilities drawn from a larger benchmark, the S&P/LSTA Leveraged Loan Index. The Markit iBoxx USD Liquid Leveraged Loan Index (the "Secondary Index") selects the 100 most liquid Senior Loans in the market. The Fund does not seek to track either the Primary or Secondary Index, but rather seeks to outperform each of the indices. It is anticipated that the Fund, in accordance with its principal investment strategy, will invest approximately 50% to 75% of its net assets in Senior Loans that are eligible for inclusion in and meet the liquidity thresholds of the Primary and/or the Secondary Indices at the time of investment. A Senior Loan is an advance or commitment of funds made by one or more banks or similar financial institutions to one or more corporations, partnerships or other business entities and typically pays interest at a floating or adjusting rate that is determined periodically at a designated premium above a base lending rate, most commonly the London Interbank Offered Rate. The Fund invests primarily in Senior Loans that are below investment grade quality at the time of investment. The Fund invests in Senior Loans made predominantly to businesses operating in North America, but may also invest in Senior Loans made to businesses operating outside of North America. 2. SIGNIFICANT ACCOUNTING POLICIES The Fund is considered an investment company and follows accounting and reporting guidance under Financial Accounting Standards Board ("FASB") Accounting Standards Codification Topic 946, "Financial Services-Investment Companies." The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of the financial statements. The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. PORTFOLIO VALUATION The Fund's NAV is determined daily as of the close of regular trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV is determined as of that time. Domestic debt securities and foreign securities are priced using data reflecting the earlier closing of the principal markets for those securities. The Fund's NAV is calculated by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding. The Fund's investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Pricing Committee of the Fund's ----------------------------- (1) The terms "security" and "securities" used throughout the Notes to Financial Statements include Senior Loans. Page 22 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) OCTOBER 31, 2020 investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"), in accordance with valuation procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act. Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. The Fund's investments are valued as follows: Senior Loans in which the Fund invests are not listed on any securities exchange or board of trade. Senior Loans are typically bought and sold by institutional investors in individually negotiated private transactions that function in many respects like an over-the-counter secondary market, although typically no formal market-makers exist. This market, while having grown substantially since its inception, generally has fewer trades and less liquidity than the secondary market for other types of securities. Some Senior Loans have few or no trades, or trade infrequently, and information regarding a specific Senior Loan may not be widely available or may be incomplete. Accordingly, determinations of the market value of Senior Loans may be based on infrequent and dated information. Because there is less reliable, objective data available, elements of judgment may play a greater role in valuation of Senior Loans than for other types of securities. Typically, Senior Loans are valued using information provided by a third-party pricing service. The third-party pricing service primarily uses over-the-counter pricing from dealer runs and broker quotes from indicative sheets to value the Senior Loans. Corporate bonds, corporate notes and other debt securities are fair valued on the basis of valuations provided by dealers who make markets in such securities or by a third-party pricing service approved by the Trust's Board of Trustees, which may use the following valuation inputs when available: 1) benchmark yields; 2) reported trades; 3) broker/dealer quotes; 4) issuer spreads; 5) benchmark securities; 6) bids and offers; and 7) reference data including market research publications. Exchange-traded funds and other equity securities listed on any national or foreign exchange (excluding Nasdaq and the London Stock Exchange Alternative Investment Market ("AIM")) are valued at the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price. Securities traded on more than one securities exchange are valued at the last sale price or official closing price, as applicable, at the close of the securities exchange representing the principal market for such securities. Shares of open-end funds are valued at fair value which is based on NAV per share. Securities traded in an over-the-counter market are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price. Fixed income and other debt securities having a remaining maturity of sixty days or less when purchased are fair valued at cost adjusted for amortization of premiums and accretion of discounts (amortized cost), provided the Advisor's Pricing Committee has determined that the use of amortized cost is an appropriate reflection of fair value given market and issuer-specific conditions existing at the time of the determination. Factors that may be considered in determining the appropriateness of the use of amortized cost include, but are not limited to, the following: 1) the credit conditions in the relevant market and changes thereto; 2) the liquidity conditions in the relevant market and changes thereto; 3) the interest rate conditions in the relevant market and changes thereto (such as significant changes in interest rates); 4) issuer-specific conditions (such as significant credit deterioration); and 5) any other market-based data the Advisor's Pricing Committee considers relevant. In this regard, the Advisor's Pricing Committee may use last-obtained market-based data to assist it when valuing portfolio securities using amortized cost. Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Trust's Board of Trustees or its delegate, the Advisor's Pricing Committee, at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing Page 23 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) OCTOBER 31, 2020 source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of the Fund's NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security's fair value. As a general principle, the current fair value of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities, including, but not limited to, the following: 1) the fundamental business data relating to the borrower/issuer; 2) an evaluation of the forces which influence the market in which these securities are purchased and sold; 3) the type, size and cost of a security; 4) the financial statements of the borrower/issuer; 5) the credit quality and cash flow of the borrower/issuer, based on the Advisor's or external analysis; 6) the information as to any transactions in or offers for the security; 7) the price and extent of public trading in similar securities (or equity securities) of the borrower/issuer, or comparable companies; 8) the coupon payments; 9) the quality, value and salability of collateral, if any, securing the security; 10) the business prospects of the borrower/issuer, including any ability to obtain money or resources from a parent or affiliate and an assessment of the borrower's/issuer's management; 11) the prospects for the borrower's/issuer's industry, and multiples (of earnings and/or cash flows) being paid for similar businesses in that industry; 12) borrower's/issuer's competitive position within the industry; 13) borrower's/issuer's ability to access additional liquidity through public and/or private markets; and 14) other relevant factors. The Fund is subject to fair value accounting standards that define fair value, establish the framework for measuring fair value and provide a three-level hierarchy for fair valuation based upon the inputs to the valuation as of the measurement date. The three levels of the fair value hierarchy are as follows: o Level 1 - Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis. o Level 2 - Level 2 inputs are observable inputs, either directly or indirectly, and include the following: o Quoted prices for similar investments in active markets. o Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly. o Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). o Inputs that are derived principally from or corroborated by observable market data by correlation or other means. o Level 3 - Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the investment. The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A summary of the inputs used to value the Fund's investments as of October 31, 2020, is included with the Fund's Portfolio of Investments. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income is recorded daily on the accrual basis. Amortization of premiums and accretion of discounts are recorded using the effective interest method over the expected life of each respective borrowing for loans and bonds. In July 2017, the Financial Conduct Authority ("FCA") announced that it will no longer persuade or compel banks to submit rates for the calculations of the London Interbank Offered Rates ("LIBOR") after 2021. Further, the FCA has subsequently stated, as recently as March 2020, that the central assumption continues to be that firms should not rely on LIBOR being published after the end of 2021. Page 24 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) OCTOBER 31, 2020 In the United States, the Alternative Reference Rates Committee (the "ARRC"), a group of market participants convened by the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of New York in cooperation with other federal and state government agencies, has since 2014 undertaken efforts to identify U.S. dollar reference interest rates as alternatives to LIBOR and to facilitate the mitigation of LIBOR-related risks. In June 2017, the ARRC identified the Secured Overnight Financing Rate ("SOFR"), a broad measure of the cost of cash overnight borrowing collateralized by U.S. Treasury securities, as the preferred alternative for U.S. dollar LIBOR. The Federal Reserve Bank of New York began daily publishing of SOFR in April 2018. At this time, it is not possible to predict the full impact of the elimination of LIBOR and the establishment of an alternative reference rate on the Fund or its investments. Securities purchased or sold on a when-issued, delayed-delivery or forward purchase commitment basis may have extended settlement periods. The value of the security so purchased is subject to market fluctuations during this period. Due to the nature of the Senior Loan market, the actual settlement date may not be certain at the time of the purchase or sale for some of the Senior Loans. Interest income on such Senior Loans is not accrued until settlement date. The Fund maintains liquid assets with a current value at least equal to the amount of its when-issued, delayed delivery or forward purchase commitments. The Fund had no when-issued, delayed-delivery, or forward purchase commitments (other than unfunded loan commitments discussed below) as of October 31, 2020. C. UNFUNDED LOAN COMMITMENTS The Fund may enter into certain credit agreements, all or a portion of which may be unfunded. The Fund is obligated to fund these loan commitments at the borrower's discretion. Unfunded loan commitments are marked-to-market daily, and any unrealized appreciation (depreciation) is included in the Statement of Assets and Liabilities and Statement of Operations. In connection with these commitments, the Fund earns a commitment fee typically set as a percentage of the commitment amount. As of October 31, 2020, the Fund had the following unfunded loan commitment: <TABLE> <CAPTION> UNREALIZED PRINCIPAL COMMITMENT APPRECIATION BORROWER VALUE AMOUNT VALUE (DEPRECIATION) ----------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Help at Home (HAH Group Holding Company, LLC), Term Loan $ 414,520 $ 408,302 $ 407,266 $ (1,036) </TABLE> D. AFFILIATED TRANSACTIONS The Fund invests in securities of affiliated funds. Dividend income and realized gains and losses, and change in appreciation (depreciation) from affiliated funds are presented on the Statement of Operations. The Fund's investment performance and risks are directly related to the investment performance and risks of the affiliated funds. Amounts related to these investments at October 31, 2020, and for the fiscal year then ended are as follows:<TABLE> <CAPTION> CHANGE IN UNREALIZED REALIZED SHARES AT VALUE AT APPRECIATION GAIN VALUE AT DIVIDEND SECURITY NAME 10/31/2020 10/31/2018 PURCHASES SALES (DEPRECIATION) (LOSS) 10/31/2020 INCOME ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> <C> <C> <C> First Trust Enhanced Short Maturity ETF -- $ 32,058,015 $ -- $(32,072,311) $ (64,020) $ 78,316 $ -- $ 215,267 =============================================================================================== </TABLE> E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment income, if any, are declared and paid monthly by the Fund, or as the Board of Trustees may determine from time to time. Distributions of net realized gains earned by the Fund, if any, are distributed at least annually. Distributions in cash may be reinvested automatically in additional whole shares only if the broker through whom the shares were purchased makes such option available. Such shares will generally be reinvested by the broker based upon the market price of those shares and investors may be subject to customary brokerage commissions charged by the broker. Distributions from net investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying Page 25 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) OCTOBER 31, 2020 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 years ended October 31, 2020 and 2019 was as follows:Distributions paid from: 2020 2019 Ordinary income................................. $ 53,352,275 $ 74,733,494 Capital gains................................... -- -- Return of capital............................... 984,628 385,786 As of October 31, 2020, the components of distributable earnings on a tax basis for the Fund were as follows:Undistributed ordinary income................... $ -- Accumulated capital and other gain (loss)....... (73,961,664) Net unrealized appreciation (depreciation)...... (54,040,099) 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 2017, 2018, 2019, and 2020 remain open to federal and state audit. As of October 31, 2020, management has evaluated the application of these standards to the Fund and has determined that no provision for income tax is required in the Fund's financial statements for uncertain tax positions. The Fund intends to utilize provisions of the federal income tax laws, which allow it to carry a realized capital loss forward indefinitely following the year of the loss and offset such loss against any future realized capital gains. The Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. As of October 31, 2020, the Fund had non-expiring capital loss carryforwards available for federal income tax purposes of $73,961,664. Certain losses realized during the current fiscal year may be deferred and treated as occurring on the first day of the following fiscal year for federal income tax purposes. For the fiscal year ended October 31, 2020, the Fund had no net late year ordinary or capital losses. In order to present paid-in capital and accumulated distributable earnings (loss) (which consists of accumulated net investment income (loss), accumulated net realized gain (loss) on investments and net unrealized appreciation (depreciation) on investments) on the Statement of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to paid-in capital, accumulated net investment income (loss) and accumulated net realized gain (loss) on investments. These adjustments are primarily due to the difference between book and tax treatments of income and gains on various investment securities held by the Fund. The results of operations and net assets were not affected by these adjustments. For the fiscal year ended October 31, 2020, the adjustments for the Fund were as follows:ACCUMULATED ACCUMULATED NET REALIZED NET INVESTMENT GAIN (LOSS) INCOME (LOSS) ON INVESTMENTS PAID-IN CAPITAL -------------- -------------- --------------- $ 37,255 $ 811,084 $ (848,339) G. EXPENSES Expenses, other than the investment advisory fee and other excluded expenses, are paid by the Advisor (see Note 3). Page 26 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) OCTOBER 31, 2020 H. NEW ACCOUNTING PRONOUNCEMENT On March 30, 2017, the FASB issued Accounting Standards Update ("ASU") 2017-08 "Premium Amortization on Purchased Callable Debt Securities," which amends the amortization period for certain purchased callable debt securities held at a premium by shortening such period to the earliest call date. The new guidance requires an entity to amortize the premium on a callable debt security within its scope to the earliest call date, unless the guidance for considering estimated prepayments is applied. If the call option is not exercised at the earliest call date, the yield is reset to the effective yield using the payment terms of the security. If the security has more than one call date and the premium was amortized to a call price greater than the next call price, any excess of the amortized cost basis over the amount repayable at the next call date will be amortized to that date. If there are no other call dates, any excess of the amortized cost basis over the par amount will be amortized to maturity. Discounts on purchased callable debt securities will continue to be amortized to the security's maturity date. ASU 2017-08 is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. ASU 2017-08 was adopted for these financial statements and did not have a material impact. 3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS First Trust, the investment advisor to the Fund, is a limited partnership with one limited partner, Grace Partners of DuPage L.P., and one general partner, The Charger Corporation. The Charger Corporation is an Illinois corporation controlled by James A. Bowen, Chief Executive Officer of First Trust. First Trust is responsible for the selection and ongoing monitoring of the securities in the Fund's portfolio, managing the Fund's business affairs and providing certain administrative services necessary for the management of the Fund. Pursuant to the Investment Management Agreement between the Trust and the Advisor, First Trust manages the investment of the Fund's assets and is responsible for the Fund's expenses, including the cost of transfer agency, custody, fund administration, legal, audit and other services, but excluding fee payments under the Investment Management Agreement, interest, taxes, pro rata share of fees and expenses attributable to investments in other investment companies ("acquired fund fees and expenses"), brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees payable pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses. The Fund has agreed to pay First Trust an annual unitary management fee equal to 0.85% of its average daily net assets. In addition, the Fund incurs acquired fund fees and expenses. The total of the unitary management fee and acquired fund fees and expenses represents the Fund's total annual operating expenses. The Trust has multiple service agreements with The Bank of New York Mellon ("BNYM"). Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services, and transfer agency services for the Fund. As custodian, BNYM is responsible for custody of the Fund's assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of the Fund's securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for the Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company. Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, defined-outcome fund or is an index fund. Additionally, the Lead Independent Trustee and the Chairmen of the Audit Committee, Nominating and Governance Committee and the Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and Committee Chairmen rotate every three years. The officers and "Interested" Trustee receive no compensation from the Trust for acting in such capacities. 4. PURCHASES AND SALES OF SECURITIES For the fiscal year ended October 31, 2020, the cost of purchases and proceeds from sales of investments, excluding short-term investments and in-kind transactions, were $1,074,196,258 and $1,361,178,299, respectively. For the fiscal year ended October 31, 2020, there were no in-kind transactions. Page 27 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) OCTOBER 31, 2020 5. BORROWINGS The Trust, on behalf of the Fund, along with First Trust Exchange-Traded Fund III and First Trust Series Fund have a $410 million Credit Agreement with The Bank of Nova Scotia ("Scotia") as administrative agent for a group of lenders. Prior to November 25, 2019, the commitment amount was $385 million. Scotia charges a commitment fee of 0.25% of the daily amount of the excess of the commitment amount over the outstanding principal balance of the loans and an agency fee. First Trust allocates the commitment fee and agency fee amongst the funds that have access to the credit line. To the extent that the Fund accesses the credit line, there would also be an interest fee charged. The Fund did not have any borrowings outstanding during the fiscal year ended October 31, 2020. 6. CREATIONS, REDEMPTIONS AND TRANSACTION FEES Shares are created and redeemed by the Fund only in Creation Unit size aggregations of 50,000 shares in transactions with broker dealers or large institutional investors that have entered into a participation agreement (an "Authorized Participant"). Due to the nature of the Fund's investments, the Fund's Creation Units are generally issued and redeemed for cash, although Creation Units may be issued in-kind for securities in which the Fund invests in limited circumstances. Authorized Participants purchasing Creation Units must pay to BNYM, as transfer agent, a creation transaction fee (the "Creation Transaction Fee") regardless of the number of Creation Units purchased in the transaction. The Creation Transaction Fee may increase or decrease with changes in the Fund's portfolio. The price for each Creation Unit will equal the daily NAV per share times the number of shares in a Creation Unit plus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees or stamp taxes. When Creation Units are issued for cash, the Authorized Participant may also be assessed an amount to cover the cost of purchasing portfolio securities, including operational processing and brokerage costs, transfer fees, stamp taxes, and part or all of the spread between the expected bid and offer side of the market related to such securities. Authorized Participants redeeming Creation Units must pay to BNYM, as transfer agent, a standard redemption transaction fee (the "Redemption Transaction Fee"), regardless of the number of Creation Units redeemed in the transaction. The Redemption Transaction Fee may increase or decrease with changes in the Fund's portfolio. When shares are redeemed for cash, the Authorized Participant may also be assessed an amount to cover other costs, including operational processing and brokerage costs, transfer fees, stamp taxes and part or all of the spread between the expected bid and offer side of the market related to portfolio securities sold in connection with the redemption. 7. DISTRIBUTION PLAN The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Fund is authorized to pay an amount up to 0.25% of its average daily net assets each year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the Fund, for amounts expended to finance activities primarily intended to result in the sale of Creation Units or the provision of investor services. FTP may also use this amount to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and educational and promotional services. No 12b-1 fees are currently paid by the Fund, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before March 31, 2022. 8. INDEMNIFICATION The Trust, on behalf of the Fund, has a variety of indemnification obligations under contracts with its service providers. The Trust's maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 9. SUBSEQUENT EVENTS Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued, and has determined that there were no subsequent events, requiring recognition or disclosure in the financial statements that have not already been disclosed. Page 28 <PAGE> --------------------------------------------------------------------------------REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED FUND IV: OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS We have audited the accompanying statement of assets and liabilities of First Trust Senior Loan Fund (the "Fund"), a series of the First Trust Exchange-Traded Fund IV, including the portfolio of investments, as of October 31, 2020, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2020, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended in conformity with accounting principles generally accepted in the United States of America. BASIS FOR OPINION These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund's financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2020, by correspondence with the custodian, agent banks and brokers; when replies were not received from agent banks and brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP Chicago, Illinois December 23, 2020 We have served as the auditor of one or more First Trust investment companies since 2001. Page 29 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) OCTOBER 31, 2020 (UNAUDITED) PROXY VOTING POLICIES AND PROCEDURES A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how the Fund voted proxies relating to its portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on the Fund's website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov. PORTFOLIO HOLDINGS The Fund files portfolio holdings information for each month in a fiscal quarter within 60 days after the end of the relevant fiscal quarter on Form N-PORT. Portfolio holdings information for the third month of each fiscal quarter will be publicly available on the SEC's website at www.sec.gov. The Fund's complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year is included in the semi-annual and annual reports to shareholders, respectively, and is filed with the SEC on Form N-CSR. The semi-annual and annual report for the Fund is available to investors within 60 days after the period to which it relates. The Fund's Forms N-PORT and Forms N-CSR are available on the SEC's website listed above. FEDERAL TAX INFORMATION Distributions paid to the foreign shareholders during the Fund's fiscal year ended October 31, 2020 that were properly designated by the Fund as "interest-related dividends" or "short-term capital gain dividends," may not be subject to federal income tax provided that the income was earned directly by such foreign shareholders. Of the ordinary income (including short-term capital gain) distributions made by the Fund during the fiscal year ended October 31, 2020, none qualify for the corporate dividends received deduction available to corporate shareholders or as qualified dividend income. RISK CONSIDERATIONS RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE, RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND. CONCENTRATION RISK. To the extent that a fund is able to invest a large percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund's investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund's corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is not concentrated. CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer's ability to make such payments. CYBER SECURITY RISK. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. In addition, cyber security breaches of a fund's third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or issuers in which the fund invests, can also subject a fund to many of the same risks associated with direct cyber security breaches. DERIVATIVES RISK. To the extent a fund uses derivative instruments such as futures contracts, options contracts and swaps, the fund may experience losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivative. These risks are heightened when a fund's portfolio managers use derivatives to enhance the fund's return or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the fund. Page 30 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) OCTOBER 31, 2020 (UNAUDITED) 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 CONSTITUENT RISK. Certain funds may be a constituent of one or more indices. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could significantly increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, a fund's net asset value could be negatively impacted and the fund's market price may be significantly below its net asset value during certain periods. INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject to Index Provider Risk. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, maintained, constructed, reconstituted, rebalanced, composed, calculated or disseminated accurately. To correct any such error, the Index Provider may carry out an unscheduled rebalance or other modification of the Index constituents or weightings, which may increase the fund's costs. The Index Provider does not provide any representation or warranty in relation to the quality, accuracy or completeness of data in the Index, and it does not guarantee that the Index will be calculated in accordance with its stated methodology. Losses or costs associated with any Index Provider errors generally will be borne by the fund and its shareholders. INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of other investment vehicles, the fund will incur additional fees and expenses that would not be present in a direct investment in those investment vehicles. Furthermore, the fund's investment performance and risks are directly related to the investment performance and risks of the investment vehicles in which the fund invests. LIBOR RISK. To the extent a fund invests in floating or variable rate obligations that use the London Interbank Offered Rate ("LIBOR") as a reference interest rate, it is subject to LIBOR Risk. In 2017, the United Kingdom's Financial Conduct Authority announced that LIBOR will cease to be available for use after 2021. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition away from LIBOR on the fund or on certain instruments in which the fund invests can be difficult to ascertain, and they may vary depending on a variety of factors. Any such effects of the transition away from LIBOR, as well as other unforeseen effects, could result in losses to the fund. MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund's investment portfolio, the fund's portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective. Page 31 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) OCTOBER 31, 2020 (UNAUDITED) MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than others. The outbreak of the respiratory disease designated as COVID-19 in December 2019 has caused significant volatility and declines in global financial markets, which have caused losses for investors. The COVID-19 pandemic may last for an extended period of time and will continue to impact the economy for the foreseeable future. NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic issuers. Non-U.S. securities are subject to higher volatility than securities of domestic issuers due to: possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries. Passive Investment Risk. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets. NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE ADVISORY AGREEMENT BOARD CONSIDERATIONS REGARDING APPROVAL OF CONTINUATION OF INVESTMENT MANAGEMENT AGREEMENT The Board of Trustees of First Trust Exchange-Traded Fund IV (the "Trust"), including the Independent Trustees, unanimously approved the continuation of the Investment Management Agreement (the "Agreement") with First Trust Advisors L.P. (the "Advisor") on behalf of the First Trust Senior Loan Fund (the "Fund"). The Board approved the continuation of the Agreement for a one-year period ending June 30, 2021 at a meeting held on June 8, 2020. The Board determined that the continuation of the Agreement is in the best interests of the Fund in light of the nature, extent and quality of the services provided and such other matters as the Board considered to be relevant in the exercise of its reasonable business judgment. To reach this determination, the Board considered its duties under the Investment Company Act of 1940, as amended (the "1940 Act"), as well as under the general principles of state law, in reviewing and approving advisory contracts; the requirements of the 1940 Act in such matters; the fiduciary duty of investment advisors with respect to advisory agreements and compensation; the standards used by courts in determining whether investment company boards have fulfilled their duties; and the factors to be considered by the Board in voting on such agreements. At meetings held on May 11, 2020 and June 8, 2020, the Board, including the Independent Trustees, reviewed materials provided by the Advisor 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 provided by the Advisor to the Fund (including the relevant personnel responsible for these services and their experience); the unitary fee rate payable by the Fund as compared to fees charged to a peer group of funds (the "Expense Group") and a broad peer universe of funds (the "Expense Universe"), each assembled by Broadridge Financial Solutions, Inc. ("Broadridge"), an independent source, and as compared to fees charged to other clients of the Advisor, including other exchange-traded funds ("ETFs") managed by the Advisor; the expense ratio of the Fund as compared to expense ratios of the funds in the Fund's Expense Group and Expense Universe; performance information for the Fund, including comparisons of the Fund's performance to that of one or more relevant benchmark indexes and to that of a performance group of funds and a broad performance universe of funds (the "Performance Universe"), each assembled by Broadridge; the nature of expenses incurred in providing services to the Fund and the potential for the Advisor to realize economies of scale, if any; profitability and other financial data for the Advisor; any fall-out benefits to the Advisor and its affiliate, First Trust Portfolios L.P. ("FTP"); and information on the Advisor's compliance program. The Board reviewed initial materials with the Advisor at the meeting held on May 11, 2020, prior to which the Independent Trustees and their counsel met separately to discuss the information provided by the Advisor. Following the May Page 32 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) OCTOBER 31, 2020 (UNAUDITED) meeting, counsel to the Independent Trustees, on behalf of the Independent Trustees, requested certain clarifications and supplements to the materials provided, and the information provided in response to those requests was considered at an executive session of the Independent Trustees and their counsel held prior to the June 8, 2020 meeting, as well as at the meeting held that day. The Board considered supplemental information provided by the Advisor on the operations of the Advisor and the performance of the Fund since the onset of the COVID-19 pandemic. The Board applied its business judgment to determine whether the arrangement between the Trust and the Advisor continues to be a reasonable business arrangement from the Fund's perspective. The Board determined that, given the totality of the information provided with respect to the Agreement, the Board had received sufficient information to renew the Agreement. The Board considered that shareholders chose to invest or remain invested in the Fund knowing that the Advisor manages the Fund and knowing the Fund's unitary fee. In reviewing the Agreement, the Board considered the nature, extent and quality of the services provided by the Advisor under the Agreement. The Board considered that the Advisor is responsible for the overall management and administration of the Trust and the Fund and reviewed all of the services provided by the Advisor to the Fund, as well as the background and experience of the persons responsible for such services. The Board noted that the Fund is an actively-managed ETF and noted that the Advisor's Leveraged Finance Investment Team is responsible for the day-to-day management of the Fund's investments. The Board considered the background and experience of the members of the Leveraged Finance Investment Team and noted the Board's prior meetings with members of the Team. The Board considered the Advisor's statement that it applies the same oversight model internally with its Leveraged Finance Investment Team as it uses for overseeing external sub-advisors, including portfolio risk monitoring and performance review. In reviewing the services provided, the Board noted the compliance program that had been developed by the Advisor and considered that it includes a robust program for monitoring the Advisor's and the Fund's compliance with the 1940 Act, as well as the Fund's compliance with its investment objectives, policies and restrictions. The Board also considered a report from the Advisor with respect to its risk management functions related to the operation of the Fund. Finally, as part of the Board's consideration of the Advisor's services, the Advisor, in its written materials and at the May 11, 2020 meeting, described to the Board the scope of its ongoing investment in additional infrastructure and personnel to maintain and improve the quality of services provided to the Fund and the other funds in the First Trust Fund Complex. In light of the information presented and the considerations made, the Board concluded that the nature, extent and quality of the services provided to the Trust and the Fund by the Advisor under the Agreement have been and are expected to remain satisfactory and that the Advisor has managed the Fund consistent with its investment objectives, policies and restrictions. The Board considered the unitary fee rate payable by the Fund under the Agreement for the services provided. The Board considered that as part of the unitary fee the Advisor is responsible for the Fund's expenses, including the cost of transfer agency, custody, fund administration, legal, audit and other services and license fees, if any, but excluding the fee payment under the Agreement and interest, taxes, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses, if any. The Board received and reviewed information showing the advisory 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 to other fund (including ETFs) and non-fund clients, as applicable. Because the Fund pays a unitary fee, the Board determined that expense ratios were the most relevant comparative data point. Based on the information provided, the Board noted that the unitary fee rate for the Fund was above the median total (net) expense ratio of the peer funds in the Expense Group. With respect to the Expense Group, the Board, at the May 11, 2020 meeting, discussed with Broadridge its methodology for assembling peer groups and discussed with the Advisor limitations in creating peer groups for actively-managed ETFs, including that the Expense Group contained both actively-managed ETFs and open-end mutual funds, and different business models that may affect the pricing of services among ETF sponsors. The Board took these limitations and differences into account in considering the peer data. With respect to fees charged to other non-ETF clients, the Board considered differences between the Fund and other non-ETF clients that limited their comparability. In considering the unitary fee rate overall, the Board also considered the Advisor's statement that it seeks to meet investor needs through innovative and value-added investment solutions and the Advisor's demonstrated long-term commitment to the Fund and the other funds in the First Trust Fund Complex. The Board considered performance information for the Fund. The Board noted the process it has established for monitoring the Fund's performance and portfolio risk on an ongoing basis, which includes quarterly performance reporting from the Advisor for the Fund. The Board determined that this process continues to be effective for reviewing the Fund's performance. The Board received and reviewed information comparing the Fund's performance for periods ended December 31, 2019 to the performance of the funds in the Performance Universe and to that of a benchmark index. Based on the information provided, the Board noted that the Fund outperformed the Performance Universe median for the one-, three- and five-year periods ended December 31, 2019. The Board also noted that the Fund underperformed the benchmark index for the one , three- and five-year periods ended December 31, 2019. Page 33 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) OCTOBER 31, 2020 (UNAUDITED) On the basis of all the information provided on the unitary fee and performance of the Fund and the ongoing oversight by the Board, the Board concluded that the unitary fee for the Fund continues to be reasonable and appropriate in light of the nature, extent and quality of the services provided by the Advisor to the Fund under the Agreement. The Board considered information and discussed with the Advisor whether there were any economies of scale in connection with providing advisory services to the Fund and noted the Advisor's statement that it believes its expenses will likely increase over the next twelve months as the Advisor continues to hire personnel and build infrastructure, including technology, to improve the services to the Fund. The Board noted that any reduction in fixed costs associated with the management of the Fund would benefit the Advisor, but that the unitary fee structure provides a level of certainty in expenses for the Fund. The Board considered the revenues and allocated costs (including the allocation methodology) of the Advisor in serving as investment advisor to the Fund for the twelve months ended December 31, 2019 and the estimated profitability level for the Fund calculated by the Advisor based on such data, as well as complex-wide and product-line profitability data, for the same period. The Board noted the inherent limitations in the profitability analysis and concluded that, based on the information provided, the Advisor's profitability level for the Fund was not unreasonable. In addition, the Board considered fall-out benefits described by the Advisor that may be realized from its relationship with the Fund. The Board considered that the Advisor had identified as a fall-out benefit to the Advisor and FTP their exposure to investors and brokers who, absent their exposure to the Fund, may have had no dealings with the Advisor or FTP, and noted that the Advisor does not utilize soft dollars in connection with the Fund. The Board concluded that the character and amount of potential fall-out benefits to the Advisor were not unreasonable. Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, unanimously determined that the terms of the Agreement continue to be fair and reasonable and that the continuation of the Agreement is in the best interests of the Fund. No single factor was determinative in the Board's analysis. REMUNERATION First Trust Advisors L.P. ("First Trust") is authorised and regulated by the U.S. Securities and Exchange Commission and is entitled to market shares of certain funds it manages, including First Trust Senior Loan Fund (the "Fund"), in certain member states in the European Economic Area in accordance with the cooperation arrangements in Article 42 of the Alternative Investment Fund Managers Directive (the "Directive"). First Trust is required under the Directive to make disclosures in respect of remuneration. The following disclosures are made in line with First Trust's interpretation of currently available regulatory guidance on remuneration disclosures. During the year ended December 31, 2019, the amount of remuneration paid (or to be paid) by First Trust in respect of the Fund is $5,628,611. This figure is comprised of $714,579 paid (or to be paid) in fixed compensation and $4,914,032 paid (or to be paid) in variable compensation. There were a total of 22 beneficiaries of the remuneration described above. Those amounts include $365,981 paid (or to be paid) to senior management of First Trust and $5,262,630 paid (or to be paid) to other employees whose professional activities have a material impact on the risk profiles of First Trust or the Fund (collectively, "Code Staff"). Code Staff included in the aggregated figures disclosed above are rewarded in line with First Trust's remuneration policy (the "Remuneration Policy") which is determined and implemented by First Trust's senior management. The Remuneration Policy reflects First Trust's ethos of good governance and encapsulates the following principal objectives: i. to provide a clear link between remuneration and performance of First Trust and to avoid rewarding for failure; ii. to promote sound and effective risk management consistent with the risk profiles of the funds managed by First Trust; and iii. to remunerate staff in line with the business strategy, objectives, values and interests of First Trust and the funds managed by First Trust in a manner that avoids conflicts of interest. First Trust assesses various risk factors which it is exposed to when considering and implementing remuneration for Code Staff and considers whether any potential award to such person(s) would give rise to a conflict of interest. First Trust does not reward failure, or consider the taking of risk or failure to take risk in its remuneration of Code Staff. First Trust assesses performance for the purposes of determining payments in respect of performance-related remuneration of Code Staff by reference to a broad range of measures including (i) individual performance (using financial and non-financial criteria), and (ii) the overall performance of First Trust. Remuneration is not based upon the performance of the Fund. Page 34 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) OCTOBER 31, 2020 (UNAUDITED) The elements of remuneration are balanced between fixed and variable and the senior management sets fixed salaries at a level sufficient to ensure that variable remuneration incentivises and rewards strong individual performance but does not encourage excessive risk taking. No individual is involved in setting his or her own remuneration. 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 May 11, 2020 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 June 1, 2019 (the initial compliance date for certain requirements of Rule 22e-4) through the Liquidity Committee's annual meeting held on March 20, 2020 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. Note that because the Funds primarily hold assets that are highly liquid investments, the Funds have not adopted a highly liquid investment minimum. As stated in the written report, during the review period, no fund breached the 15% limitation on illiquid investments, no fund with a highly liquid investment minimum breached that minimum and no fund filed a Form N-LIQUID. The Advisor concluded that each fund's investment strategy is appropriate for an open-end fund; that the Program operated effectively in all material respects during the review period; and that the Program is reasonably designed to assess and manage the liquidity risk of each fund and to maintain compliance with Rule 22e-4. Page 35 <PAGE> -------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) OCTOBER 31, 2020 (UNAUDITED) The following tables identify the Trustees and Officers of the Trust. Unless otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite 400, Wheaton, IL 60187. The Trust's statement of additional information includes additional information about the Trustees and is available, without charge, upon request, by calling (800) 988-5891. <TABLE> <CAPTION> NUMBER OF OTHER PORTFOLIOS IN TRUSTEESHIPS OR THE FIRST TRUST DIRECTORSHIPS NAME, TERM OF OFFICE AND FUND COMPLEX HELD BY TRUSTEE YEAR OF BIRTH AND YEAR FIRST ELECTED PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST POSITION WITH THE TRUST OR APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ INDEPENDENT TRUSTEES ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 189 None (1951) Limited Partner, Gundersen Real Estate o Since Inception Limited Partnership (June 1992 to December 2016); Member, Sportsmed LLC (April 2007 to November 2015) Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 189 Director of ADM (1957) (Futures Commission Merchant) Investor Services, o Since Inception Inc., ADM Investor Services International, Futures Industry Association, and National Futures Association Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 189 Director of Trust (1956) and Management Consulting) Company of o Since Inception Illinois Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 189 None (1954) Managing Director and Chief Operating o Since Inception Officer (January 2015 to August 2018), Pelita Harapan Educational Foundation (Educational Product and Services) ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED TRUSTEE ------------------------------------------------------------------------------------------------------------------------------------ James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 189 None Chairman of the Board Advisors L.P. and First Trust Portfolios (1955) o Since Inception L.P., Chairman of the Board of Directors, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) </TABLE> ----------------------------- (1) Mr. Bowen is deemed an "interested person" of the Trust due to his position as Chief Executive Officer of First Trust Advisors L.P., investment advisor of the Trust. Page 36 <PAGE> --------------------------------------------------------------------------------BOARD OF TRUSTEES AND OFFICERS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) OCTOBER 31, 2020 (UNAUDITED) <TABLE> <CAPTION> NAME AND POSITION AND OFFICES TERM OF OFFICE AND PRINCIPAL OCCUPATIONS YEAR OF BIRTH WITH TRUST LENGTH OF SERVICE DURING PAST 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS(2) ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> James M. Dykas President and Chief Executive o Indefinite Term Managing Director and Chief Financial Officer (1966) Officer (January 2016 to Present), Controller (January 2011 o Since January 2016 to January 2016), Senior Vice President (April 2007 to January 2016), First Trust Advisors L.P. and First Trust Portfolios L.P.; Chief Financial Officer (January 2016 to Present), BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President (July 2016 to Present), Vice (1972) Officer and Chief President (April 2012 to July 2016), First Trust Accounting Officer o Since January 2016 Advisors L.P. and First Trust Portfolios L.P. W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and First (1960) Legal Officer Trust Portfolios L.P.; Secretary and General o Since Inception Counsel, BondWave LLC; Secretary, Stonebridge Advisors LLC Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and (1970) First Trust Portfolios L.P. o Since Inception Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P. (1966) and Assistant Secretary and First Trust Portfolios L.P. o Since Inception Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. (1966) and First Trust Portfolios L.P. o Since Inception Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. (1970) and First Trust Portfolios L.P. o Since Inception </TABLE> ----------------------------- (2) The term "officer" means the president, vice president, secretary, treasurer, controller or any other officer who performs a policy making function. Page 37 <PAGE> -------------------------------------------------------------------------------- PRIVACY POLICY -------------------------------------------------------------------------------- FIRST TRUST SENIOR LOAN FUND (FTSL) OCTOBER 31, 2020 (UNAUDITED) PRIVACY POLICY First Trust values our relationship with you and considers your privacy an important priority in maintaining that relationship. We are committed to protecting the security and confidentiality of your personal information. SOURCES OF INFORMATION We collect nonpublic personal information about you from the following sources: o Information we receive from you and your broker-dealer, investment advisor or financial representative through interviews, applications, agreements or other forms; o Information about your transactions with us, our affiliates or others; o Information we receive from your inquiries by mail, e-mail or telephone; and o Information we collect on our website through the use of "cookies". For example, we may identify the pages on our website that your browser requests or visits. INFORMATION COLLECTED The type of data we collect may include your name, address, social security number, age, financial status, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, investment objectives, marital status, family relationships and other personal information. DISCLOSURE OF INFORMATION We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. In addition to using this information to verify your identity (as required under law), the permitted uses may also include the disclosure of such information to unaffiliated companies for the following reasons: o In order to provide you with products and services and to effect transactions that you request or authorize, we may disclose your personal information as described above to unaffiliated financial service providers and other companies that perform administrative or other services on our behalf, such as transfer agents, custodians and trustees, or that assist us in the distribution of investor materials such as trustees, banks, financial representatives, proxy services, solicitors and printers. o We may release information we have about you if you direct us to do so, if we are compelled by law to do so, or in other legally limited circumstances (for example to protect your account from fraud). In addition, in order to alert you to our other financial products and services, we may share your personal information within First Trust. USE OF WEBSITE ANALYTICS We currently use third party analytics tools, Google Analytics and AddThis, to gather information for purposes of improving First Trust's website and marketing our products and services to you. These tools employ cookies, which are small pieces of text stored in a file by your web browser and sent to websites that you visit, to collect information, track website usage and viewing trends such as the number of hits, pages visited, videos and PDFs viewed and the length of user sessions in order to evaluate website performance and enhance navigation of the website. We may also collect other anonymous information, which is generally limited to technical and web navigation information such as the IP address of your device, internet browser type and operating system for purposes of analyzing the data to make First Trust's website better and more useful to our users. The information collected does not include any personal identifiable information such as your name, address, phone number or email address unless you provide that information through the website for us to contact you in order to answer your questions or respond to your requests. To find out how to opt-out of these services click on: Google Analytics and AddThis. CONFIDENTIALITY AND SECURITY With regard to our internal security procedures, First Trust restricts access to your nonpublic personal information to those First Trust employees who need to know that information to provide products or services to you. We maintain physical, electronic and procedural safeguards to protect your nonpublic personal information. POLICY UPDATES AND INQUIRIES As required by federal law, we will notify you of our privacy policy annually. We reserve the right to modify this policy at any time, however, if we do change it, we will tell you promptly. For questions about our policy, or for additional copies of this notice, please go to www.ftportfolios.com, or contact us at 1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust Advisors). March 2019 Page 38 <PAGE> This page intentionally left blank. <PAGE> This page intentionally left blank. <PAGE> FIRST TRUST First Trust Exchange-Traded Fund IV INVESTMENT ADVISOR First Trust Advisors L.P. 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 ADMINISTRATOR, CUSTODIAN, FUND ACCOUNTANT & TRANSFER AGENT The Bank of New York Mellon 240 Greenwich Street New York, NY 10286 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deloitte & Touche LLP 111 S. Wacker Drive Chicago, IL 60606 LEGAL COUNSEL Chapman and Cutler LLP 111 W. Monroe Street Chicago, IL 60603 <PAGE> [BLANK BACK COVER] <PAGE>
FIRST TRUST First Trust Exchange-Traded Fund IV -------------------------------------------------------------------------------- First Trust Tactical High Yield ETF (HYLS) Annual Report For the Year Ended October 31, 2020 <PAGE> --------------------------------------------------------------------------------TABLE OF CONTENTS -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) ANNUAL REPORT OCTOBER 31, 2020 Shareholder Letter........................................................... 1 Fund Performance Overview.................................................... 2 Portfolio Commentary......................................................... 5 Understanding Your Fund Expenses............................................. 8 Portfolio of Investments..................................................... 9 Statement of Assets and Liabilities.......................................... 25 Statement of Operations...................................................... 26 Statements of Changes in Net Assets.......................................... 27 Statement of Cash Flows...................................................... 28 Financial Highlights......................................................... 29 Notes to Financial Statements................................................ 30 Report of Independent Registered Public Accounting Firm...................... 37 Additional Information....................................................... 38 Board of Trustees and Officers............................................... 44 Privacy Policy............................................................... 46 CAUTION REGARDING FORWARD-LOOKING STATEMENTS This report contains certain forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding the goals, beliefs, plans or current expectations of First Trust Advisors L.P. ("First Trust" or the "Advisor") and its representatives, taking into account the information currently available to them. Forward-looking statements include all statements that do not relate solely to current or historical fact. For example, forward-looking statements include the use of words such as "anticipate," "estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or other words that convey uncertainty of future events or outcomes. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the series of First Trust Exchange-Traded Fund IV (the "Trust") described in this report (First Trust Tactical High Yield ETF; hereinafter referred to as the "Fund") to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. When evaluating the information included in this report, you are cautioned not to place undue reliance on these forward-looking statements, which reflect the judgment of the Advisor and its representatives only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events and circumstances that arise after the date hereof. PERFORMANCE AND RISK DISCLOSURE There is no assurance that the Fund will achieve its investment objectives. The Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the Fund's shares may therefore be less than what you paid for them. Accordingly, you can lose money investing in the Fund. See "Risk Considerations" in the Additional Information section of this report for a discussion of other risks of investing in the Fund. Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. For the most recent month-end performance figures, please visit www.ftportfolios.com or speak with your financial advisor. Investment returns, net asset value and share price will fluctuate and Fund shares, when sold, may be worth more or less than their original cost. The Advisor may also periodically provide additional information on Fund performance on the Fund's webpage at www.ftportfolios.com. HOW TO READ THIS REPORT This report contains information that may help you evaluate your investment in the Fund. It includes details about the Fund and presents data and analysis that provide insight into the Fund's performance and investment approach. By reading the portfolio commentary from the portfolio management team of the Fund, you may obtain an understanding of how the market environment affected the Fund's performance. The statistical information that follows may help you understand the Fund's performance compared to that of a relevant market benchmark. It is important to keep in mind that the opinions expressed by personnel of the Advisor are just that: informed opinions. They should not be considered to be promises or advice. The opinions, like the statistics, cover the period through the date on the cover of this report. The material risks of investing in the Fund are spelled out in the prospectus, the statement of additional information, and other Fund regulatory filings. <PAGE> -------------------------------------------------------------------------------- SHAREHOLDER LETTER -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) ANNUAL LETTER FROM THE CHAIRMAN AND CEO OCTOBER 31, 2020 Dear Shareholders: First Trust is pleased to provide you with the annual report for the First Trust Tactical High Yield ETF (the "Fund"), which contains detailed information about the Fund for the twelve months ended October 31, 2020. As I was collecting my thoughts for this annual roundup it occurred to me that my message this year should touch on the tone of the markets and the investing climate rather than belabor all the news and events that brought us to this juncture. We all know how tumultuous our lives have become over the past eight or so months. The phrase "shelter-at-home" says it all. I would rather talk about why I believe investors should be optimistic about where we could be headed. Having said that, allow me to at least acknowledge the two elephants in the room: the coronavirus ("COVID-19") and the election. In the first 12 days of November, we learned the following: that we likely have a new president-elect (Joe Biden), though it may not be official for some time because it is being contested by President Donald Trump and some of his loyal backers in the Republican Party citing voter fraud in certain states; that we still do not know which political party will have control of the Senate due to a couple of run-offs in Georgia to be held on January 5, 2021; and, that it looks as though we may be fortunate enough to have an FDA-approved COVID-19 vaccine by either the end of 2020 or the start of 2021, though that too is not yet official. It could be a game-changer in the COVID-19 battle. And, we may gain access to additional vaccines as well. The key to getting the economy back to running on all cylinders is to fully reopen, and a vaccine is "what the doctor ordered." With respect to the tone of the markets and investment climate, to say that I am encouraged about what has transpired in 2020 would be an understatement. Despite the extraordinary challenges so far this year, the S&P 500(R) Index posted a total return of 2.77% over the first 10 months of 2020, this despite plunging 33.8% into bear market territory from February 19, 2020 through March 23, 2020, according to Bloomberg. As impressive as that feat is, the future looks even brighter. While Bloomberg's consensus earnings growth rate estimate for the S&P 500(R) Index for 2020 was -16.51%, as of November 13, 2020, its 2021 and 2022 estimates were 21.74% and 16.95%, respectively. That is a strong take on the prospects for a rebound in Corporate America over the next 24 months. One of the tailwinds that is providing a good deal of support to the economy and markets is the decision by the Federal Reserve (the "Fed") to keep interest rates artificially low for as long as need be to meet both its employment and inflation targets. By keeping rates lower for longer, the Fed is essentially inviting investors to assume more risk to generate higher returns. Brian Wesbury, Chief Economist at First Trust, believes that the Fed could need until 2024 to accomplish its goals. That is a lot of runway for investors to reposition their portfolios, if needed, and a very generous, and perhaps unprecedented, amount of guidance from the Fed, in our opinion. Those investors with cash on the sidelines earning next to nothing have options if they choose to act. We are encouraged about the prospects for the economy and the markets, but investors should be prepared to weather some volatility until the COVID-19 pandemic is better contained. As always, we encourage investors to stay the course! Thank you for giving First Trust the opportunity to play a role in your financial future. We value our relationship with you and will report on the Fund again in six months. Sincerely, /s/ James A. Bowen James A. Bowen Chairman of the Board of Trustees Chief Executive Officer of First Trust Advisors L.P. Page 1 <PAGE> -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) The primary investment objective of the First Trust Tactical High Yield ETF (the "Fund") is to provide current income. The Fund's secondary investment objective is to provide capital appreciation. Under normal market conditions, the Fund invests at least 80% of its net assets (including investment borrowings) in high yield debt securities that are rated below investment grade at the time of purchase or unrated securities deemed by the Fund's advisor to be of comparable quality. Below investment grade securities are those that, at the time of purchase, are rated lower than "BBB-" by Standard & Poor's Ratings Group, a division of the McGraw Hill Companies, Inc., or lower than "Baa3" by Moody's Investors Service, Inc., or comparably rated by another nationally recognized statistical rating organization. High yield debt securities that are rated below investment grade are commonly referred to as "junk" debt. Such securities may include U.S. and non-U.S. corporate debt obligations, bank loans and convertible bonds. For purposes of determining whether a security is below investment grade, the lowest available rating will be considered. The Fund may invest no more than 15% in non-income producing securities including Distressed Securities (defined below) and common stocks. Companies whose financial condition is troubled or uncertain and that may be involved in bankruptcy proceedings, reorganizations or financial restructurings are referred to herein as "Distressed Securities." The Fund may, under normal market conditions, invest up to 40% of its net assets (including investment borrowings) in bank loans; however the Fund invests no more than 15% of its net assets (including investment borrowings) in junior loans, and all other bank loans in which the Fund invests are first lien senior secured floating rate bank loans. The Fund may invest in listed and over-the-counter derivatives to the extent permitted by the Nasdaq Stock Market LLC. The Fund may not be appropriate for all investors.<TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL CUMULATIVE TOTAL RETURNS TOTAL RETURNS 1 Year Ended 5 Years Ended Inception (2/25/13) 5 Years Ended Inception (2/25/13) 10/31/20 10/31/20 to 10/31/20 10/31/20 to 10/31/20 <S> <C> <C> <C> <C> <C> FUND PERFORMANCE NAV 2.92% 4.79% 4.84% 26.38% 43.78% Market Price 3.18% 4.79% 4.87% 26.33% 44.10% INDEX PERFORMANCE ICE BofA US High Yield Constrained Index 2.44% 6.11% 5.05% 34.59% 45.97% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> Total returns for the period since inception are calculated from the inception date of the Fund. "Average Annual Total Returns" represent the average annual change in value of an investment over the periods indicated. "Cumulative Annual Total Returns" represent the total change in value of an investment over the periods indicated. The Fund's per share net asset value ("NAV") is the value of one share of the Fund and is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of outstanding shares. The price used to calculate market return ("Market Price") is determined by using the midpoint 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 the shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future performance. Page 2 <PAGE> --------------------------------------------------------------------------------FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) ----------------------------------------------------------- % OF TOTAL LONG-TERM INDUSTRY CLASSIFICATION INVESTMENTS(1) ----------------------------------------------------------- Health Care Providers & Services 15.4% Media 13.0 Software 12.7 Pharmaceuticals 8.4 Insurance 7.5 Hotels, Restaurants & Leisure 7.0 Diversified Telecommunication Services 4.4 Entertainment 3.5 Diversified Consumer Services 2.5 Building Products 2.2 Health Care Technology 2.2 Containers & Packaging 2.1 Diversified Financial Services 1.7 Electric Utilities 1.7 Professional Services 1.6 Technology Hardware, Storage & Peripherals 1.5 Food Products 1.4 Specialty Retail 1.2 Real Estate Management & Development 1.2 Automobiles 0.9 Food & Staples Retailing 0.7 Aerospace & Defense 0.7 Capital Markets 0.7 Auto Components 0.6 IT Services 0.6 Communications Equipment 0.5 Commercial Services & Supplies 0.5 Trading Companies & Distributors 0.5 Machinery 0.5 Industrial Conglomerates 0.3 Airlines 0.3 Independent Power and Renewable Electricity Producers 0.3 Wireless Telecommunication Services 0.2 Construction & Engineering 0.2 Life Sciences Tools & Services 0.2 Construction Materials 0.2 Semiconductors & Semiconductor Equipment 0.2 Consumer Finance 0.1 Household Durables 0.1 Electronic Equipment, Instruments & Components 0.1 Metals & Mining 0.1 Road & Rail 0.1 Household Products 0.1 Chemicals 0.1 Interactive Media & Services 0.0* Oil, Gas & Consumable Fuels 0.0* Electrical Equipment 0.0* Health Care Equipment & Supplies 0.0* Personal Products 0.0* -------- Total 100.0% ======== * Amount is less than 0.1%.----------------------------------------------------------- % OF TOTAL LONG-TERM ASSET CLASSIFICATION INVESTMENTS(1) ----------------------------------------------------------- Corporate Bonds 61.4% Senior Floating-Rate Loan Interests 29.4 Foreign Corporate Bonds 9.1 Common Stock 0.1 Rights 0.0* -------- Total 100.0% ======== ----------------------------------------------------------- % OF SENIOR LOANS AND OTHER CREDIT QUALITY (S&P RATINGS)(2) DEBT SECURITIES(1) ----------------------------------------------------------- BBB 0.4% BBB- 1.3 BB+ 3.9 BB 9.2 BB- 9.5 B+ 16.8 B 27.0 B- 13.9 CCC+ 11.7 CCC 2.5 CCC- 0.5 D 2.7 NR 0.6 -------- Total 100.0% ======== ----------------------------------------------------------- % OF TOTAL LONG-TERM TOP 10 ISSUERS INVESTMENTS(1) ----------------------------------------------------------- Bausch Health Cos., Inc. (Valeant) 3.4% Alliant Holdings I LLC 2.6 HUB International Ltd. 2.4 Asurion LLC 2.2 Endo LLC 2.1 Gray Television, Inc. 2.0 AmWINS Group, Inc. 1.9 Tenet Healthcare Corp. 1.9 iHeartCommunications, Inc. 1.8 Frontier Communications Corp. 1.7 -------- Total 22.0% ======== (1) Percentages are based on the long positions only. Money market funds and short positions are excluded. (2) The ratings are by Standard & Poor's Rating Group, a division of the McGraw-Hill Companies, Inc. A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO) of the creditworthiness of an issuer with respect to debt obligations except for those debt obligations that are only privately rated. Ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). Investment grade is defined as those issuers that have a long-term credit rating of BBB- or higher. The credit ratings shown relate to the creditworthiness of the issuers of the underlying securities in the Fund, and not to the Fund or its shares. Credit ratings are subject to change. Page 3 <PAGE> --------------------------------------------------------------------------------FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT FEBRUARY 25, 2013 - OCTOBER 31, 2020 First Trust Tactical ICE BofA US High High Yield ETF Yield Constrained Index <S> <C> <C> 2/25/13 $10,000 $10,000 4/30/13 10,403 10,308 10/31/13 10,676 10,458 4/30/14 11,167 10,956 10/31/14 11,285 11,070 4/30/15 11,493 11,238 10/31/15 11,376 10,845 4/30/16 11,519 11,089 10/31/16 11,933 11,950 4/30/17 12,431 12,602 10/31/17 12,744 13,042 4/30/18 12,748 13,012 10/31/18 12,948 13,154 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 </TABLE> Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 4 <PAGE> -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) ANNUAL REPORT OCTOBER 31, 2020 (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 October 31, 2020, the First Trust Leveraged Finance Team managed or supervised approximately $5.43 billion in senior secured bank loans and high-yield bonds. These assets are managed across various strategies, including three closed-end funds, an open-end fund, three exchange-traded funds, and a series of unit investment trusts on behalf of retail and institutional clients. PORTFOLIO MANAGEMENT TEAM WILLIAM HOUSEY, CFA - MANAGING DIRECTOR OF FIXED INCOME AND SENIOR PORTFOLIO MANAGER JEFFREY SCOTT, CFA - SENIOR VICE PRESIDENT, DEPUTY CREDIT OFFICER AND PORTFOLIO MANAGER ORLANDO PURPURA, CFA, CMT - SENIOR VICE PRESIDENT, CHIEF CREDIT OFFICER AND PORTFOLIO MANAGER COMMENTARY The First Trust Tactical High Yield ETF (the "Fund") is an actively managed exchanged-traded fund ("ETF"). The Fund's primary investment objective is to provide current income, with a secondary objective of capital appreciation. MARKET RECAP As we ended 2019, the Federal Reserve (the "Fed") had cut interest rates for the last time in October 2019 and in December indicated that no action would be likely in 2020 given the persistently low inflation environment. In January 2020, the United States and China signed "Phase One" of a trade agreement and U.S. economic data remained strong. The combination of a patient Fed, improving U.S.-China trade relations, and a robust domestic economy propelled the S&P 500(R) Index to new highs in late February 2020. Shortly after, as the coronavirus ("COVID-19") pandemic gripped the world's attention, the financial market implications from the onset of the resulting global economic shutdown became clear. Equities experienced their most rapid sell-off since the global financial crisis in 2008. By March 23, 2020 the S&P 500(R) Index was down nearly -34% from its all-time high set on February 19, 2020. Policy makers then took unprecedented steps to stabilize the markets. Central Banks around the world cut interest rates and governments announced aggressive monetary stimulus packages. Domestically, the CARES Act was passed and signed into law on March 27. The bill included a historic $2 trillion stimulus package aimed at sending financial aid to struggling U.S. citizens and businesses affected by COVID-19. The Fed also cut the target Fed Funds rate by 150 basis points ("bps") during the month of March. As fears subsided, and optimism that the combination of a re-opening of the U.S. economy and aggressive fiscal and monetary stimulus would result in a quicker than expected recovery, markets surpassed pre-pandemic levels before a resurgence in COVID-19 infections tempered investor optimism at the end of the 12-month period ended October 31, 2020. High-Yield Bond Market High-yield bond spreads over U.S. Treasuries increased 119 bps to end the 12-month period ended October 31, 2020 at T+534 bps, which is well below the spread of T+1087 bps experienced on March 23, 2020 during the depths of the pandemic-induced market selloff. The spread is slightly inside the long-term average spread over U.S. Treasuries of T+566 bps (December 1997 - October 2020). High-yield bond funds experienced robust inflows in the period as the Fed added high-yield bonds to its list of eligible asset classes for purchase under its Secondary Market Corporate Credit Facility. This combined with investor appetite for yield drove strong demand. Higher quality high-yield bonds (BB rated) outperformed lower quality high-yield bonds (B rated or below) in the period, which was a continuation of the trend from the prior year period. High-yield bond issues rated BB returned 4.60%, outperforming the 0.77% return of B rated issues and outperforming the -2.73% return of issues rated CCC in the period. The average price of high-yield bonds in the market at the beginning of the period was $99.09. The price dropped to $78.60 on March 23, 2020 and subsequently recovered to end the period with an average price of $99.29. Page 5 <PAGE> -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) ANNUAL REPORT OCTOBER 31, 2020 (UNAUDITED) Senior Loan Market Senior loan spreads over 3-month London Interbank Offered Rate ("LIBOR") increased 70 bps during the 12-month period ended October 31, 2020 to L+585 bps. This is above the long-term average spread of L+518 (December 1997 - October 2020). Retail senior loan funds have experienced 25 consecutive monthly outflows with demand impacted by the dramatic decrease of the 3-month LIBOR rate during the same period. Single-B rated senior loans outperformed both higher and lower quality senior loans during the period, returning 3.13% while BB rated issues returned -0.60%. Single Bs also outperformed CCC rated issues which returned -1.41% during the same period. The average price of senior loans in the market decreased from $95.42 in the beginning of the period to $93.17 at the end of the period. Default Rates During the 12-month period ended October 31, 2020, default rates increased within the ICE BofA US High Yield Constrained Index and the S&P/LSTA Leveraged Loan Index. The last twelve months ("LTM") default rate within the high-yield bond market ended the period at 6.34% compared to the 2.54% default rate at the beginning of the period. The senior loan market default rate ended the period at 4.11% compared to the 1.43% rate at the beginning of the period. The default rates in both the high-yield bond market and the senior loan market are above the long-term average default rates of 3.17% and 2.90%, respectively. Looking forward, we anticipate high yield and senior loan market default rates to remain above the long-term averages through 2021, but anticipate a decline in the default rate as the economy recovers and the introduction of a vaccine bring a recovery to the industries most impacted by COVID-19. FUND PERFORMANCE The Fund returned 2.92% on a net asset value ("NAV") basis and 3.18% on a market price basis over the LTM period ended October 31, 2020. The ICE BofA US High Yield Constrained Index ("the Index") returned 2.44% over the same time period. The Fund held 410 individual positions diversified across 49 industries at the end of the reporting period. Health Care Providers & Services (15.50%), Media (12.95%), and Software (12.69%) were the Fund's largest three industry exposures at the end of the period. By comparison, the Fund held 277 individual position across 40 industries as of October 31, 2019. The Fund's duration as of October 31, 2020 was 2.59 years. The Fund strategically deployed leverage over the LTM period, which was a tailwind to performance as risk asset prices generated positive returns during the period. The Fund's long position was 116.56% as of October 31, 2020. During the LTM period the Fund's performance significantly benefitted from its de minimis position in the energy industry. Energy was the worst performing industry in the Index during the period. The average weight of the energy industry in the Index during the LTM period was 12.28%, while the Fund held a modest 0.64% allocation. The significant underweight during a period of declining energy prices was significantly accretive to relative returns. In addition, the Fund benefited from its overweight position and asset selection in the healthcare industry and an overweight exposure to the technology & electronics industry. Within the healthcare industry the Fund's overweight position in a healthcare cost management solutions company, a managed services provider, and a drug manufacturer all outperformed the broader healthcare industry. The healthcare industry is expected to benefit from a divided government, which we believe will result in no major healthcare legislation or significant changes to the regulatory environment. Moreover, we anticipate a continued recovery in healthcare volumes as the economy recovers from COVID-19. Finally, the technology & electronics industry was the third-best performing industry in the Index during the LTM period and an overweight position benefitted the Fund. The average weight to the industry in the Index during the LTM period was 4.98%, while the Fund had a 14.59% allocation. Modestly offsetting these contributors were the Fund's overweight position and asset selection within the leisure industry and underweight position and asset selection within the basic industry and the automotive industry. The primary driver of the leisure industry underperformance was the Fund's overweight exposure to movie theaters. Movie theaters continue to face headwinds as new movie releases have been pushed further out on the calendar as the industry awaits a COVID-19 vaccine. The Fund's most recent monthly distribution of $0.204 per share is $0.009 per share higher than the monthly distribution paid in October 2019. At the end of the period, the effective yield based on the distributions for the trailing twelve months was 5.09% based on NAV and 5.07% based on market price. Page 6 <PAGE> -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) ANNUAL REPORT OCTOBER 31, 2020 (UNAUDITED) The Fund experienced two defaults during the LTM period compared to 54 defaults within the JP Morgan High-Yield Bond Universe during the LTM period. Since inception, the Fund has experienced nine defaults, which compares to 237 within the JP Morgan High-Yield Bond Universe during the same period. The Fund's LTM default rate was 1.93% at month-end. The JP Morgan High-Yield Bond Universe default rate was 6.34%. MARKET AND FUND OUTLOOK We believe high yield bonds are supported by spreads that remain in line with the long-term average, opportunistic pockets of value across ratings and industries, a low interest rate environment and an improving U.S. economy. Moreover, while the default rate has increased during the period, we believe individual credits that came into the 2020 recession with too much leverage and sectors most impacted by COVID-19 will face a higher likelihood of defaults including, but not limited to Energy, Travel, Leisure and Retail, in no particular order. However, generally, businesses that haven't been impacted by COVID-19 continue to perform well, in our opinion. We remain confident that improving economic conditions, unprecedented support from the Fed, and the potential for additional stimulus will provide a backdrop for continued recovery in high-yield bonds, in our view. As we evaluate new investment opportunities, decisions will continue to be rooted in our rigorous bottom-up credit analysis and our focus will remain on identifying the opportunities that we believe offer the best risk and reward balance. Page 7 <PAGE> FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) UNDERSTANDING YOUR FUND EXPENSES OCTOBER 31, 2020 (UNAUDITED) As a shareholder of First Trust Tactical High Yield ETF (the "Fund"), you incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, if any, and other Fund expenses. This Example is intended to help you understand your ongoing costs of investing in the Fund and to compare these costs with the ongoing costs of investing in other funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held through the six-month period ended October 31, 2020. ACTUAL EXPENSES The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Six-Month Period" to estimate the expenses you paid on your account during this six-month period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the following table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as brokerage commissions. Therefore, the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.<TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------ ANNUALIZED EXPENSE RATIO BEGINNING ENDING BASED ON THE EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH DURING THE MAY 1, 2020 OCTOBER 31, 2020 PERIOD SIX-MONTH PERIOD (a) ------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) Actual $1,000.00 $1,082.40 1.01% $5.29 Hypothetical (5% return before expenses) $1,000.00 $1,020.06 1.01% $5.13 </TABLE> (a) Expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (May 1, 2020 through October 31, 2020), multiplied by 184/366 (to reflect the six-month period). Page 8 <PAGE>FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) PORTFOLIO OF INVESTMENTS OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> CORPORATE BONDS -- 71.5% AEROSPACE & DEFENSE -- 0.8% $ 342,000 Booz Allen Hamilton, Inc. (a)................................... 3.88% 09/01/28 $ 347,771 7,802,000 Science Applications International Corp. (a).................... 4.88% 04/01/28 8,186,483 1,333,000 Spirit AeroSystems, Inc. (a).................................... 5.50% 01/15/25 1,357,994 3,000,000 Spirit AeroSystems, Inc. (a).................................... 7.50% 04/15/25 3,028,110 1,500,000 TransDigm, Inc. (a)............................................. 8.00% 12/15/25 1,625,700 1,000,000 TransDigm, Inc. (a)............................................. 6.25% 03/15/26 1,043,745 --------------- 15,589,803 --------------- AGRICULTURAL PRODUCTS -- 0.0% 500,000 Lamb Weston Holdings, Inc. (a).................................. 4.88% 05/15/28 542,685 --------------- AIRLINES -- 0.3% 5,469,000 Mileage Plus Holdings LLC / Mileage Plus Intellectual Property Assets Ltd. (a).............................................. 6.50% 06/20/27 5,704,851 --------------- ALTERNATIVE CARRIERS -- 0.5% 777,000 Level 3 Financing, Inc.......................................... 5.38% 05/01/25 800,594 2,000,000 Level 3 Financing, Inc.......................................... 5.25% 03/15/26 2,067,300 3,000,000 Level 3 Financing, Inc. (a)..................................... 4.63% 09/15/27 3,065,385 2,000,000 Level 3 Financing, Inc. (a)..................................... 4.25% 07/01/28 2,012,000 2,000,000 Level 3 Financing, Inc. (a)..................................... 3.63% 01/15/29 1,938,750 --------------- 9,884,029 --------------- APPAREL RETAIL -- 0.7% 3,040,000 Burlington Coat Factory Warehouse Corp. (a)..................... 6.25% 04/15/25 3,190,100 1,000,000 Nordstrom, Inc. (a)............................................. 8.75% 05/15/25 1,095,685 11,149,000 Nordstrom, Inc.................................................. 4.00% 03/15/27 9,352,054 --------------- 13,637,839 --------------- APPLICATION SOFTWARE -- 2.8% 1,276,000 BY Crown Parent LLC / BY Bond Finance, Inc. (a)................. 6.25% 05/01/25 1,100,699 4,910,000 Expedia Group, Inc. (a)......................................... 7.00% 05/01/25 5,261,540 6,486,000 Go Daddy Operating Co. LLC / GD Finance Co., Inc. (a)........... 5.25% 12/01/27 6,806,246 7,689,000 j2 Cloud Services LLC / j2 Cloud Co-Obligor, Inc. (a)........... 6.00% 07/15/25 8,062,685 12,000,000 J2 Global, Inc. (a) (b)......................................... 4.63% 10/15/30 12,146,700 4,411,000 LogMeIn, Inc. (a)............................................... 5.50% 09/01/27 4,477,165 5,685,000 Open Text Holdings, Inc. (a).................................... 4.13% 02/15/30 5,908,648 9,877,000 Solera LLC / Solera Finance, Inc. (a)........................... 10.50% 03/01/24 10,267,339 --------------- 55,324,567 --------------- AUTO PARTS & EQUIPMENT -- 0.3% 4,855,000 Gates Global LLC / Gates Corp. (a).............................. 6.25% 01/15/26 5,033,033 --------------- AUTOMOBILE MANUFACTURERS -- 1.0% 3,000,000 Ford Motor Co................................................... 8.50% 04/21/23 3,316,035 2,665,000 Ford Motor Co................................................... 9.00% 04/22/25 3,143,847 7,957,000 Ford Motor Co................................................... 9.63% 04/22/30 10,695,044 2,000,000 Ford Motor Credit Co. LLC....................................... 3.66% 09/08/24 1,986,450 500,000 Ford Motor Credit Co. LLC....................................... 5.13% 06/16/25 521,770 667,000 Penske Automotive Group, Inc.................................... 3.50% 09/01/25 669,501 --------------- 20,332,647 --------------- AUTOMOTIVE RETAIL -- 0.7% 167,000 Group 1 Automotive, Inc. (a).................................... 4.00% 08/15/28 167,417 4,926,000 IAA, Inc. (a)................................................... 5.50% 06/15/27 5,187,694 7,350,000 KAR Auction Services, Inc. (a).................................. 5.13% 06/01/25 7,414,312 </TABLE> See Notes to Financial Statements Page 9 <PAGE>FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> CORPORATE BONDS (CONTINUED) AUTOMOTIVE RETAIL (CONTINUED) $ 1,351,000 Lithia Motors, Inc. (a)......................................... 4.38% 01/15/31 $ 1,397,441 --------------- 14,166,864 --------------- BROADCASTING -- 10.6% 12,265,000 Cumulus Media New Holdings, Inc. (a)............................ 6.75% 07/01/26 11,427,485 5,719,000 Diamond Sports Group LLC / Diamond Sports Finance Co. (a)....... 5.38% 08/15/26 3,352,764 18,673,000 Diamond Sports Group LLC / Diamond Sports Finance Co. (a)....... 6.63% 08/15/27 7,476,669 10,289,000 EW Scripps (The) Co. (a) (b).................................... 5.13% 05/15/25 9,832,426 28,294,000 Gray Television, Inc. (a) (b)................................... 5.88% 07/15/26 29,502,578 11,199,000 Gray Television, Inc. (a)....................................... 7.00% 05/15/27 12,094,920 4,800,000 Gray Television, Inc. (a)....................................... 4.75% 10/15/30 4,740,000 11,000,000 iHeartCommunications, Inc....................................... 8.38% 05/01/27 10,692,275 14,475,000 iHeartCommunications, Inc. (a) (b).............................. 5.25% 08/15/27 14,312,156 1,000,000 iHeartCommunications, Inc. (a).................................. 4.75% 01/15/28 956,690 16,568,000 Nexstar Broadcasting, Inc. (a) (b).............................. 5.63% 07/15/27 17,298,069 9,396,000 Nexstar Broadcasting, Inc. (a).................................. 4.75% 11/01/28 9,518,383 8,355,000 Scripps Escrow, Inc. (a) (b).................................... 5.88% 07/15/27 8,135,681 19,421,000 Sinclair Television Group, Inc. (a) (b)......................... 5.63% 08/01/24 19,418,073 10,599,000 Sinclair Television Group, Inc. (a) (b)......................... 5.88% 03/15/26 10,469,056 2,394,000 Sinclair Television Group, Inc. (a)............................. 5.13% 02/15/27 2,256,345 3,000,000 Sirius XM Radio, Inc. (a)....................................... 4.63% 07/15/24 3,097,350 2,000,000 Sirius XM Radio, Inc. (a)....................................... 4.13% 07/01/30 2,058,520 337,000 TEGNA, Inc. (a)................................................. 4.75% 03/15/26 346,689 8,700,000 TEGNA, Inc. (a)................................................. 4.63% 03/15/28 8,600,646 11,500,000 TEGNA, Inc...................................................... 5.00% 09/15/29 11,654,560 3,000,000 Univision Communications, Inc. (a).............................. 5.13% 02/15/25 2,953,125 8,782,000 Univision Communications, Inc. (a).............................. 6.63% 06/01/27 8,897,264 --------------- 209,091,724 --------------- BUILDING PRODUCTS -- 0.3% 2,000,000 American Builders & Contractors Supply Co., Inc. (a)............ 5.88% 05/15/26 2,078,750 1,000,000 American Builders & Contractors Supply Co., Inc. (a)............ 4.00% 01/15/28 1,016,690 1,392,000 Standard Industries, Inc. (a)................................... 5.00% 02/15/27 1,438,110 350,000 Standard Industries, Inc. (a)................................... 4.38% 07/15/30 361,037 1,000,000 Standard Industries, Inc. (a)................................... 3.38% 01/15/31 974,584 --------------- 5,869,171 --------------- CABLE & SATELLITE -- 3.1% 7,076,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a) (b)........... 5.75% 02/15/26 7,344,251 2,000,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)............... 5.50% 05/01/26 2,082,810 2,828,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)............... 5.13% 05/01/27 2,973,176 500,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)............... 5.38% 06/01/29 541,820 2,000,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)............... 4.75% 03/01/30 2,106,200 2,000,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)............... 4.25% 02/01/31 2,052,080 1,000,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)............... 4.50% 05/01/32 1,035,000 4,000,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)............... 5.00% 02/01/28 4,206,000 9,183,000 CSC Holdings LLC (a) (b)........................................ 5.50% 05/15/26 9,566,390 819,000 CSC Holdings LLC (a)............................................ 5.50% 04/15/27 863,840 1,800,000 CSC Holdings LLC (a)............................................ 5.38% 02/01/28 1,917,000 5,800,000 CSC Holdings LLC (a)............................................ 7.50% 04/01/28 6,358,250 15,200,000 CSC Holdings LLC (a) (b)........................................ 5.75% 01/15/30 16,268,560 4,167,000 CSC Holdings LLC (a)............................................ 4.63% 12/01/30 4,172,688 --------------- 61,488,065 --------------- </TABLE> Page 10 See Notes to Financial Statements <PAGE> FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> CORPORATE BONDS (CONTINUED) CASINOS & GAMING -- 4.1% $ 890,000 Boyd Gaming Corp. (a)........................................... 8.63% 06/01/25 $ 975,395 4,718,000 Boyd Gaming Corp................................................ 6.38% 04/01/26 4,901,860 3,850,000 Boyd Gaming Corp................................................ 6.00% 08/15/26 3,958,762 500,000 Boyd Gaming Corp................................................ 4.75% 12/01/27 487,285 12,576,000 Caesars Entertainment, Inc. (a) (b)............................. 6.25% 07/01/25 12,898,236 15,500,000 Caesars Entertainment, Inc. (a) (b)............................. 8.13% 07/01/27 16,197,500 5,000,000 Caesars Resort Collection LLC / CRC Finco, Inc. (a)............. 5.25% 10/15/25 4,755,075 7,430,000 Golden Nugget, Inc. (a)......................................... 6.75% 10/15/24 6,300,789 8,350,000 MGM Resorts International (b)................................... 7.75% 03/15/22 8,785,870 5,100,000 MGM Resorts International (b)................................... 6.00% 03/15/23 5,297,625 4,229,000 MGM Resorts International....................................... 6.75% 05/01/25 4,455,146 1,000,000 MGM Resorts International....................................... 5.75% 06/15/25 1,040,950 1,250,000 Scientific Games International, Inc. (a)........................ 8.63% 07/01/25 1,301,163 5,386,000 Station Casinos LLC (a)......................................... 5.00% 10/01/25 5,369,169 3,616,000 Station Casinos LLC (a)......................................... 4.50% 02/15/28 3,432,940 --------------- 80,157,765 --------------- COAL & CONSUMABLE FUELS -- 0.0% 483,000 Peabody Energy Corp. (a)........................................ 6.00% 03/31/22 221,878 967,000 Peabody Energy Corp. (a)........................................ 6.38% 03/31/25 299,770 --------------- 521,648 --------------- COMMUNICATIONS EQUIPMENT -- 0.6% 8,655,000 CommScope Technologies LLC (a).................................. 6.00% 06/15/25 8,592,078 3,679,000 CommScope Technologies LLC (a).................................. 5.00% 03/15/27 3,439,939 --------------- 12,032,017 --------------- CONSTRUCTION & ENGINEERING -- 0.2% 4,039,000 Pike Corp. (a).................................................. 5.50% 09/01/28 4,140,823 --------------- CONSTRUCTION MACHINERY & HEAVY TRUCKS -- 0.3% 5,565,000 Clark Equipment Co. (a)......................................... 5.88% 06/01/25 5,804,991 --------------- CONSTRUCTION MATERIALS -- 0.2% 3,623,000 Summit Materials LLC / Summit Materials Finance Corp. (a)....... 5.25% 01/15/29 3,736,219 --------------- CONSUMER FINANCE -- 0.2% 486,000 Black Knight InfoServ LLC (a)................................... 3.63% 09/01/28 492,682 3,000,000 FirstCash, Inc. (a)............................................. 4.63% 09/01/28 3,050,625 --------------- 3,543,307 --------------- DATA PROCESSING & OUTSOURCED SERVICES -- 0.1% 1,084,000 Cardtronics, Inc. / Cardtronics USA, Inc. (a)................... 5.50% 05/01/25 1,097,436 --------------- DIVERSIFIED METALS & MINING -- 0.1% 2,500,000 Freeport-McMoRan, Inc........................................... 5.00% 09/01/27 2,609,300 --------------- DIVERSIFIED REAL ESTATE ACTIVITIES -- 0.1% 1,000,000 Meritage Homes Corp............................................. 7.00% 04/01/22 1,067,265 --------------- ELECTRIC UTILITIES -- 1.7% 2,500,000 Pacific Gas and Electric Co..................................... 4.55% 07/01/30 2,699,227 9,000,000 PG&E Corp....................................................... 5.00% 07/01/28 9,034,650 12,250,000 PG&E Corp. (b).................................................. 5.25% 07/01/30 12,265,312 5,000,000 Vistra Operations Co. LLC (a)................................... 5.63% 02/15/27 5,219,800 3,189,000 Vistra Operations Co. LLC (a)................................... 5.00% 07/31/27 3,335,694 --------------- 32,554,683 --------------- ELECTRICAL COMPONENTS & EQUIPMENT -- 0.0% 667,000 Sensata Technologies, Inc. (a).................................. 3.75% 02/15/31 661,164 --------------- </TABLE> See Notes to Financial Statements Page 11 <PAGE>FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> CORPORATE BONDS (CONTINUED) FERTILIZERS & AGRICULTURAL CHEMICALS -- 0.0% $ 250,000 Scotts Miracle-Gro (The) Co..................................... 4.50% 10/15/29 $ 266,414 --------------- FINANCIAL EXCHANGES & DATA -- 0.0% 750,000 MSCI, Inc. (a).................................................. 4.00% 11/15/29 784,012 --------------- FOOD DISTRIBUTORS -- 0.4% 4,837,000 US Foods, Inc. (a).............................................. 5.88% 06/15/24 4,827,931 3,488,000 US Foods, Inc. (a).............................................. 6.25% 04/15/25 3,649,616 --------------- 8,477,547 --------------- FOOD RETAIL -- 0.4% 1,000,000 Albertsons Cos., Inc. / Safeway, Inc. / New Albertsons LP / Albertsons LLC (a)........................................... 7.50% 03/15/26 1,109,875 3,700,000 Albertsons Cos., Inc. / Safeway, Inc. / New Albertsons LP / Albertsons LLC (a)........................................... 4.63% 01/15/27 3,819,140 3,000,000 Albertsons Cos., Inc. / Safeway, Inc. / New Albertsons LP / Albertsons LLC (a)........................................... 5.88% 02/15/28 3,177,570 --------------- 8,106,585 --------------- HEALTH CARE EQUIPMENT -- 0.0% 250,000 Hill-Rom Holdings, Inc. (a)..................................... 4.38% 09/15/27 259,062 300,000 Teleflex, Inc. (a).............................................. 4.25% 06/01/28 313,875 --------------- 572,937 --------------- HEALTH CARE FACILITIES -- 5.5% 11,663,000 Acadia Healthcare Co., Inc...................................... 5.63% 02/15/23 11,735,894 2,318,000 Acadia Healthcare Co., Inc...................................... 6.50% 03/01/24 2,378,604 1,000,000 Acadia Healthcare Co., Inc. (a)................................. 5.50% 07/01/28 1,041,875 788,000 Acadia Healthcare Co., Inc. (a)................................. 5.00% 04/15/29 813,846 1,087,000 Encompass Health Corp........................................... 5.13% 03/15/23 1,099,115 8,745,000 Encompass Health Corp. (b)...................................... 5.75% 11/01/24 8,745,000 2,284,000 Encompass Health Corp........................................... 5.75% 09/15/25 2,363,940 1,300,000 Encompass Health Corp........................................... 4.50% 02/01/28 1,333,553 6,080,000 Encompass Health Corp........................................... 4.75% 02/01/30 6,343,325 500,000 Encompass Health Corp........................................... 4.63% 04/01/31 515,625 2,000,000 HCA, Inc........................................................ 5.88% 05/01/23 2,177,910 6,530,000 HCA, Inc........................................................ 5.88% 02/15/26 7,387,062 16,229,000 Select Medical Corp. (a) (b).................................... 6.25% 08/15/26 17,146,588 1,168,000 Tenet Healthcare Corp. (a)...................................... 4.63% 09/01/24 1,196,850 1,500,000 Tenet Healthcare Corp. (a)...................................... 7.50% 04/01/25 1,617,937 4,379,000 Tenet Healthcare Corp........................................... 5.13% 05/01/25 4,339,370 7,492,000 Tenet Healthcare Corp. (a)...................................... 4.88% 01/01/26 7,609,404 6,281,000 Tenet Healthcare Corp. (a)...................................... 5.13% 11/01/27 6,483,248 2,327,000 Tenet Healthcare Corp. (a)...................................... 4.63% 06/15/28 2,363,359 19,531,000 Tenet Healthcare Corp. (a) (b).................................. 6.13% 10/01/28 18,981,691 2,250,000 Universal Health Services, Inc. (a)............................. 5.00% 06/01/26 2,342,385 --------------- 108,016,581 --------------- HEALTH CARE SERVICES -- 5.4% 19,408,000 DaVita, Inc. (a)................................................ 4.63% 06/01/30 19,752,880 2,000,000 DaVita, Inc. (a)................................................ 3.75% 02/15/31 1,926,250 18,084,000 Global Medical Response, Inc. (a) (b)........................... 6.50% 10/01/25 17,880,555 16,225,000 MEDNAX, Inc. (a) (b)............................................ 5.25% 12/01/23 16,377,109 8,821,000 MEDNAX, Inc. (a)................................................ 6.25% 01/15/27 9,116,239 1,951,000 Providence Service (The) Corp. (a).............................. 5.88% 11/15/25 1,988,801 </TABLE> Page 12 See Notes to Financial Statements <PAGE> FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> CORPORATE BONDS (CONTINUED) HEALTH CARE SERVICES (CONTINUED) $ 100,000 Service Corp. International..................................... 3.38% 08/15/30 $ 101,562 6,462,000 US Renal Care, Inc. (a)......................................... 10.63% 07/15/27 6,898,185 18,034,000 Verscend Escrow Corp. (a) (b)................................... 9.75% 08/15/26 19,420,364 11,867,000 Vizient, Inc. (a) (b)........................................... 6.25% 05/15/27 12,591,599 --------------- 106,053,544 --------------- HEALTH CARE TECHNOLOGY -- 1.6% 31,493,000 Change Healthcare Holdings LLC / Change Healthcare Finance, Inc. (a) (b)................................................. 5.75% 03/01/25 31,518,824 --------------- HOTELS, RESORTS & CRUISE LINES -- 0.3% 1,100,000 Hilton Domestic Operating Co., Inc. (a)......................... 5.38% 05/01/25 1,137,818 1,100,000 Vail Resorts, Inc. (a).......................................... 6.25% 05/15/25 1,156,375 3,000,000 Wyndham Hotels & Resorts, Inc. (a).............................. 5.38% 04/15/26 3,043,125 711,000 Wyndham Hotels & Resorts, Inc. (a).............................. 4.38% 08/15/28 708,010 --------------- 6,045,328 --------------- HOUSEHOLD PRODUCTS -- 0.1% 200,000 Central Garden & Pet Co......................................... 4.13% 10/15/30 202,875 1,350,000 Energizer Holdings, Inc. (a).................................... 4.38% 03/31/29 1,364,850 --------------- 1,567,725 --------------- HUMAN RESOURCE & EMPLOYMENT SERVICES -- 0.8% 3,000,000 Tempo Acquisition LLC / Tempo Acquisition Finance Corp. (a)..... 5.75% 06/01/25 3,153,750 11,478,000 Tempo Acquisition LLC / Tempo Acquisition Finance Corp. (a) (b)................................................ 6.75% 06/01/25 11,661,648 --------------- 14,815,398 --------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS -- 0.3% 5,000,000 Calpine Corp. (a)............................................... 5.13% 03/15/28 5,162,600 667,000 Calpine Corp. (a)............................................... 4.63% 02/01/29 674,477 167,000 Calpine Corp. (a)............................................... 5.00% 02/01/31 170,749 --------------- 6,007,826 --------------- INDUSTRIAL CONGLOMERATES -- 0.4% 2,500,000 Hillenbrand, Inc................................................ 5.75% 06/15/25 2,673,437 4,225,000 RBS Global, Inc. / Rexnord LLC (a).............................. 4.88% 12/15/25 4,320,950 --------------- 6,994,387 --------------- INDUSTRIAL MACHINERY -- 0.2% 4,667,000 Vertical US Newco, Inc. (a)..................................... 5.25% 07/15/27 4,812,027 --------------- INSURANCE BROKERS -- 5.2% 32,532,000 Alliant Holdings Intermediate LLC / Alliant Holdings Co-Issuer (a) (b)............................................ 6.75% 10/15/27 34,213,579 30,686,000 AmWINS Group, Inc. (a) (b)...................................... 7.75% 07/01/26 32,866,547 6,188,000 AssuredPartners, Inc. (a)....................................... 7.00% 08/15/25 6,377,446 27,438,000 HUB International Ltd. (a) (b).................................. 7.00% 05/01/26 28,151,525 --------------- 101,609,097 --------------- INTEGRATED TELECOMMUNICATION SERVICES -- 2.7% 5,320,000 CenturyLink, Inc................................................ 5.80% 03/15/22 5,542,775 21,071,000 Frontier Communications Corp. (a) (d)........................... 8.50% 04/01/26 21,223,765 1,930,000 Frontier Communications Corp. (a) (d)........................... 5.88% 10/15/27 1,982,882 732,000 Windstream Escrow LLC / Windstream Escrow Finance Corp. (a).................................................... 7.75% 08/15/28 708,210 2,500,000 Zayo Group Holdings, Inc. (a)................................... 4.00% 03/01/27 2,457,000 </TABLE> See Notes to Financial Statements Page 13 <PAGE>FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> CORPORATE BONDS (CONTINUED) INTEGRATED TELECOMMUNICATION SERVICES (CONTINUED) $ 21,009,000 Zayo Group Holdings, Inc. (a) (b)............................... 6.13% 03/01/28 $ 21,228,964 --------------- 53,143,596 --------------- INTERACTIVE MEDIA & SERVICES -- 0.1% 684,000 ANGI Group LLC (a).............................................. 3.88% 08/15/28 677,587 500,000 Match Group Holdings II LLC (a)................................. 4.63% 06/01/28 518,613 --------------- 1,196,200 --------------- INVESTMENT BANKING & BROKERAGE -- 0.7% 14,050,000 LPL Holdings, Inc. (a) (b)...................................... 5.75% 09/15/25 14,581,792 --------------- IT CONSULTING & OTHER SERVICES -- 0.6% 6,261,000 CDK Global, Inc................................................. 4.88% 06/01/27 6,500,170 4,448,000 CDK Global, Inc. (a)............................................ 5.25% 05/15/29 4,775,551 250,000 Gartner, Inc. (a)............................................... 4.50% 07/01/28 261,302 250,000 Gartner, Inc. (a)............................................... 3.75% 10/01/30 255,963 --------------- 11,792,986 --------------- LEISURE FACILITIES -- 0.7% 250,000 Cedar Fair LP................................................... 5.25% 07/15/29 227,298 1,850,000 Cedar Fair LP / Canada's Wonderland Co. / Magnum Management Corp. / Millennium Op............................. 5.38% 04/15/27 1,717,031 11,209,000 Six Flags Entertainment Corp. (a) (b)........................... 4.88% 07/31/24 10,434,122 1,000,000 Six Flags Entertainment Corp. (a)............................... 5.50% 04/15/27 931,550 1,000,000 Six Flags Theme Parks, Inc. (a)................................. 7.00% 07/01/25 1,060,625 --------------- 14,370,626 --------------- MANAGED HEALTH CARE -- 0.8% 2,000,000 Centene Corp.................................................... 4.75% 01/15/25 2,057,500 1,000,000 Centene Corp. (a)............................................... 5.38% 08/15/26 1,060,000 1,500,000 Centene Corp.................................................... 4.25% 12/15/27 1,582,522 1,000,000 Molina Healthcare, Inc. (a)..................................... 4.38% 06/15/28 1,026,000 10,200,000 MPH Acquisition Holdings LLC (a)................................ 5.75% 11/01/28 10,034,250 --------------- 15,760,272 --------------- METAL & GLASS CONTAINERS -- 1.0% 1,000,000 Ball Corp....................................................... 2.88% 08/15/30 990,000 6,500,000 Berry Global, Inc. (a).......................................... 4.50% 02/15/26 6,599,027 2,000,000 Owens-Brockway Glass Container, Inc. (a)........................ 5.88% 08/15/23 2,108,000 6,550,000 Owens-Brockway Glass Container, Inc. (a)........................ 6.38% 08/15/25 7,209,094 684,000 Owens-Brockway Glass Container, Inc. (a)........................ 6.63% 05/13/27 734,873 2,200,000 Silgan Holdings, Inc............................................ 4.13% 02/01/28 2,290,860 --------------- 19,931,854 --------------- MOVIES & ENTERTAINMENT -- 2.5% 5,955,000 AMC Entertainment Holdings, Inc. (a)............................ 10.50% 04/15/25 3,223,144 15,398,000 Cinemark USA, Inc. (b).......................................... 5.13% 12/15/22 13,386,636 6,234,000 Cinemark USA, Inc. (b).......................................... 4.88% 06/01/23 5,238,212 4,124,000 Cinemark USA, Inc. (a).......................................... 8.75% 05/01/25 4,276,073 7,000,000 Live Nation Entertainment, Inc. (a)............................. 4.88% 11/01/24 6,750,660 5,494,000 Live Nation Entertainment, Inc. (a)............................. 5.63% 03/15/26 5,255,011 523,000 Live Nation Entertainment, Inc. (a)............................. 6.50% 05/15/27 560,279 10,895,000 Live Nation Entertainment, Inc. (a)............................. 4.75% 10/15/27 10,030,209 1,000,000 WMG Acquisition Corp. (a)....................................... 3.00% 02/15/31 952,500 --------------- 49,672,724 --------------- </TABLE> Page 14 See Notes to Financial Statements <PAGE> FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> CORPORATE BONDS (CONTINUED) OIL & GAS EXPLORATION & PRODUCTION -- 0.0% $ 3,250,000 Mesquite Energy Corp. (c) (d) (e)............................... 7.75% 06/15/21 $ 32,500 3,125,000 Mesquite Energy Corp. (c) (d) (e)............................... 6.13% 01/15/23 31,250 --------------- 63,750 --------------- OIL & GAS REFINING & MARKETING -- 0.0% 415,000 Murphy Oil USA, Inc............................................. 5.63% 05/01/27 437,227 --------------- PACKAGED FOODS & MEATS -- 1.7% 2,190,000 B&G Foods, Inc.................................................. 5.25% 04/01/25 2,257,890 627,000 Kraft Heinz Foods Co............................................ 3.95% 07/15/25 678,437 750,000 Performance Food Group, Inc. (a)................................ 5.50% 10/15/27 770,122 12,246,000 Post Holdings, Inc. (a) (b)..................................... 5.00% 08/15/26 12,720,349 5,990,000 Post Holdings, Inc. (a)......................................... 5.75% 03/01/27 6,290,758 4,434,000 Post Holdings, Inc. (a)......................................... 5.63% 01/15/28 4,686,184 1,000,000 Post Holdings, Inc. (a)......................................... 5.50% 12/15/29 1,082,525 4,000,000 Post Holdings, Inc. (a)......................................... 4.63% 04/15/30 4,115,000 --------------- 32,601,265 --------------- PAPER PACKAGING -- 0.9% 13,381,000 Graham Packaging Co., Inc. (a) (b).............................. 7.13% 08/15/28 14,008,234 2,000,000 Graphic Packaging International LLC (a)......................... 3.50% 03/15/28 2,005,600 1,000,000 Graphic Packaging International LLC (a)......................... 3.50% 03/01/29 1,001,875 376,000 Sealed Air Corp. (a)............................................ 5.50% 09/15/25 421,825 1,000,000 Sealed Air Corp. (a)............................................ 4.00% 12/01/27 1,050,000 --------------- 18,487,534 --------------- PERSONAL PRODUCTS -- 0.0% 250,000 Prestige Brands, Inc. (a)....................................... 5.13% 01/15/28 260,156 --------------- PHARMACEUTICALS -- 2.1% 792,000 Bausch Health Americas, Inc. (a)................................ 9.25% 04/01/26 874,210 1,242,000 Bausch Health Americas, Inc. (a)................................ 8.50% 01/31/27 1,359,785 500,000 Catalent Pharma Solutions, Inc. (a)............................. 5.00% 07/15/27 522,095 4,000,000 Charles River Laboratories International, Inc. (a).............. 5.50% 04/01/26 4,187,500 750,000 Charles River Laboratories International, Inc. (a).............. 4.25% 05/01/28 785,018 1,333,000 Emergent BioSolutions, Inc. (a)................................. 3.88% 08/15/28 1,342,165 14,914,000 Horizon Therapeutics USA, Inc. (a) (b).......................... 5.50% 08/01/27 15,895,490 800,000 IQVIA, Inc. (a)................................................. 5.00% 10/15/26 830,616 1,278,000 IQVIA, Inc. (a)................................................. 5.00% 05/15/27 1,341,216 1,000,000 Jaguar Holding Co. II / PPD Development LP (a).................. 5.00% 06/15/28 1,043,560 10,000,000 Par Pharmaceutical, Inc. (a).................................... 7.50% 04/01/27 10,613,100 2,085,000 West Street Merger Sub, Inc. (a)................................ 6.38% 09/01/25 2,120,184 --------------- 40,914,939 --------------- PUBLISHING -- 0.1% 2,445,000 Meredith Corp. (a).............................................. 6.50% 07/01/25 2,519,878 --------------- REAL ESTATE OPERATING COMPANIES -- 0.2% 1,379,000 Lennar Corp..................................................... 8.38% 01/15/21 1,400,374 2,785,000 Lennar Corp. (b)................................................ 5.25% 06/01/26 3,171,447 --------------- 4,571,821 --------------- REAL ESTATE SERVICES -- 0.8% 3,310,000 KB Home (b)..................................................... 7.00% 12/15/21 3,448,606 500,000 MDC Holdings, Inc............................................... 3.85% 01/15/30 529,360 2,302,000 PulteGroup, Inc................................................. 5.50% 03/01/26 2,663,126 290,000 TRI Pointe Group, Inc........................................... 5.25% 06/01/27 312,783 </TABLE> See Notes to Financial Statements Page 15 <PAGE>FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> CORPORATE BONDS (CONTINUED) REAL ESTATE SERVICES (CONTINUED) $ 500,000 TRI Pointe Group, Inc........................................... 5.70% 06/15/28 $ 556,250 7,545,000 TRI Pointe Group, Inc. / TRI Pointe Homes, Inc. (b)............. 5.88% 06/15/24 8,186,325 --------------- 15,696,450 --------------- RESEARCH & CONSULTING SERVICES -- 0.5% 2,961,000 Nielsen Finance LLC / Nielsen Finance Co. (a)................... 5.00% 04/15/22 2,965,441 4,254,000 Nielsen Finance LLC / Nielsen Finance Co. (a)................... 5.63% 10/01/28 4,394,914 2,666,000 Nielsen Finance LLC / Nielsen Finance Co. (a)................... 5.88% 10/01/30 2,804,299 --------------- 10,164,654 --------------- RESTAURANTS -- 1.1% 661,000 Brinker International, Inc. (a)................................. 5.00% 10/01/24 663,509 8,483,000 IRB Holding Corp. (a)........................................... 7.00% 06/15/25 9,055,687 11,749,000 IRB Holding Corp. (a) (b)....................................... 6.75% 02/15/26 11,793,059 --------------- 21,512,255 --------------- SECURITY & ALARM SERVICES -- 0.2% 1,200,000 Brink's (The) Co. (a)........................................... 5.50% 07/15/25 1,250,502 2,061,000 Brink's (The) Co. (a)........................................... 4.63% 10/15/27 2,106,765 --------------- 3,357,267 --------------- SEMICONDUCTORS -- 0.2% 1,000,000 Microchip Technology, Inc. (a).................................. 4.25% 09/01/25 1,039,084 1,550,000 Qorvo, Inc...................................................... 4.38% 10/15/29 1,664,452 1,000,000 Qorvo, Inc. (a)................................................. 3.38% 04/01/31 1,013,750 --------------- 3,717,286 --------------- SPECIALIZED CONSUMER SERVICES -- 0.3% 4,000,000 Aramark Services, Inc. (a)...................................... 6.38% 05/01/25 4,200,520 2,000,000 Aramark Services, Inc........................................... 4.75% 06/01/26 1,990,500 481,000 Aramark Services, Inc. (a)...................................... 5.00% 02/01/28 485,863 --------------- 6,676,883 --------------- SPECIALTY CHEMICALS -- 0.2% 3,726,000 Avantor Funding, Inc. (a)....................................... 4.63% 07/15/28 3,865,539 250,000 HB Fuller Co.................................................... 4.25% 10/15/28 253,906 --------------- 4,119,445 --------------- SYSTEMS SOFTWARE -- 1.9% 4,756,000 Boxer Parent Co., Inc. (a)...................................... 9.13% 03/01/26 5,071,085 250,000 PTC, Inc. (a)................................................... 3.63% 02/15/25 255,000 7,075,000 PTC, Inc. (a)................................................... 4.00% 02/15/28 7,327,047 24,100,000 SS&C Technologies, Inc. (a) (b)................................. 5.50% 09/30/27 25,644,328 --------------- 38,297,460 --------------- TECHNOLOGY DISTRIBUTORS -- 0.2% 1,250,000 CDW LLC / CDW Finance Corp...................................... 4.13% 05/01/25 1,301,694 1,000,000 CDW LLC / CDW Finance Corp...................................... 4.25% 04/01/28 1,034,520 750,000 CDW LLC / CDW Finance Corp...................................... 3.25% 02/15/29 750,000 --------------- 3,086,214 --------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 1.7% 8,042,000 Dell International LLC / EMC Corp. (a).......................... 5.88% 06/15/21 8,071,434 22,225,000 Dell International LLC / EMC Corp. (a) (b)...................... 7.13% 06/15/24 23,053,548 1,000,000 Dell International LLC / EMC Corp. (a).......................... 6.10% 07/15/27 1,190,303 1,000,000 Dell International LLC / EMC Corp. (a).......................... 6.20% 07/15/30 1,223,977 </TABLE> Page 16 See Notes to Financial Statements <PAGE> FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> CORPORATE BONDS (CONTINUED) TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS (CONTINUED) $ 667,000 Xerox Holdings Corp. (a)........................................ 5.00% 08/15/25 $ 659,356 --------------- 34,198,618 --------------- TRADING COMPANIES & DISTRIBUTORS -- 0.6% 940,000 Ashtead Capital, Inc. (a)....................................... 4.13% 08/15/25 967,796 2,000,000 Ashtead Capital, Inc. (a)....................................... 5.25% 08/01/26 2,122,500 750,000 Ashtead Capital, Inc. (a)....................................... 4.00% 05/01/28 783,750 4,199,000 Ashtead Capital, Inc. (a)....................................... 4.25% 11/01/29 4,491,880 2,276,000 United Rentals North America, Inc............................... 5.88% 09/15/26 2,397,743 257,000 United Rentals North America, Inc............................... 5.50% 05/15/27 273,705 --------------- 11,037,374 --------------- TRUCKING -- 0.1% 2,350,000 XPO Logistics, Inc. (a)......................................... 6.25% 05/01/25 2,502,033 --------------- WIRELESS TELECOMMUNICATION SERVICES -- 0.3% 1,219,000 SBA Communications Corp. (b).................................... 4.88% 09/01/24 1,247,098 500,000 SBA Communications Corp. (a).................................... 3.88% 02/15/27 508,750 2,329,000 T-Mobile USA, Inc............................................... 6.00% 03/01/23 2,331,911 1,180,000 T-Mobile USA, Inc............................................... 5.13% 04/15/25 1,213,176 416,000 T-Mobile USA, Inc............................................... 4.50% 02/01/26 427,180 --------------- 5,728,115 --------------- TOTAL CORPORATE BONDS........................................................................ 1,410,640,802 (Cost $1,398,097,631) --------------- FOREIGN CORPORATE BONDS -- 10.6% APPLICATION SOFTWARE -- 0.3% 2,958,000 Open Text Corp. (a)............................................. 5.88% 06/01/26 3,080,018 2,336,000 Open Text Corp. (a)............................................. 3.88% 02/15/28 2,376,880 --------------- 5,456,898 --------------- BUILDING PRODUCTS -- 2.3% 11,900,000 Cemex SAB de C.V. (a) (b)....................................... 7.75% 04/16/26 12,605,075 15,634,000 Cemex SAB de C.V. (a) (b)....................................... 7.38% 06/05/27 17,240,550 4,700,000 Cemex SAB de C.V. (a)........................................... 5.45% 11/19/29 4,979,885 2,000,000 Cemex SAB de C.V. (a)........................................... 5.20% 09/17/30 2,115,280 7,513,000 Masonite International Corp. (a)................................ 5.75% 09/15/26 7,877,831 1,000,000 Masonite International Corp. (a)................................ 5.38% 02/01/28 1,061,690 --------------- 45,880,311 --------------- CABLE & SATELLITE -- 0.3% 250,000 Virgin Media Finance PLC (a).................................... 5.00% 07/15/30 249,063 3,073,000 Virgin Media Secured Finance PLC (a)............................ 5.50% 08/15/26 3,202,757 2,000,000 Virgin Media Secured Finance PLC (a)............................ 5.50% 05/15/29 2,140,000 --------------- 5,591,820 --------------- CASINOS & GAMING -- 0.0% 500,000 International Game Technology PLC (a)........................... 5.25% 01/15/29 495,802 --------------- DIVERSIFIED SUPPORT SERVICES -- 0.0% 950,000 Ritchie Bros Auctioneers, Inc. (a).............................. 5.38% 01/15/25 979,094 --------------- ENVIRONMENTAL & FACILITIES SERVICES -- 0.1% 1,027,000 GFL Environmental, Inc. (a)..................................... 3.75% 08/01/25 1,028,926 500,000 GFL Environmental, Inc. (a)..................................... 5.13% 12/15/26 525,775 --------------- 1,554,701 --------------- </TABLE> See Notes to Financial Statements Page 17 <PAGE>FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> FOREIGN CORPORATE BONDS (CONTINUED) INTEGRATED TELECOMMUNICATION SERVICES -- 0.4% $ 7,693,000 Altice France S.A. (a).......................................... 7.38% 05/01/26 $ 8,037,262 --------------- METAL & GLASS CONTAINERS -- 0.0% 200,000 Ardagh Packaging Finance PLC / Ardagh Holdings USA, Inc. (a)..................................................... 4.13% 08/15/26 204,250 --------------- OTHER DIVERSIFIED FINANCIAL SERVICES -- 0.5% 1,867,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust....... 4.50% 09/15/23 1,940,156 6,000,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust....... 6.50% 07/15/25 6,617,142 1,500,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust....... 3.88% 01/23/28 1,418,174 --------------- 9,975,472 --------------- PHARMACEUTICALS -- 5.7% 610,000 Bausch Health Cos., Inc. (a).................................... 5.50% 03/01/23 610,381 1,461,000 Bausch Health Cos., Inc. (a) (b)................................ 5.88% 05/15/23 1,458,487 55,462,000 Bausch Health Cos., Inc. (a) (b)................................ 6.13% 04/15/25 57,001,070 4,349,000 Bausch Health Cos., Inc. (a).................................... 5.00% 01/30/28 4,303,901 3,818,000 Bausch Health Cos., Inc. (a).................................... 6.25% 02/15/29 3,940,176 3,000,000 Bausch Health Cos., Inc. (a).................................... 7.25% 05/30/29 3,232,140 5,000,000 Bausch Health Cos., Inc. (a).................................... 5.25% 01/30/30 4,943,350 169,000 Cheplapharm Arzneimittel GmbH (a)............................... 5.50% 01/15/28 171,359 11,840,000 Endo Dac / Endo Finance LLC / Endo Finco, Inc. (a) (b).......... 5.88% 10/15/24 11,877,000 16,083,000 Endo Dac / Endo Finance LLC / Endo Finco, Inc. (a) (b).......... 9.50% 07/31/27 17,282,551 1,000,000 Mallinckrodt International Finance S.A. / Mallinckrodt CB LLC (a) (c) (d).............................................. 5.63% 10/15/23 325,000 1,750,000 Mallinckrodt International Finance S.A. / Mallinckrodt CB LLC (a) (c) (d).............................................. 5.50% 04/15/25 595,000 7,000,000 Mallinckrodt International Finance S.A. / Mallinckrodt CB LLC (a) (d).................................................. 10.00% 04/15/25 7,630,000 --------------- 113,370,415 --------------- REAL ESTATE SERVICES -- 0.3% 5,346,000 Taylor Morrison Communities, Inc. / Taylor Morrison Holdings II, Inc. (a)........................................ 5.88% 04/15/23 5,673,362 --------------- RESEARCH & CONSULTING SERVICES -- 0.2% 3,774,000 Camelot Finance S.A. (a)........................................ 4.50% 11/01/26 3,932,036 140,000 Nielsen Co. Luxembourg (The) S.A.R.L. (a)....................... 5.50% 10/01/21 140,569 --------------- 4,072,605 --------------- RESTAURANTS -- 0.4% 507,000 1011778 BC ULC / New Red Finance, Inc. (a)...................... 5.00% 10/15/25 520,005 7,000,000 1011778 BC ULC / New Red Finance, Inc. (a)...................... 4.00% 10/15/30 6,965,000 --------------- 7,485,005 --------------- 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 1,048,750 --------------- TOTAL FOREIGN CORPORATE BONDS................................................................ 209,825,747 (Cost $202,901,190) --------------- </TABLE> Page 18 See Notes to Financial Statements <PAGE> FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED VALUE DESCRIPTION RATE (f) MATURITY (g) VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> SENIOR FLOATING-RATE LOAN INTERESTS -- 34.2% AIRLINES -- 0.0% $ 823,022 Delta Air Lines, Inc., Term Loan B, 3 Mo. LIBOR + 3.75%, 1.00% Floor.................................................. 4.75% 09/16/27 $ 819,080 --------------- APPLICATION SOFTWARE -- 7.3% 3,000,000 Epicor Software Corp., Term Loan (Second Lien), 1 Mo. LIBOR + 7.75%, 1.00% Floor......................................... 8.75% 07/30/28 3,063,750 3,295,945 Epicor Software Corp., Term Loan B, 1 Mo. LIBOR + 4.25%, 1.00% Floor.................................................. 5.25% 07/30/27 3,280,290 21,063,770 Greeneden U.S. Holdings II LLC (Genesys Telecommunications Laoratories, Inc.), Initial Dollar Term Loan, 1 Mo. LIBOR + 4.00%, 0.75% Floor........................................... 4.75% 11/30/27 20,708,424 11,713,146 Hyland Software, Inc., Term Loan (Second Lien), 1 Mo. LIBOR + 7.00%, 0.75% Floor......................................... 7.75% 07/10/25 11,576,454 22,220,448 Hyland Software, Inc., 2018 Refinancing Term Loan, 1 Mo. LIBOR + 3.50%, 0.75% Floor............................. 4.25% 07/01/24 21,871,364 4,682,639 Internet Brands, Inc. (WebMD/MH Sub I. LLC), 2020 June New Term Loan, 1 Mo. LIBOR + 3.75%, 1.00% Floor.................. 4.75% 09/15/24 4,597,790 14,951,423 Internet Brands, Inc. (WebMD/MH Sub I. LLC), Initial Term Loan, 1 Mo. LIBOR + 3.50%, 0.00% Floor....................... 3.65% 09/13/24 14,435,151 6,273,194 Internet Brands, Inc. (WebMD/MH Sub I. LLC), Term Loan (Second Lien), 1 Mo. LIBOR + 7.50%, 1.00% Floor.............. 7.65% 09/15/25 6,233,987 17,479,852 LogMeIn, Inc. (Logan), Term Loan B, 1 Mo. LIBOR + 4.75%, 0.00% Floor.................................................. 4.89% 08/31/27 16,922,769 7,525,065 McAfee LLC, Term Loan B, 1 Mo. LIBOR + 3.75%, 0.00% Floor........................................................ 3.89% 09/30/24 7,441,386 1,109,359 Micro Focus International (MA Financeco LLC), Miami Escrow Term Loan B3, 1 Mo. LIBOR + 2.50%, 0.00% Floor............... 2.65% 06/21/24 1,042,797 7,491,398 Micro Focus International (MA Financeco LLC), Seattle Spinco Term Loan B, 1 Mo. LIBOR + 2.50%, 0.00% Floor................ 2.65% 06/21/24 7,041,914 5,632,703 Micro Focus International (MA Financeco LLC), Term Loan B4, 3 Mo. LIBOR + 4.25%, 1.00% Floor............................. 5.25% 06/05/25 5,597,498 8,908,090 Milano Acquisition Corp., Term Loan B, 3 Mo. LIBOR + 4.00%, 0.75% Floor.................................................. 4.75% 10/01/27 8,744,805 1,846,699 Qlik Technologies (Project Alpha Intermediate Holding, Inc.), 2019 Incremental Term Loan B, 3 Mo. LIBOR + 4.25%, 0.00% Floor.................................................. 4.48% 04/26/24 1,812,074 8,057,862 Qlik Technologies (Project Alpha Intermediate Holding, Inc.), Term Loan B, 3 Mo. LIBOR + 3.50%, 1.00% Floor................ 4.50% 04/26/24 7,892,675 1,989,583 Solera Holdings, Inc., Term Loan B, 2 Mo. LIBOR + 2.75%, 0.00% Floor.................................................. 2.92% 03/03/23 1,933,099 --------------- 144,196,227 --------------- AUTO PARTS & EQUIPMENT -- 0.5% 6,984,038 Gates Global LLC, Initial B-2 Dollar Term Loan, 1 Mo. LIBOR + 2.75%, 1.00% Floor......................................... 3.75% 03/31/24 6,838,560 6,850,769 Lumileds (Bright Bidco B.V.), Term Loan B, 6 Mo. LIBOR + 3.50%, 1.00% Floor........................................... 4.50% 06/30/24 3,190,198 --------------- 10,028,758 --------------- </TABLE> See Notes to Financial Statements Page 19 <PAGE>FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED VALUE DESCRIPTION RATE (f) MATURITY (g) VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED) BROADCASTING -- 0.8% $ 14,896,385 iHeartCommunications, Inc., Incremental Term Loan B, 1 Mo. LIBOR + 4.00%, 0.75% Floor................................... 4.75% 05/01/26 $ 14,331,515 1,661,415 iHeartCommunications, Inc., Term Loan B, 1 Mo. LIBOR + 3.00%, 0.00% Floor........................................... 3.15% 04/29/26 1,557,277 --------------- 15,888,792 --------------- CASINOS & GAMING -- 1.3% 13,582,401 Caesars Resort Collection LLC, Term Loan B, 1 Mo. LIBOR + 2.75%, 0.00% Floor........................................... 2.90% 12/22/24 12,703,348 1,000,000 Caesars Resort Collection LLC, Term Loan B-1, 1 Mo. LIBOR + 4.50%, 0.00% Floor........................................... 4.65% 06/30/25 967,190 500,000 Caesars Resort Collection LLC, Term Loan B-1, 3 Mo. LIBOR + 4.50%, 0.00% Floor........................................... 4.65% 06/30/25 483,595 1,994,845 CityCenter Holdings LLC, Term Loan B, 1 Mo. LIBOR + 2.25%, 0.75% Floor.................................................. 3.00% 04/18/24 1,872,661 3,646,228 Golden Nugget, Inc., Term Loan B, 2 Mo. LIBOR + 2.50%, 0.75% Floor.................................................. 3.25% 10/04/23 3,204,123 1,241,653 Scientific Games International, Inc., Term Loan B5, 1 Mo. LIBOR + 2.75%, 0.00% Floor................................... 2.90% 08/14/24 1,152,801 5,075,571 Scientific Games International, Inc., Term Loan B5, 6 Mo. LIBOR + 2.75%, 0.00% Floor................................... 2.99% 08/14/24 4,712,363 --------------- 25,096,081 --------------- ELECTRIC UTILITIES -- 0.3% 5,985,000 PG&E Corp., Exit Term Loan, 3 Mo. LIBOR + 4.50%, 1.00% Floor........................................................ 5.50% 06/23/25 5,910,188 --------------- ENVIRONMENTAL & FACILITIES SERVICES -- 0.3% 5,245,940 Packers Holdings LLC, Term Loan B, 1 Mo. LIBOR + 3.00%, 1.00% Floor.................................................. 4.00% 12/04/24 5,153,034 --------------- HEALTH CARE SERVICES -- 5.8% 2,430,949 Air Methods Corp. (a/k/a ASP AMC Intermediate Holdings, Inc.), Term Loan B, 3 Mo. LIBOR + 3.50%, 1.00% Floor................ 4.50% 04/21/24 2,070,658 28,319,975 athenahealth, Inc. (VVC Holding Corp.), Term Loan B, 3 Mo. LIBOR + 4.50%, 0.00% Floor................................... 4.75% 02/15/26 27,682,776 20,132,303 CHG Healthcare Services, Inc., Term Loan, 6 Month LIBOR + 3.00%, 1.00% Floor........................................... 4.00% 06/07/23 19,628,995 1,768,869 DuPage Medical Group (Midwest Physician Admin. Services LLC), Repricing Term Loan, 1 Mo. LIBOR + 2.75%, 0.75% Floor........................................................ 3.50% 08/15/24 1,720,225 12,726,324 Envision Healthcare Corp., Initial Term Loan, 1 Mo. LIBOR + 3.75%, 0.00% Floor........................................... 3.90% 10/10/25 9,044,980 238,266 Exam Works (Gold Merger Co., Inc.), Term Loan B-1, 3 Mo. LIBOR + 3.25%, 1.00% Floor................................... 4.25% 07/27/23 235,388 2,561,422 Global Medical Response, Inc. (fka Air Medical), 2018 New Term Loan, 6 Mo. LIBOR + 4.25%, 1.00% Floor.................. 5.25% 03/14/25 2,472,566 5,748,111 Help at Home (HAH Group Holding Co. LLC), Initial Term Loans, 3 Mo. LIBOR + 5.00%, 1.00% Floor............................. 6.00% 10/31/27 5,647,519 2,570,642 Surgery Centers Holdings, Inc., 2020 Incremental Term Loan, 1 Mo. LIBOR + 8.00%, 1.00% Floor............................. 9.00% 08/31/24 2,600,642 </TABLE> Page 20 See Notes to Financial Statements <PAGE> FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED VALUE DESCRIPTION RATE (f) MATURITY (g) VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED) HEALTH CARE SERVICES (CONTINUED) $ 15,706,757 Surgery Centers Holdings, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%, 1.00% Floor........................................... 4.25% 08/31/24 $ 14,860,006 6,928,714 Team Health, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%, 1.00% Floor........................................................ 3.75% 02/06/24 5,629,580 11,083,845 U.S. Renal Care, Inc., Term Loan B, 1 Mo. LIBOR + 5.00%, 0.00% Floor.................................................. 5.19% 06/28/26 10,637,055 12,922,413 Verscend Technologies, Inc., Term Loan B, 1 Mo. LIBOR + 4.50%, 0.00% Floor........................................... 4.65% 08/27/25 12,659,959 --------------- 114,890,349 --------------- HEALTH CARE TECHNOLOGY -- 1.0% 19,042,662 Zelis Payments Buyer, Inc., Initial Term Loan, 1 Mo. LIBOR + 4.75%, 0.00% Floor........................................... 4.90% 09/30/26 18,903,270 --------------- HOUSEHOLD APPLIANCES -- 0.2% 3,594,975 Traeger Grills (TGP Holdings III LLC), 2018 Refinancing Term Loan, 1 Mo. LIBOR + 4.00%, 1.00% Floor....................... 5.00% 09/25/24 3,436,185 --------------- HUMAN RESOURCE & EMPLOYMENT SERVICES -- 0.3% 7,255,591 Alight, Inc. (fka Tempo Acq.), Non Extended Term Loan, 1 Mo. LIBOR + 2.75%, 0.00% Floor................................... 2.90% 05/01/24 7,008,466 --------------- INSURANCE BROKERS -- 3.5% 8,859,702 Alliant Holdings I LLC, 2019 New Term Loan, 1 Mo. LIBOR + 3.25%, 0.00% Floor........................................... 3.40% 05/10/25 8,563,433 18,505,910 Alliant Holdings I LLC, Initial Term Loan, 1 Mo. LIBOR + 2.75%, 0.00% Floor........................................... 2.90% 05/09/25 17,795,098 11,915,234 AmWINS Group, Inc., Term Loan B (First Lien), 1 Mo. LIBOR + 2.75%, 1.00% Floor......................................... 3.75% 01/25/24 11,742,463 4,962,500 AssuredPartners, Inc., Term Loan B, 1 Mo. LIBOR + 3.50%, 0.00% Floor.................................................. 3.65% 02/15/27 4,782,609 6,953,509 HUB International Ltd., 2019 Incremental Term Loan B2, 3 Mo. LIBOR + 4.00%, 1.00% Floor................................... 5.00% 04/25/25 6,909,215 63,606 HUB International Ltd., Term Loan B, 2 Mo. LIBOR + 3.00%, 0.00% Floor.................................................. 3.19% 04/25/25 61,080 20,931,672 HUB International Ltd., Term Loan B, 3 Mo. LIBOR + 3.00%, 0.00% Floor.................................................. 3.21% 04/25/25 20,100,476 --------------- 69,954,374 --------------- INTEGRATED TELECOMMUNICATION SERVICES -- 1.5% 16,881,129 Frontier Communications Corp., Term Loan B-1, Prime Rate + 2.75%, 0.75% Floor (d)....................................... 6.00% 06/15/24 16,547,388 4,480,034 Numericable (Altice France S.A. or SFR), Term Loan B-11, 1 Mo. LIBOR + 2.75%, 0.00% Floor................................... 2.90% 07/31/25 4,271,488 1,989,744 Numericable (Altice France S.A. or SFR), Term Loan B-12, 1 Mo. LIBOR + 3.69%, 0.00% Floor................................... 3.84% 01/31/26 1,920,859 7,920,566 Numericable (Altice France S.A. or SFR), Term Loan B-13, 3 Mo. LIBOR + 4.00%, 0.00% Floor................................... 4.24% 08/14/26 7,675,504 --------------- 30,415,239 --------------- INTERACTIVE HOME ENTERTAINMENT -- 0.9% 17,617,774 Playtika Holding Corp., Term Loan B, 3 Mo. LIBOR + 6.00%, 1.00% Floor.................................................. 7.00% 12/10/24 17,605,793 --------------- </TABLE> See Notes to Financial Statements Page 21 <PAGE>FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED VALUE DESCRIPTION RATE (f) MATURITY (g) VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED) MANAGED HEALTH CARE -- 0.5% $ 9,706,092 Multiplan, Inc. (MPH), Term Loan B, 3 Mo. LIBOR + 2.75%, 1.00% Floor.................................................. 3.75% 06/07/23 $ 9,570,886 --------------- MOVIES & ENTERTAINMENT -- 0.6% 19,550,753 Cineworld Group PLC (Crown), Term Loan B, 6 Mo. LIBOR + 2.50%, 0.00% Floor........................................... 2.77% 02/28/25 10,871,783 1,739,898 PUG LLC (Stubhub), Term Loan B, 1 Mo. LIBOR + 3.50%, 0.00% Floor.................................................. 3.65% 02/12/27 1,515,886 --------------- 12,387,669 --------------- OTHER DIVERSIFIED FINANCIAL SERVICES -- 1.5% 30,224,535 Refinitiv US Holdings, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%, 0.00% Floor........................................... 3.40% 10/01/25 29,738,222 --------------- PAPER PACKAGING -- 0.5% 9,486,473 Graham Packaging Company, L.P., Intial Term Loan, 1 Mo. LIBOR + 3.75%, 0.75% Floor................................... 4.50% 08/04/27 9,399,482 --------------- PHARMACEUTICALS -- 1.8% 3,053,454 Akorn, Inc., Exit Take Back Term Loan, 3 Mo. LIBOR + 7.50%, 1.00% Floor (h) (i).......................................... 8.50% 09/30/25 3,058,554 8,607,038 Endo LLC, Term Loan B, 3 Mo. LIBOR + 4.25%, 0.75% Floor......... 5.00% 04/29/24 8,155,169 16,276,109 Mallinckrodt International Finance S.A., 2017 Term Loan B, 3 Mo. LIBOR + 4.75%, 0.75% Floor (d)......................... 5.50% 09/24/24 14,982,158 193,927 Mallinckrodt International Finance S.A., 2018 Incremental Term Loan, 6 Mo. LIBOR + 5.00%, 0.75% Floor (d)................... 5.75% 02/24/25 178,292 10,527,561 Parexel International Corp., Term Loan B, 1 Mo. LIBOR + 2.75%, 0.00% Floor........................................... 2.90% 09/27/24 10,083,930 --------------- 36,458,103 --------------- PUBLISHING -- 0.2% 3,459,933 Meredith Corp., Tranche B-3 Term Loan, 3 Mo. LIBOR + 4.25%, 1.00% Floor.................................................. 5.25% 01/31/25 3,379,212 --------------- RESTAURANTS -- 0.3% 15,385 IRB Holding Corp. (Arby's/Inspire Brands), Term Loan B, 3 Mo. LIBOR + 2.75%, 1.00% Floor................................... 3.75% 02/05/25 14,598 5,984,615 IRB Holding Corp. (Arby's/Inspire Brands), Term Loan B, 6 Mo. LIBOR + 2.75%, 1.00% Floor................................... 3.75% 02/05/25 5,678,742 --------------- 5,693,340 --------------- SPECIALIZED CONSUMER SERVICES -- 2.6% 50,439,305 Asurion LLC, Second Lien Replacement B-2 Term Loan, 1 Mo. LIBOR + 6.50%, 0.00% Floor................................... 6.65% 08/04/25 50,439,305 --------------- SYSTEMS SOFTWARE -- 2.5% 8,930,327 Applied Systems, Inc., Term Loan (First Lien), 3 Mo. LIBOR + 3.25%, 1.00% Floor........................................... 4.25% 09/19/24 8,876,567 1,262,391 Applied Systems, Inc., Term Loan (Second Lien), 3 Mo. LIBOR + 7.00%, 1.00% Floor......................................... 8.00% 09/19/25 1,268,703 20,564,358 BMC Software Finance, Inc. (Boxer Parent), Initial Dollar Term Loan, 1 Mo. LIBOR + 4.25%, 0.00% Floor....................... 4.40% 10/02/25 19,954,830 5,356,494 Misys Financial Software Ltd. (Almonde, Inc.) (Finastra), Term Loan B, 6 Mo. LIBOR + 3.50%, 1.00% Floor..................... 4.50% 06/13/24 5,046,996 24,134 Riverbed Technology, Inc., Term Loan B, 2 Mo. LIBOR + 3.25%, 1.00% Floor.................................................. 4.25% 04/24/22 21,504 </TABLE> Page 22 See Notes to Financial Statements <PAGE> FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED VALUE DESCRIPTION RATE (f) MATURITY (g) VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED) SYSTEMS SOFTWARE (CONTINUED) $ 9,098,385 Riverbed Technology, Inc., Term Loan B, 3 Mo. LIBOR + 3.25%, 1.00% Floor.................................................. 4.25% 04/24/22 $ 8,107,025 4,108,501 Sophos Group PLC (Surf), Term Loan B, 3 Mo. LIBOR + 3.50%, 0.00% Floor.................................................. 3.75% 03/05/27 3,973,948 1,537,461 SUSE (Marcel Lux IV S.A.R.L.), Facility B1 USD, 1 Mo. LIBOR + 3.25%, 0.00% Floor......................................... 3.40% 03/15/26 1,486,540 --------------- 48,736,113 --------------- TOTAL SENIOR FLOATING-RATE LOAN INTERESTS.................................................... 675,108,168 (Cost $691,973,721) --------------- </TABLE> <TABLE> <CAPTION> SHARES DESCRIPTION VALUE ---------------- --------------------------------------------------------------------------------------------- --------------- <S> <C> <C> COMMON STOCKS -- 0.1% PHARMACEUTICALS -- 0.1% 259,956 Akorn, Inc. (e) (j).......................................................................... 2,924,505 (Cost $2,979,179) --------------- RIGHTS -- 0.0% ELECTRIC UTILITIES -- 0.0% 1,629 Vistra Energy Corp. (e) (j).................................................................. 1,820 (Cost $2,830) --------------- MONEY MARKET FUNDS -- 0.3% 5,066,654 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 0.01% (k)........................................................... 5,066,654 (Cost $5,066,654) --------------- TOTAL INVESTMENTS -- 116.7%.................................................................. 2,303,567,696 (Cost $2,301,021,205) (l) --------------- </TABLE> <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ --------------- <S> <C> <C> <C> <C> U.S. TREASURY BILLS SOLD SHORT -- (17.5)% $ (70,000,000) U.S. Treasury Bill.............................................. (m) 11/10/20 (69,999,183) (60,000,000) U.S. Treasury Bill.............................................. (m) 12/03/20 (59,996,125) (100,000,00) U.S. Treasury Bill.............................................. (m) 12/10/20 (99,991,556) (55,000,000) U.S. Treasury Bill.............................................. (m) 12/17/20 (54,994,672) (10,000,000) U.S. Treasury Bill.............................................. (m) 12/22/20 (9,998,924) (50,000,000) U.S. Treasury Bill.............................................. (m) 01/28/21 (49,989,729) --------------- TOTAL U.S. TREASURY BILLS SOLD SHORT........................................................ (344,970,189) (Proceeds $344,930,997) --------------- NET OTHER ASSETS AND LIABILITIES -- 0.8%..................................................... 15,528,234 --------------- NET ASSETS -- 100.0%......................................................................... $ 1,974,125,741 =============== </TABLE> ----------------------------- (a) This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A under the Securities Act of 1933, as amended, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Pursuant to procedures adopted by the Trust's Board of Trustees, this security has been determined to be liquid by First Trust Advisors L.P. ("First Trust" or the "Advisor"). Although market instability can result in periods of increased overall market illiquidity, liquidity for each security is determined based on security-specific factors and assumptions, which require subjective judgment. At October 31, 2020, securities noted as such amounted to $1,369,200,245 or 69.4% of net assets. See Notes to Financial Statements Page 23 <PAGE>FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 (b) This security or a portion of this security is segregated as collateral for investments sold short. (c) This issuer is in default and interest is not being accrued by the Fund nor paid by the issuer. (d) This issuer has filed for protection in bankruptcy court. (e) Pursuant to procedures adopted by the Trust's Board of Trustees, this security has been determined to be illiquid by the Advisor. (f) Senior Floating-Rate Loan Interests ("Senior Loans") in which the Fund invests generally pay interest at rates which are periodically predetermined by reference to a base lending rate plus a premium. These base lending rates are generally (i) the lending rate offered by one or more major European banks, such as the LIBOR, (ii) the prime rate offered by one or more United States banks or (iii) the certificate of deposit rate. Certain Senior Loans are subject to a LIBOR floor that establishes a minimum LIBOR rate. When a range of rates is disclosed, the Fund holds more than one contract within the same tranche with identical LIBOR period, spread and floor, but different LIBOR reset dates. (g) Senior Loans generally are subject to mandatory and/or optional prepayment. As a result, the actual remaining maturity of Senior Loans may be substantially less than the stated maturities shown. (h) The issuer may pay interest on the loans (1) entirely in cash or (2) in the event that both the Payme("PIK") Toggle Condition has been satisfied and the issuer elects to exercise the PIK interest, 2.50% payable in cash and 7.00% payable as PIK interest. The First interest payment is scheduled for January 4, 2021. (i) On October 1, 2020, Akorn Holding Company LLC completed a Bankruptcy Plan of Reorganization. In connection with the Plan of Reorganization, the Fund received a portion of a new exit term loan and a share of the newly issued common equity shares in the re-organized company. (j) Non-income producing security. (k) Rate shown reflects yield as of October 31, 2020. (l) Aggregate cost for federal income tax purposes is $1,959,252,935. As of October 31, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $45,945,157 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $46,600,585. The net unrealized depreciation was $655,428. The amounts presented are inclusive of investments sold short. (m) Zero coupon security.LIBOR - London Interbank Offered Rate ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of October 31, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): <TABLE> <CAPTION> ASSETS TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 10/31/2020 PRICES INPUTS INPUTS --------------- --------------- --------------- --------------- <S> <C> <C> <C> <C> Corporate Bonds*.................................. $ 1,410,640,802 $ -- $ 1,410,640,802 $ -- Foreign Corporate Bonds*.......................... 209,825,747 -- 209,825,747 -- Senior Floating-Rate Loan Interests*.............. 675,108,168 -- 675,108,168 -- Common Stocks*.................................... 2,924,505 -- 2,924,505 -- Rights*........................................... 1,820 -- 1,820 -- Money Market Funds................................ 5,066,654 5,066,654 -- -- --------------- --------------- --------------- --------------- Total Investments................................. $ 2,303,567,696 $ 5,066,654 $ 2,298,501,042 $ -- =============== =============== =============== =============== LIABILITIES TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 10/31/2020 PRICES INPUTS INPUTS --------------- --------------- --------------- --------------- U.S. Treasury Bills Sold Short.................... $ (344,970,189) $ -- $ (344,970,189) $ -- =============== =============== =============== =============== </TABLE> * See Portfolio of Investments for industry breakout.Page 24 See Notes to Financial Statements <PAGE> FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 2020 <TABLE> <CAPTION> ASSETS: <S> <C> Investments, at value..................................................... $ 2,303,567,696 Cash...................................................................... 206,124 Restricted Cash........................................................... 62,579,860 Receivables: Interest............................................................... 24,090,877 Investment securities sold............................................. 15,727,424 Capital shares sold.................................................... 35,252 Dividends.............................................................. 85 --------------- Total Assets........................................................ 2,406,207,318 --------------- LIABILITIES: Investments sold short, at value (proceeds $344,930,997).................. 344,970,189 Payables: Investment securities purchased........................................ 61,853,287 Capital shares purchased............................................... 23,501,646 Investment advisory fees............................................... 1,642,018 Margin interest expense................................................ 112,623 Unrealized depreciation on unfunded loan commitments...................... 1,814 --------------- Total Liabilities................................................... 432,081,577 --------------- NET ASSETS................................................................ $ 1,974,125,741 =============== NET ASSETS CONSIST OF: Paid-in capital........................................................... $ 2,026,129,354 Par value................................................................. 420,000 Accumulated distributable earnings (loss)................................. (52,423,613) --------------- NET ASSETS................................................................ $ 1,974,125,741 =============== NET ASSET VALUE, per share................................................ $ 47.00 =============== Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share)................................. 42,000,002 =============== Investments, at cost...................................................... $ 2,301,021,205 =============== </TABLE> See Notes to Financial Statements Page 25 <PAGE>FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 2020 <TABLE> <CAPTION> INVESTMENT INCOME: <S> <C> Interest.................................................................. $ 98,821,217 Dividends................................................................. 173,575 --------------- Total investment income................................................ 98,994,792 --------------- EXPENSES: Investment advisory fees.................................................. 15,619,019 Margin interest expense................................................... 775,201 Interest on investments sold short........................................ 131,731 --------------- Total expenses......................................................... 16,525,951 --------------- NET INVESTMENT INCOME (LOSS).............................................. 82,468,841 --------------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments............................................................ (23,932,010) Investments sold short................................................. (2,314,918) --------------- Net realized gain (loss).................................................. (26,246,928) --------------- Net change in unrealized appreciation (depreciation) on: Investments............................................................ 587,285 Investments sold short................................................. (39,192) Unfunded loan commitments.............................................. (1,814) --------------- Net change in unrealized appreciation (depreciation)...................... 546,279 --------------- NET REALIZED AND UNREALIZED GAIN (LOSS)................................... (25,700,649) --------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................................................ $ 56,768,192 =============== </TABLE> Page 26 See Notes to Financial Statements <PAGE> FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) STATEMENTS OF CHANGES IN NET ASSETS <TABLE> <CAPTION> YEAR YEAR ENDED ENDED 10/31/2020 10/31/2019 --------------- --------------- <S> <C> <C> OPERATIONS: Net investment income (loss).............................................. $ 82,468,841 $ 64,768,034 Net realized gain (loss).................................................. (26,246,928) (1,271,330) Net change in unrealized appreciation (depreciation)...................... 546,279 23,388,851 --------------- --------------- Net increase (decrease) in net assets resulting from operations........... 56,768,192 86,885,555 --------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations..................................................... (84,896,005) (66,781,356) Return of capital......................................................... -- (495,649) --------------- --------------- Total distributions to shareholders....................................... (84,896,005) (67,277,005) --------------- --------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................................. 971,116,727 378,687,649 Cost of shares redeemed................................................... (400,951,154) (219,243,496) --------------- --------------- Net increase (decrease) in net assets resulting from shareholder transactions.......................................... 570,165,573 159,444,153 --------------- --------------- Total increase (decrease) in net assets................................... 542,037,760 179,052,703 NET ASSETS: Beginning of period....................................................... 1,432,087,981 1,253,035,278 --------------- --------------- End of period............................................................. $ 1,974,125,741 $ 1,432,087,981 =============== =============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period................................... 29,800,002 26,650,002 Shares sold............................................................... 21,100,000 7,900,000 Shares redeemed........................................................... (8,900,000) (4,750,000) --------------- --------------- Shares outstanding, end of period......................................... 42,000,002 29,800,002 =============== =============== </TABLE> See Notes to Financial Statements Page 27 <PAGE>FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) STATEMENT OF CASH FLOWS FOR THE YEAR ENDED OCTOBER 31, 2020 <TABLE> <CAPTION> CASH FLOWS FROM OPERATING ACTIVITIES: <S> <C> <C> Net increase (decrease) in net assets resulting from operations........... $ 56,768,192 Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash used in operating activities: Purchases of investments............................................ (2,778,181,610) Borrowed investments sold short..................................... 784,479,794 Cost to cover short positions....................................... (442,079,144) Sales, maturities and paydowns of investments....................... 1,920,844,519 Net amortization/accretion of premiums/discounts on investments..... 267,616 Net realized gain/loss on investments............................... 23,932,010 Net realized gain/loss on investments sold short.................... 2,314,918 Net change in unrealized appreciation/depreciation on investments and unfunded loan commitments.................................... (585,471) Net change in unrealized appreciation/depreciation on investments sold short....................................................... 39,192 CHANGES IN ASSETS AND LIABILITIES Increase in interest receivable..................................... (9,940,854) Decrease in dividends receivable.................................... 19,009 Decrease in margin interest rebate receivable....................... 1,186 Increase in margin interest expense payable......................... 108,600 Increase in investment advisory fees payable........................ 506,771 --------------- CASH USED IN OPERATING ACTIVITIES......................................... $ (441,505,272) --------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from shares sold........................................... 971,081,475 Cost of shares redeemed............................................. (377,449,508) Distributions to shareholders from investment operations............ (84,896,005) Repayment of borrowings............................................. (4,697,696) --------------- CASH PROVIDED BY FINANCING ACTIVITIES..................................... 504,038,266 --------------- Increase in cash and restricted cash...................................... 62,532,994 Cash and restricted cash at beginning of period........................... 252,990 --------------- CASH AND RESTRICTED CASH AT END OF PERIOD................................. $ 62,785,984 =============== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest.................................. $ 666,601 =============== CASH AND RESTRICTED CASH RECONCILIATION: Cash................................................................ $ 206,124 Restricted Cash..................................................... 62,579,860 --------------- CASH AND RESTRICTED CASH AT END OF PERIOD:................................ $ 62,785,984 =============== </TABLE> Page 28 See Notes to Financial Statements <PAGE> FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD <TABLE> <CAPTION> YEAR ENDED OCTOBER 31, ------------------------------------------------------------------------ 2020 2019 2018 2017 2016 ------------ ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Net asset value, beginning of period $ 48.06 $ 47.02 $ 48.95 $ 48.31 $ 48.69 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 2.33 2.49 2.52 2.56 2.41 Net realized and unrealized gain (loss) (1.00) 1.13 (1.76) 0.66 (0.14) ---------- ---------- ---------- ---------- ---------- Total from investment operations 1.33 3.62 0.76 3.22 2.27 ---------- ---------- ---------- ---------- ---------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (2.39) (2.56) (2.69) (2.58) (2.48) Return of capital -- (0.02) (0.00)(a) -- (0.17) ---------- ---------- ---------- ---------- ---------- Total distributions (2.39) (2.58) (2.69) (2.58) (2.65) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 47.00 $ 48.06 $ 47.02 $ 48.95 $ 48.31 ========== ========== ========== ========== ========== TOTAL RETURN (b) 2.92% 7.90% 1.60% 6.79% 4.89% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $1,974,126 $1,432,088 $1,253,035 $1,250,565 $1,077,297 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 1.01% 1.23% 1.16% 1.10% 1.11% Ratio of total expenses to average net assets excluding interest expense 0.95% 0.95% 0.95% 0.95% 0.95% Ratio of net investment income (loss) to average net assets 5.02% 5.22% 5.26% 5.25% 5.04% Portfolio turnover rate (c) 68% 50% 52% 75% 45% </TABLE> (a) Amount represents less than $0.01 per share. (b) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. (c) 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 <PAGE> --------------------------------------------------------------------------------NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) OCTOBER 31, 2020 1. ORGANIZATION First Trust Exchange-Traded Fund IV (the "Trust") is an open-end management investment company organized as a Massachusetts business trust on September 15, 2010, and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust currently consists of nine funds that are offering shares. This report covers the First Trust Tactical High Yield ETF (the "Fund"), a diversified series of the Trust which trades under the ticker "HYLS" on The Nasdaq Stock Market LLC ("Nasdaq"). Unlike conventional mutual funds, the Fund issues and redeems shares on a continuous basis, at net asset value ("NAV"), only in large specified blocks consisting of 50,000 shares called a "Creation Unit." Creation Units are generally issued and redeemed for cash and, in certain circumstances, in-kind for securities in which the Fund invests. Except when aggregated in Creation Units, the Fund's shares are not redeemable securities. The primary investment objective of the Fund is to provide current income. The Fund's secondary investment objective is to provide capital appreciation. Under normal market conditions, the Fund invests at least 80% of its net assets (including investment borrowings) in high yield debt securities that are rated below investment grade at the time of purchase or unrated securities deemed by the Fund's advisor to be of comparable quality. Below investment grade securities are those that, at the time of purchase, are rated lower than "BBB-" by Standard & Poor's Ratings Group, a division of the McGraw Hill Companies, Inc., or lower than "Baa3" by Moody's Investors Service, Inc., or comparably rated by another nationally recognized statistical rating organization. High yield debt securities that are rated below investment grade are commonly referred to as "junk" debt. Such securities may include U.S. and non-U.S. corporate debt obligations, bank loans and convertible bonds. For purposes of determining whether a security is below investment grade, the lowest available rating will be considered. 2. SIGNIFICANT ACCOUNTING POLICIES The Fund is considered an investment company and follows accounting and reporting guidance under Financial Accounting Standards Board ("FASB") Accounting Standards Codification Topic 946, "Financial Services-Investment Companies." The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of the financial statements. The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. PORTFOLIO VALUATION The Fund's NAV is determined daily as of the close of regular trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV is determined as of that time. Domestic debt securities and foreign securities are priced using data reflecting the earlier closing of the principal markets for those securities. The Fund's NAV is calculated by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding. The Fund's investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Advisor's Pricing Committee of the Fund's investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"), in accordance with valuation procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act. Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. The Fund's investments are valued as follows: Corporate bonds, corporate notes, U.S. government securities and other debt securities are fair valued on the basis of valuations provided by dealers who make markets in such securities or by a third-party pricing service approved by the Trust's Board of Trustees, which may use the following valuation inputs when available: 1) benchmark yields; 2) reported trades; 3) broker/dealer quotes; 4) issuer spreads; 5) benchmark securities; 6) bids and offers; and 7) reference data including market research publications. Page 30 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) OCTOBER 31, 2020 Shares of open-end funds are valued at fair value which is based on NAV per share. Securities traded in an over-the-counter market are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price. Senior Floating-Rate Loan Interests ("Senior Loans")(1) are not listed on any securities exchange or board of trade. Senior Loans are typically bought and sold by institutional investors in individually negotiated private transactions that function in many respects like an over-the-counter secondary market, although typically no formal market-makers exist. This market, while having grown substantially since its inception, generally has fewer trades and less liquidity than the secondary market for other types of securities. Some Senior Loans have few or no trades, or trade infrequently, and information regarding a specific Senior Loan may not be widely available or may be incomplete. Accordingly, determinations of the market value of Senior Loans may be based on infrequent and dated information. Because there is less reliable, objective data available, elements of judgment may play a greater role in valuation of Senior Loans than for other types of securities. Typically, Senior Loans are fair valued using information provided by a third-party pricing service. The third-party pricing service primarily uses over-the-counter pricing from dealer runs and broker quotes from indicative sheets to value the Senior Loans. Fixed income and other debt securities having a remaining maturity of sixty days or less when purchased are fair valued at cost adjusted for amortization of premiums and accretion of discounts (amortized cost), provided the Advisor's Pricing Committee has determined that the use of amortized cost is an appropriate reflection of fair value given market and issuer-specific conditions existing at the time of the determination. Factors that may be considered in determining the appropriateness of the use of amortized cost include, but are not limited to, the following: 1) the credit conditions in the relevant market and changes thereto; 2) the liquidity conditions in the relevant market and changes thereto; 3) the interest rate conditions in the relevant market and changes thereto (such as significant changes in interest rates); 4) issuer-specific conditions (such as significant credit deterioration); and 5) any other market-based data the Advisor's Pricing Committee considers relevant. In this regard, the Advisor's Pricing Committee may use last-obtained market-based data to assist it when valuing portfolio securities using amortized cost. Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Trust's Board of Trustees or its delegate, the Advisor's Pricing Committee, at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of the Fund's NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security's fair value. As a general principle, the current fair value of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities, including, but not limited to, the following: 1) the fundamental business data relating to the borrower/issuer; 2) an evaluation of the forces which influence the market in which these securities are purchased and sold; 3) the type, size and cost of a security; 4) the financial statements of the borrower/issuer; 5) the credit quality and cash flow of the borrower/issuer, based on the Advisor's or external analysis; 6) the information as to any transactions in or offers for the security; 7) the price and extent of public trading in similar securities of the issuer/borrower, or comparable companies; 8) the coupon payments; 9) the quality, value and salability of collateral, if any, securing the security; 10) the business prospects of the borrower/issuer, including any ability to obtain money or resources from a parent or affiliate and an assessment of the issuer's management; 11) the prospects for the borrower's/issuer's industry, and multiples (of earnings and/or cash flows) being paid for similar businesses in that industry; ----------------------------- (1) The terms "security" and "securities" used throughout the Notes to Financial Statements include Senior Loans. Page 31 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) OCTOBER 31, 2020 12) borrower's/issuer's competitive position within the industry; 13) borrower's/issuer's ability to access additional liquidity through public and/or private markets; and 14) other relevant factors. The Fund is subject to fair value accounting standards that define fair value, establish the framework for measuring fair value and provide a three-level hierarchy for fair valuation based upon the inputs to the valuation as of the measurement date. The three levels of the fair value hierarchy are as follows: o Level 1 - Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis. o Level 2 - Level 2 inputs are observable inputs, either directly or indirectly, and include the following: o Quoted prices for similar investments in active markets. o Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly. o Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). o Inputs that are derived principally from or corroborated by observable market data by correlation or other means. o Level 3 - Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the investment. The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A summary of the inputs used to value the Fund's investments as of October 31, 2020, is included with the Fund's Portfolio of Investments. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income is recorded daily on the accrual basis. Amortization of premiums and accretion of discounts are recorded using the effective interest method over the expected life of each respective borrowing for loans and bonds. In July 2017, the Financial Conduct Authority ("FCA") announced that it will no longer persuade or compel banks to submit rates for the calculations of the London Interbank Offered Rates ("LIBOR") after 2021. Further, the FCA has subsequently stated, as recently as March 2020, that the central assumption continues to be that firms should not rely on LIBOR being published after the end of 2021. In the United States, the Alternative Reference Rates Committee (the "ARRC"), a group of market participants convened by the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of New York in cooperation with other federal and state government agencies, has since 2014 undertaken efforts to identify U.S. dollar reference interest rates as alternatives to LIBOR and to facilitate the mitigation of LIBOR-related risks. In June 2017, the ARRC identified the Secured Overnight Financing Rate ("SOFR"), a broad measure of the cost of cash overnight borrowing collateralized by U.S. Treasury securities, as the preferred alternative for U.S. dollar LIBOR. The Federal Reserve Bank of New York began daily publishing of SOFR in April 2018. At this time, it is not possible to predict the full impact of the elimination of LIBOR and the establishment of an alternative reference rate on the Fund or its investments. Securities purchased or sold on a when-issued, delayed-delivery or forward purchase commitment basis may have extended settlement periods. The value of the security so purchased is subject to market fluctuations during this period. Due to the nature of the Senior Loan market, the actual settlement date may not be certain at the time of the purchase or sale for some of the Senior Loans. Interest income on such Senior Loans is not accrued until settlement date. The Fund maintains liquid assets with current value at least equal to the amount of its when-issued, delayed-delivery or forward purchase commitments. The Fund had no when-issued, delayed-delivery, or forward purchase commitments (other than unfunded loan commitments discussed below) as of October 31, 2020. C. SHORT SALES Short sales are utilized for investment and risk management purposes and are transactions in which securities or other instruments (such as options, forwards, futures or other derivative contracts) are sold that are not currently owned in the Fund's portfolio. When the Fund engages in a short sale, the Fund must borrow the security sold short and deliver the security to the counterparty. Short selling allows the Fund to profit from a decline in a market price to the extent such decline exceeds the transaction costs and the costs of Page 32 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) OCTOBER 31, 2020 borrowing the securities. The Fund is charged a fee or premium to borrow the securities sold short and is obligated to repay the lenders of the securities. Any dividends or interest that accrues on the securities during the period of the loan are due to the lenders. A gain, limited to the price at which the security was sold short, or a loss, unlimited in size, will be recognized upon the termination of the short sale; which is effected by the Fund purchasing the security sold short and delivering the security to the lender. Any such gain or loss may be offset, completely or in part, by the change in the value of the long portion of the Fund's portfolio. The Fund is subject to the risk it may be unable to reacquire a security to terminate a short position except at a price substantially in excess of the last quoted price. Also, there is the risk that the counterparty to a short sale may fail to honor its contractual terms, causing a loss to the Fund. The Fund has established an account with Pershing, LLC for the purpose of purchasing or borrowing securities on margin. The Fund pays interest on any margin balance, which is calculated as the daily margin account balance times the broker's margin interest rate. At October 31, 2020, the Fund had $62,579,860 in restricted cash associated with investments sold short and $344,970,189 of investments sold short as shown on Statement of Assets and Liabilities. The Fund is charged interest on debit margin balance at a rate equal to the Overnight Bank Funding Rate plus 75 basis points. With regard to securities held short, the Fund is credited a rebate equal to the market value of its short positions at a rate equal to the Overnight Bank Funding Rate less 35 basis points. This rebate rate applies to easy to borrow securities. Securities that are hard to borrow may earn a rebate that is less than the foregoing or may be subject to a premium charge on a security by security basis. The different rebate rate is determined at the time of a short sale request. At October 31, 2020, the Fund had a debit margin balance of $282,384,540 with an interest rate of 0.83%. For the fiscal year ended October 31, 2020, the Fund had margin interest expense of $775,201, as shown on the Statement of Operations. For the fiscal year ended October 31, 2020, the average margin balance and interest rates were $82,303,401 and 1.36%, respectively. D. RESTRICTED CASH Restricted cash includes cash on deposit with other banks or brokers that is legally restricted as to the withdrawal and primarily serves as collateral for investments sold short. The Fund presents restricted cash activity within "Increase in cash and restricted cash" and as part of "Cash and restricted cash at beginning of period" and "Cash and restricted cash at end of period" in the Statement of Cash Flows, along with a reconciliation of those balances in the Statement of Assets and Liabilities. E. UNFUNDED LOAN COMMITMENTS The Fund may enter into certain credit agreements, all or a portion of which may be unfunded. The Fund is obligated to fund these loan commitments at the borrower's discretion. Unfunded loan commitments are marked-to-market daily, and any unrealized appreciation (depreciation) is included in the Statement of Assets and Liabilities and Statement of Operations. In connection with these commitments, the Fund earns a commitment fee typically set as a percentage of the commitment amount. As of October 31, 2020, the Fund had the following unfunded loan commitment: <TABLE> <CAPTION> UNREALIZED PRINCIPAL COMMITMENT APPRECIATION BORROWER VALUE AMOUNT VALUE (DEPRECIATION) ----------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Help at Home (HAH Group Holdings Company, LLC), Term Loan................................................... $ 725,490 $ 714,608 $ 712,794 $ (1,814) </TABLE> F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment income, if any, are declared and paid monthly by the Fund, or as the Board of Trustees may determine from time to time. Distributions of net realized gains earned by the Fund, if any, are distributed at least annually. Distributions in cash may be reinvested automatically in additional whole shares only if the broker through whom the shares were purchased makes such option available. Such shares will generally be reinvested by the broker based upon the market price of those shares and investors may be subject to customary brokerage commissions charged by the broker. Distributions from net investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on significantly modified portfolio securities held by the Fund and have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will reverse at some time in the future. Page 33 <PAGE> --------------------------------------------------------------------------------NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) OCTOBER 31, 2020 The tax character of distributions paid during the fiscal years ended October 31, 2020 and 2019 was as follows: Distributions paid from: 2020 2019 Ordinary income................................. $ 84,896,005 $ 66,781,356 Capital gains................................... -- -- Return of capital............................... -- 495,649 As of October 31, 2020, the components of distributable earnings on a tax basis for the Fund were as follows:Undistributed ordinary income................... $ 1,007,704 Accumulated capital and other gain (loss)....... (52,774,075) Net unrealized appreciation (depreciation)...... (657,242) G. INCOME TAXES The Fund intends to continue to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, which includes distributing substantially all of its net investment income and net realized gains to shareholders. Accordingly, no provision has been made for federal and state income taxes. However, due to the timing and amount of distributions, the Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of the Fund's taxable income exceeds the distributions from such taxable income for the calendar year. The Fund is subject to accounting standards that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. The taxable years ended 2017, 2018, 2019, and 2020 remain open to federal and state audit. As of October 31, 2020, management has evaluated the application of these standards to the Fund and has determined that no provision for income tax is required in the Fund's financial statements for uncertain tax positions. The Fund intends to utilize provisions of the federal income tax laws, which allow it to carry a realized capital loss forward indefinitely following the year of the loss and offset such loss against any future realized capital gains. The Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. As of October 31, 2020, the Fund had non-expiring capital loss carryforwards available for federal income tax purposes of $52,774,075. Certain losses realized during the current fiscal year may be deferred and treated as occurring on the first day of the following fiscal year for federal income tax purposes. For the fiscal year ended October 31, 2020, the Fund had no net late year ordinary or capital losses. In order to present paid-in capital and accumulated distributable earnings (loss) (which consists of accumulated net investment income (loss), accumulated net realized gain (loss) on investments and net unrealized appreciation (depreciation) on investments) on the Statement of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to paid-in capital, accumulated net investment income (loss) and accumulated net realized gain (loss) on investments. These adjustments are primarily due to the difference between book and tax treatments of income and gains on various investment securities held by the Fund. The results of operations and net assets were not affected by these adjustments. For the fiscal year ended October 31, 2020, the adjustments for the Fund were as follows:ACCUMULATED ACCUMULATED NET REALIZED NET INVESTMENT GAIN (LOSS) INCOME (LOSS) ON INVESTMENTS PAID-IN CAPITAL -------------- -------------- --------------- $ 3,434,868 $ (2,723,295) $ (711,573) H. EXPENSES Expenses, other than the investment advisory fee and other excluded expenses, are paid by the Advisor (see Note 3). The Fund is subject to an interest expense due to the costs associated with the Fund's short positions in securities. I. NEW ACCOUNTING PRONOUNCEMENTS On March 30, 2017, the FASB issued Accounting Standards Update ("ASU") 2017-08 "Premium Amortization on Purchased Callable Debt Securities," which amends the amortization period for certain purchased callable debt securities held at a premium by shortening such period to the earliest call date. The new guidance requires an entity to amortize the premium on a callable debt security within its scope to the earliest call date, unless the guidance for considering estimated prepayments is applied. If the call option is not exercised at the earliest call date, the yield is reset to the effective yield using the payment Page 34 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) OCTOBER 31, 2020 terms of the security. If the security has more than one call date and the premium was amortized to a call price greater than the next call price, any excess of the amortized cost basis over the amount repayable at the next call date will be amortized to that date. If there are no other call dates, any excess of the amortized cost basis over the par amount will be amortized to maturity. Discounts on purchased callable debt securities will continue to be amortized to the security's maturity date. ASU 2017-08 is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. ASU 2017-08 was adopted for these financial statements and did not have a material impact. 3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS First Trust, the investment advisor to the Fund, is a limited partnership with one limited partner, Grace Partners of DuPage L.P., and one general partner, The Charger Corporation. The Charger Corporation is an Illinois corporation controlled by James A. Bowen, Chief Executive Officer of First Trust. First Trust is responsible for the selection and ongoing monitoring of the securities in the Fund's portfolio, managing the Fund's business affairs and providing certain administrative services necessary for the management of the Fund. Pursuant to the Investment Management Agreement between the Trust and the Advisor, First Trust manages the investment of the Fund's assets and is responsible for the Fund's expenses, including the cost of transfer agency, custody, fund administration, legal, audit and other services, but excluding fee payments under the Investment Management Agreement, interest, taxes, brokerage commissions and other expenses connected with the execution of portfolio transactions, expenses associated with short sale transactions, distribution and service fees payable pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses. The Fund has agreed to pay First Trust an annual unitary management fee equal to 0.95% of its average daily net assets. The Trust has multiple service agreements with The Bank of New York Mellon ("BNYM"). Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services, and transfer agency services for the Fund. As custodian, BNYM is responsible for custody of the Fund's assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of the Fund's securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for the Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company. Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, defined-outcome fund or is an index fund. Additionally, the Lead Independent Trustee and the Chairmen of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and Committee Chairmen rotate every three years. The officers and "Interested" Trustee receive no compensation from the Trust for acting in such capacities. 4. PURCHASES AND SALES OF SECURITIES For the fiscal year ended October 31, 2020, the cost of purchases and proceeds from sales of investments, excluding short-term investments, investments sold short and in-kind transactions, were $2,047,460,237 and $1,157,659,965, respectively. The cost of purchases to cover short sales and the proceeds of short sales were $22,087,500 and $19,768,750, respectively. For the fiscal year ended October 31, 2020, there were no in-kind transactions. 5. BORROWINGS The Trust, on behalf of the Fund, along with the First Trust Series Fund and First Trust Variable Insurance Trust, entered into a $200 million Credit Agreement ("Line of Credit") with BNYM, to be a liquidity backstop during periods of high redemption volume. A commitment fee of 0.15% of the daily amount of the excess of the commitment amount over the outstanding principal balance of the loans will be charged by BNYM, which First Trust allocates amongst the funds that had access to the Line of Credit. To the extent that the Fund accesses the Line of Credit, there would also be an interest fee charged. The Fund did not have any borrowings outstanding during the fiscal year ended October 31, 2020. Page 35 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) OCTOBER 31, 2020 6. CREATIONS, REDEMPTIONS AND TRANSACTION FEES Shares are created and redeemed by the Fund only in Creation Unit size aggregations of 50,000 shares in transactions with broker dealers or large institutional investors that have entered into a participation agreement (an "Authorized Participant"). Due to the nature of the Fund's investments, the Fund's Creation Units are generally issued and redeemed for cash, although Creation Units may be issued in-kind for securities in which the Fund invests in limited circumstances. Authorized Participants purchasing Creation Units must pay to BNYM, as transfer agent, a creation transaction fee (the "Creation Transaction Fee") regardless of the number of Creation Units purchased in the transaction. The Creation Transaction Fee may increase or decrease with changes in the Fund's portfolio. The price for each Creation Unit will equal the daily NAV per share times the number of shares in a Creation Unit plus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees or stamp taxes. When Creation Units are issued for cash, the Authorized Participant may also be assessed an amount to cover the cost of purchasing portfolio securities, including operational processing and brokerage costs, transfer fees, stamp taxes, and part or all of the spread between the expected bid and offer side of the market related to such securities. Authorized Participants redeeming Creation Units must pay to BNYM, as transfer agent, a standard redemption transaction fee (the "Redemption Transaction Fee"), regardless of the number of Creation Units redeemed in the transaction. The Redemption Transaction Fee may increase or decrease with changes in the Fund's portfolio. When shares are redeemed for cash, the Authorized Participant may also be assessed an amount to cover other costs, including operational processing and brokerage costs, transfer fees, stamp taxes and part or all of the spread between the expected bid and offer side of the market related to portfolio securities sold in connection with the redemption. 7. DISTRIBUTION PLAN The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Fund is authorized to pay an amount up to 0.25% of its average daily net assets each year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the Fund, for amounts expended to finance activities primarily intended to result in the sale of Creation Units or the provision of investor services. FTP may also use this amount to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and educational and promotional services. No 12b-1 fees are currently paid by the Fund, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before March 31, 2022. 8. INDEMNIFICATION The Trust, on behalf of the Fund, has a variety of indemnification obligations under contracts with its service providers. The Trust's maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 9. SUBSEQUENT EVENTS Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued, and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements that have not already been disclosed. Page 36 <PAGE> --------------------------------------------------------------------------------REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED FUND IV: OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS We have audited the accompanying statement of assets and liabilities of First Trust Tactical High Yield ETF (the "Fund"), a series of the First Trust Exchange-Traded Fund IV, including the portfolio of investments, as of October 31, 2020, the related statement of operations and cash flows for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2020, and the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended in conformity with accounting principles generally accepted in the United States of America. BASIS FOR OPINION These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund's financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2020, by correspondence with the custodian, agent banks and brokers; when replies were not received from agent banks and brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP Chicago, Illinois December 23, 2020 We have served as the auditor of one or more First Trust investment companies since 2001. Page 37 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) OCTOBER 31, 2020 (UNAUDITED) PROXY VOTING POLICIES AND PROCEDURES A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how the Fund voted proxies relating to its portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on the Fund's website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov. PORTFOLIO HOLDINGS The Fund files portfolio holdings information for each month in a fiscal quarter within 60 days after the end of the relevant fiscal quarter on Form N-PORT. Portfolio holdings information for the third month of each fiscal quarter will be publicly available on the SEC's website at www.sec.gov. The Fund's complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year is included in the semi-annual and annual reports to shareholders, respectively, and is filed with the SEC on Form N-CSR. The semi-annual and annual report for the Fund is available to investors within 60 days after the period to which it relates. The Fund's Forms N-PORT and Forms N-CSR are available on the SEC's website listed above. FEDERAL TAX INFORMATION Distributions paid to the foreign shareholders during the Fund's fiscal year ended October 31, 2020 that were properly designated by the Fund as "interest-related dividends" or "short-term capital gain dividends," may not be subject to federal income tax provided that the income was earned directly by such foreign shareholders. Of the ordinary income (including short-term capital gain) distributions made by the Fund during the fiscal year ended October 31, 2020, none qualify for the corporate dividends received deduction available to corporate shareholders or as qualified dividend income. RISK CONSIDERATIONS RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE, RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND. CONCENTRATION RISK. To the extent that a fund is able to invest a large percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund's investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund's corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is not concentrated. CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer's ability to make such payments. CYBER SECURITY RISK. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. In addition, cyber security breaches of a fund's third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or issuers in which the fund invests, can also subject a fund to many of the same risks associated with direct cyber security breaches. DERIVATIVES RISK. To the extent a fund uses derivative instruments such as futures contracts, options contracts and swaps, the fund may experience losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivative. These risks are heightened when a fund's portfolio managers use derivatives to enhance the fund's return or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the fund. Page 38 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) OCTOBER 31, 2020 (UNAUDITED) 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 CONSTITUENT RISK. Certain funds may be a constituent of one or more indices. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could significantly increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, a fund's net asset value could be negatively impacted and the fund's market price may be significantly below its net asset value during certain periods. INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject to Index Provider Risk. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, maintained, constructed, reconstituted, rebalanced, composed, calculated or disseminated accurately. To correct any such error, the Index Provider may carry out an unscheduled rebalance or other modification of the Index constituents or weightings, which may increase the fund's costs. The Index Provider does not provide any representation or warranty in relation to the quality, accuracy or completeness of data in the Index, and it does not guarantee that the Index will be calculated in accordance with its stated methodology. Losses or costs associated with any Index Provider errors generally will be borne by the fund and its shareholders. INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of other investment vehicles, the fund will incur additional fees and expenses that would not be present in a direct investment in those investment vehicles. Furthermore, the fund's investment performance and risks are directly related to the investment performance and risks of the investment vehicles in which the fund invests. LIBOR RISK. To the extent a fund invests in floating or variable rate obligations that use the London Interbank Offered Rate ("LIBOR") as a reference interest rate, it is subject to LIBOR Risk. In 2017, the United Kingdom's Financial Conduct Authority announced that LIBOR will cease to be available for use after 2021. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition away from LIBOR on the fund or on certain instruments in which the fund invests can be difficult to ascertain, and they may vary depending on a variety of factors. Any such effects of the transition away from LIBOR, as well as other unforeseen effects, could result in losses to the fund. MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund's investment portfolio, the fund's portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective. Page 39 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) OCTOBER 31, 2020 (UNAUDITED) MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than others. The outbreak of the respiratory disease designated as COVID-19 in December 2019 has caused significant volatility and declines in global financial markets, which have caused losses for investors. The COVID-19 pandemic may last for an extended period of time and will continue to impact the economy for the foreseeable future. NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic issuers. Non-U.S. securities are subject to higher volatility than securities of domestic issuers due to: possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries. PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets. NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE ADVISORY AGREEMENT BOARD CONSIDERATIONS REGARDING APPROVAL OF CONTINUATION OF INVESTMENT MANAGEMENT AGREEMENT The Board of Trustees of First Trust Exchange-Traded Fund IV (the "Trust"), including the Independent Trustees, unanimously approved the continuation of the Investment Management Agreement (the "Agreement") with First Trust Advisors L.P. (the "Advisor") on behalf of the First Trust Tactical High Yield ETF (the "Fund"). The Board approved the continuation of the Agreement for a one-year period ending June 30, 2021 at a meeting held on June 8, 2020. The Board determined that the continuation of the Agreement is in the best interests of the Fund in light of the nature, extent and quality of the services provided and such other matters as the Board considered to be relevant in the exercise of its reasonable business judgment. To reach this determination, the Board considered its duties under the Investment Company Act of 1940, as amended (the "1940 Act"), as well as under the general principles of state law, in reviewing and approving advisory contracts; the requirements of the 1940 Act in such matters; the fiduciary duty of investment advisors with respect to advisory agreements and compensation; the standards used by courts in determining whether investment company boards have fulfilled their duties; and the factors to be considered by the Board in voting on such agreements. At meetings held on May 11, 2020 and June 8, 2020, the Board, including the Independent Trustees, reviewed materials provided by the Advisor 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 provided by the Advisor to the Fund (including the relevant personnel responsible for these services and their experience); the unitary fee rate payable by the Fund as compared to fees charged to a peer group of funds (the "Expense Group") and a broad peer universe of funds (the "Expense Universe"), each assembled by Broadridge Financial Solutions, Inc. ("Broadridge"), an independent source, and as compared to fees charged to other clients of the Advisor, including other exchange-traded funds ("ETFs") managed by the Advisor; the expense ratio of the Fund as compared to expense ratios of the funds in the Fund's Expense Group and Expense Universe; performance information for the Fund, including comparisons of the Fund's performance to that of one or more relevant benchmark indexes and to that of a performance group of funds and a broad performance universe of funds (the "Performance Universe"), each assembled by Broadridge; the nature of expenses incurred in providing services to the Fund and the potential for the Advisor to realize economies of scale, if any; profitability and other financial data for the Advisor; any fall-out benefits to the Advisor and its affiliate, First Trust Portfolios L.P. ("FTP"); and information on the Advisor's compliance program. The Board reviewed initial materials with the Advisor at the meeting held on May 11, 2020, prior to which the Independent Trustees and their counsel met separately to discuss the information provided by the Advisor. Following the May meeting, counsel to the Independent Trustees, on behalf of the Independent Trustees, requested certain clarifications and supplements to the materials provided, and the information provided in response to those requests was considered at an executive session of the Independent Trustees and their counsel held prior to the June 8, 2020 meeting, as well as at the meeting held that day. The Board considered supplemental information provided by the Advisor on the operations of the Advisor and the performance of the Fund since the onset of the COVID-19 pandemic. The Board applied its business judgment to determine whether Page 40 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) OCTOBER 31, 2020 (UNAUDITED) the arrangement between the Trust and the Advisor continues to be a reasonable business arrangement from the Fund's perspective. The Board determined that, given the totality of the information provided with respect to the Agreement, the Board had received sufficient information to renew the Agreement. The Board considered that shareholders chose to invest or remain invested in the Fund knowing that the Advisor manages the Fund and knowing the Fund's unitary fee. In reviewing the Agreement, the Board considered the nature, extent and quality of the services provided by the Advisor under the Agreement. The Board considered that the Advisor is responsible for the overall management and administration of the Trust and the Fund and reviewed all of the services provided by the Advisor to the Fund, as well as the background and experience of the persons responsible for such services. The Board noted that the Fund is an actively-managed ETF and noted that the Advisor's Leveraged Finance Investment Team is responsible for the day-to-day management of the Fund's investments. The Board considered the background and experience of the members of the Leveraged Finance Investment Team and noted the Board's prior meetings with members of the Team. The Board considered the Advisor's statement that it applies the same oversight model internally with its Leveraged Finance Investment Team as it uses for overseeing external sub-advisors, including portfolio risk monitoring and performance review. In reviewing the services provided, the Board noted the compliance program that had been developed by the Advisor and considered that it includes a robust program for monitoring the Advisor's and the Fund's compliance with the 1940 Act, as well as the Fund's compliance with its investment objective, policies and restrictions. The Board also considered a report from the Advisor with respect to its risk management functions related to the operation of the Fund. Finally, as part of the Board's consideration of the Advisor's services, the Advisor, in its written materials and at the May 11, 2020 meeting, described to the Board the scope of its ongoing investment in additional infrastructure and personnel to maintain and improve the quality of services provided to the Fund and the other funds in the First Trust Fund Complex. In light of the information presented and the considerations made, the Board concluded that the nature, extent and quality of the services provided to the Trust and the Fund by the Advisor under the Agreement have been and are expected to remain satisfactory and that the Advisor has managed the Fund consistent with its investment objective, policies and restrictions. The Board considered the unitary fee rate payable by the Fund under the Agreement for the services provided. The Board considered that as part of the unitary fee the Advisor is responsible for the Fund's expenses, including the cost of transfer agency, custody, fund administration, legal, audit and other services and license fees, if any, but excluding the fee payment under the Agreement and interest, taxes, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses, if any. The Board received and reviewed information showing the advisory or unitary fee rates and expense ratios of the peer funds in the Expense Group, as well as advisory and unitary fee rates charged by the Advisor to other fund (including ETFs) and non-fund clients, as applicable. Because the Fund pays a unitary fee, the Board determined that expense ratios were the most relevant comparative data point. Based on the information provided, the Board noted that the unitary fee rate for the Fund was above the median total (net) expense ratio of the peer funds in the Expense Group. With respect to the Expense Group, the Board, at the May 11, 2020 meeting, discussed with Broadridge its methodology for assembling peer groups and discussed with the Advisor limitations in creating peer groups for actively-managed ETFs, including that the Expense Group contained both actively-managed ETFs and open-end mutual funds, and different business models that may affect the pricing of services among ETF sponsors. The Board took these limitations and differences into account in considering the peer data. With respect to fees charged to other non-ETF clients, the Board considered differences between the Fund and other non-ETF clients that limited their comparability. In considering the unitary fee rate overall, the Board also considered the Advisor's statement that it seeks to meet investor needs through innovative and value-added investment solutions and the Advisor's demonstrated long-term commitment to the Fund and the other funds in the First Trust Fund Complex. The Board considered performance information for the Fund. The Board noted the process it has established for monitoring the Fund's performance and portfolio risk on an ongoing basis, which includes quarterly performance reporting from the Advisor for the Fund. The Board determined that this process continues to be effective for reviewing the Fund's performance. The Board received and reviewed information comparing the Fund's performance for periods ended December 31, 2019 to the performance of the funds in the Performance Universe and to that of a benchmark index. Based on the information provided, the Board noted that the Fund outperformed the Performance Universe median for the one-, three- and five-year periods ended December 31, 2019 but underperformed the benchmark index for the one-, three- and five-year periods ended December 31, 2019. On the basis of all the information provided on the unitary fee and performance of the Fund and the ongoing oversight by the Board, the Board concluded that the unitary fee for the Fund continues to be reasonable and appropriate in light of the nature, extent and quality of the services provided by the Advisor to the Fund under the Agreement. The Board considered information and discussed with the Advisor whether there were any economies of scale in connection with providing advisory services to the Fund and noted the Advisor's statement that it believes its expenses will likely increase over the next twelve months as the Advisor continues to hire personnel and build infrastructure, including technology, to improve the services to the Fund. The Board noted that any reduction in fixed costs associated with the management of the Fund would benefit the Advisor, but that Page 41 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) OCTOBER 31, 2020 (UNAUDITED) the unitary fee structure provides a level of certainty in expenses for the Fund. The Board considered the revenues and allocated costs (including the allocation methodology) of the Advisor in serving as investment advisor to the Fund for the twelve months ended December 31, 2019 and the estimated profitability level for the Fund calculated by the Advisor based on such data, as well as complex-wide and product-line profitability data, for the same period. The Board noted the inherent limitations in the profitability analysis and concluded that, based on the information provided, the Advisor's profitability level for the Fund was not unreasonable. In addition, the Board considered fall-out benefits described by the Advisor that may be realized from its relationship with the Fund. The Board considered that the Advisor had identified as a fall-out benefit to the Advisor and FTP their exposure to investors and brokers who, absent their exposure to the Fund, may have had no dealings with the Advisor or FTP, and noted that the Advisor does not utilize soft dollars in connection with the Fund. The Board concluded that the character and amount of potential fall-out benefits to the Advisor were not unreasonable. Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, unanimously determined that the terms of the Agreement continue to be fair and reasonable and that the continuation of the Agreement is in the best interests of the Fund. No single factor was determinative in the Board's analysis. REMUNERATION First Trust Advisors L.P. ("First Trust") is authorised and regulated by the U.S. Securities and Exchange Commission and is entitled to market shares of certain funds it manages, including First Trust Tactical High Yield ETF (the "Fund"), in certain member states in the European Economic Area in accordance with the cooperation arrangements in Article 42 of the Alternative Investment Fund Managers Directive (the "Directive"). First Trust is required under the Directive to make disclosures in respect of remuneration. The following disclosures are made in line with First Trust's interpretation of currently available regulatory guidance on remuneration disclosures. During the year ended December 31, 2019, the amount of remuneration paid (or to be paid) by First Trust in respect of the Fund is $4,451,157. This figure is comprised of $565,095 paid (or to be paid) in fixed compensation and $3,886,062 paid (or to be paid) in variable compensation. There were a total of 22 beneficiaries of the remuneration described above. Those amounts include $289,421 paid (or to be paid) to senior management of First Trust and $4,161,736 paid (or to be paid) to other employees whose professional activities have a material impact on the risk profiles of First Trust or the Fund (collectively, "Code Staff"). Code Staff included in the aggregated figures disclosed above are rewarded in line with First Trust's remuneration policy (the "Remuneration Policy") which is determined and implemented by First Trust's senior management. The Remuneration Policy reflects First Trust's ethos of good governance and encapsulates the following principal objectives: i. to provide a clear link between remuneration and performance of First Trust and to avoid rewarding for failure; ii. to promote sound and effective risk management consistent with the risk profiles of the funds managed by First Trust; and iii. to remunerate staff in line with the business strategy, objectives, values and interests of First Trust and the funds managed by First Trust in a manner that avoids conflicts of interest. First Trust assesses various risk factors which it is exposed to when considering and implementing remuneration for Code Staff and considers whether any potential award to such person(s) would give rise to a conflict of interest. First Trust does not reward failure, or consider the taking of risk or failure to take risk in its remuneration of Code Staff. First Trust assesses performance for the purposes of determining payments in respect of performance-related remuneration of Code Staff by reference to a broad range of measures including (i) individual performance (using financial and non-financial criteria), and (ii) the overall performance of First Trust. Remuneration is not based upon the performance of the Fund. The elements of remuneration are balanced between fixed and variable and the senior management sets fixed salaries at a level sufficient to ensure that variable remuneration incentivises and rewards strong individual performance but does not encourage excessive risk taking. No individual is involved in setting his or her own remuneration. Page 42 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) OCTOBER 31, 2020 (UNAUDITED) 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 May 11, 2020 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 June 1, 2019 (the initial compliance date for certain requirements of Rule 22e-4) through the Liquidity Committee's annual meeting held on March 20, 2020 and assessed the Program's adequacy and effectiveness of implementation during this period, including the operation of the highly liquid investment minimum for each fund that is required under the Program to have one, and any material changes to the Program. Note that because the Fund primarily holds assets that are highly liquid investments, the Fund has not adopted a highly liquid investment minimum. As stated in the written report, during the review period, no fund breached the 15% limitation on illiquid investments, no fund with a highly liquid investment minimum breached that minimum and no fund filed a Form N-LIQUID. The Advisor concluded that each fund's investment strategy is appropriate for an open-end fund; that the Program operated effectively in all material respects during the review period; and that the Program is reasonably designed to assess and manage the liquidity risk of each fund and to maintain compliance with Rule 22e-4. Page 43 <PAGE> -------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) OCTOBER 31, 2020 (UNAUDITED) The following tables identify the Trustees and Officers of the Trust. Unless otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite 400, Wheaton, IL 60187. The Trust's statement of additional information includes additional information about the Trustees and is available, without charge, upon request, by calling (800) 988-5891. <TABLE> <CAPTION> NUMBER OF OTHER PORTFOLIOS IN TRUSTEESHIPS OR THE FIRST TRUST DIRECTORSHIPS NAME, TERM OF OFFICE AND FUND COMPLEX HELD BY TRUSTEE YEAR OF BIRTH AND YEAR FIRST ELECTED PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST POSITION WITH THE TRUST OR APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ INDEPENDENT TRUSTEES ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 189 None (1951) Limited Partner, Gundersen Real Estate o Since Inception Limited Partnership (June 1992 to December 2016); Member, Sportsmed LLC (April 2007 to November 2015) Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 189 Director of ADM (1957) (Futures Commission Merchant) Investor Services, o Since Inception Inc., ADM Investor Services International, Futures Industry Association, and National Futures Association Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 189 Director of Trust (1956) and Management Consulting) Company of o Since Inception Illinois Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 189 None (1954) Managing Director and Chief Operating o Since Inception Officer (January 2015 to August 2018), Pelita Harapan Educational Foundation (Educational Product and Services) ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED TRUSTEE ------------------------------------------------------------------------------------------------------------------------------------ James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 189 None Chairman of the Board Advisors L.P. and First Trust Portfolios (1955) o Since Inception L.P., Chairman of the Board of Directors, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) </TABLE> ----------------------------- (1) Mr. Bowen is deemed an "interested person" of the Trust due to his position as Chief Executive Officer of First Trust Advisors L.P., investment advisor of the Trust. Page 44 <PAGE> --------------------------------------------------------------------------------BOARD OF TRUSTEES AND OFFICERS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) OCTOBER 31, 2020 (UNAUDITED) <TABLE> <CAPTION> NAME AND POSITION AND OFFICES TERM OF OFFICE AND PRINCIPAL OCCUPATIONS YEAR OF BIRTH WITH TRUST LENGTH OF SERVICE DURING PAST 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS(2) ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> James M. Dykas President and Chief Executive o Indefinite Term Managing Director and Chief Financial Officer (1966) Officer (January 2016 to Present), Controller (January 2011 o Since January 2016 to January 2016), Senior Vice President (April 2007 to January 2016), First Trust Advisors L.P. and First Trust Portfolios L.P.; Chief Financial Officer (January 2016 to Present), BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President (July 2016 to Present), Vice (1972) Officer and Chief President (April 2012 to July 2016), First Trust Accounting Officer o Since January 2016 Advisors L.P. and First Trust Portfolios L.P. W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and First (1960) Legal Officer Trust Portfolios L.P.; Secretary and General o Since Inception Counsel, BondWave LLC; Secretary, Stonebridge Advisors LLC Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and (1970) First Trust Portfolios L.P. o Since Inception Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P. (1966) and Assistant Secretary and First Trust Portfolios L.P. o Since Inception Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. (1966) and First Trust Portfolios L.P. o Since Inception Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. (1970) and First Trust Portfolios L.P. o Since Inception </TABLE> ----------------------------- (2) The term "officer" means the president, vice president, secretary, treasurer, controller or any other officer who performs a policy making function. Page 45 <PAGE> -------------------------------------------------------------------------------- PRIVACY POLICY -------------------------------------------------------------------------------- FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) OCTOBER 31, 2020 (UNAUDITED) PRIVACY POLICY First Trust values our relationship with you and considers your privacy an important priority in maintaining that relationship. We are committed to protecting the security and confidentiality of your personal information. SOURCES OF INFORMATION We collect nonpublic personal information about you from the following sources: o Information we receive from you and your broker-dealer, investment advisor or financial representative through interviews, applications, agreements or other forms; o Information about your transactions with us, our affiliates or others; o Information we receive from your inquiries by mail, e-mail or telephone; and o Information we collect on our website through the use of "cookies". For example, we may identify the pages on our website that your browser requests or visits. INFORMATION COLLECTED The type of data we collect may include your name, address, social security number, age, financial status, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, investment objectives, marital status, family relationships and other personal information. DISCLOSURE OF INFORMATION We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. In addition to using this information to verify your identity (as required under law), the permitted uses may also include the disclosure of such information to unaffiliated companies for the following reasons: o In order to provide you with products and services and to effect transactions that you request or authorize, we may disclose your personal information as described above to unaffiliated financial service providers and other companies that perform administrative or other services on our behalf, such as transfer agents, custodians and trustees, or that assist us in the distribution of investor materials such as trustees, banks, financial representatives, proxy services, solicitors and printers. o We may release information we have about you if you direct us to do so, if we are compelled by law to do so, or in other legally limited circumstances (for example to protect your account from fraud). In addition, in order to alert you to our other financial products and services, we may share your personal information within First Trust. USE OF WEBSITE ANALYTICS We currently use third party analytics tools, Google Analytics and AddThis, to gather information for purposes of improving First Trust's website and marketing our products and services to you. These tools employ cookies, which are small pieces of text stored in a file by your web browser and sent to websites that you visit, to collect information, track website usage and viewing trends such as the number of hits, pages visited, videos and PDFs viewed and the length of user sessions in order to evaluate website performance and enhance navigation of the website. We may also collect other anonymous information, which is generally limited to technical and web navigation information such as the IP address of your device, internet browser type and operating system for purposes of analyzing the data to make First Trust's website better and more useful to our users. The information collected does not include any personal identifiable information such as your name, address, phone number or email address unless you provide that information through the website for us to contact you in order to answer your questions or respond to your requests. To find out how to opt-out of these services click on: Google Analytics and AddThis. CONFIDENTIALITY AND SECURITY With regard to our internal security procedures, First Trust restricts access to your nonpublic personal information to those First Trust employees who need to know that information to provide products or services to you. We maintain physical, electronic and procedural safeguards to protect your nonpublic personal information. POLICY UPDATES AND INQUIRIES As required by federal law, we will notify you of our privacy policy annually. We reserve the right to modify this policy at any time, however, if we do change it, we will tell you promptly. For questions about our policy, or for additional copies of this notice, please go to www.ftportfolios.com, or contact us at 1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust Advisors). March 2019 Page 46 <PAGE> This page intentionally left blank. <PAGE> This page intentionally left blank. <PAGE> FIRST TRUST First Trust Exchange-Traded Fund IV INVESTMENT ADVISOR First Trust Advisors L.P. 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 ADMINISTRATOR, CUSTODIAN, FUND ACCOUNTANT & TRANSFER AGENT The Bank of New York Mellon 240 Greenwich Street New York, NY 10286 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deloitte & Touche LLP 111 S. Wacker Drive Chicago, IL 60606 LEGAL COUNSEL Chapman and Cutler LLP 111 W. Monroe Street Chicago, IL 60603 <PAGE> [BLANK BACK COVER] <PAGE>
FIRST TRUST First Trust Exchange-Traded Fund IV -------------------------------------------------------------------------------- First Trust Enhanced Short Maturity ETF (FTSM) Annual Report For the Year Ended October 31, 2020 <PAGE> --------------------------------------------------------------------------------TABLE OF CONTENTS -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) ANNUAL REPORT OCTOBER 31, 2020 Shareholder Letter........................................................... 1 Fund Performance Overview.................................................... 2 Portfolio Commentary......................................................... 5 Understanding Your Fund Expenses............................................. 7 Portfolio of Investments..................................................... 8 Statement of Assets and Liabilities.......................................... 28 Statement of Operations...................................................... 29 Statements of Changes in Net Assets.......................................... 30 Financial Highlights......................................................... 31 Notes to Financial Statements................................................ 32 Report of Independent Registered Public Accounting Firm...................... 38 Additional Information....................................................... 39 Board of Trustees and Officers............................................... 45 Privacy Policy............................................................... 47 CAUTION REGARDING FORWARD-LOOKING STATEMENTS This report contains certain forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding the goals, beliefs, plans or current expectations of First Trust Advisors L.P. ("First Trust" or the "Advisor") and its representatives, taking into account the information currently available to them. Forward-looking statements include all statements that do not relate solely to current or historical fact. For example, forward-looking statements include the use of words such as "anticipate," "estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or other words that convey uncertainty of future events or outcomes. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the series of First Trust Exchange-Traded Fund IV (the "Trust") described in this report (First Trust Enhanced Short Maturity ETF; hereinafter referred to as the "Fund") to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. When evaluating the information included in this report, you are cautioned not to place undue reliance on these forward-looking statements, which reflect the judgment of the Advisor and its representatives only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events and circumstances that arise after the date hereof. PERFORMANCE AND RISK DISCLOSURE There is no assurance that the Fund will achieve its investment objective. The Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the Fund's shares may therefore be less than what you paid for them. Accordingly, you can lose money investing in the Fund. See "Risk Considerations" in the Additional Information section of this report for a discussion of other risks of investing in the Fund. Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. For the most recent month-end performance figures, please visit www.ftportfolios.com or speak with your financial advisor. Investment returns, net asset value and share price will fluctuate and Fund shares, when sold, may be worth more or less than their original cost. The Advisor may also periodically provide additional information on Fund performance on the Fund's webpage at www.ftportfolios.com. HOW TO READ THIS REPORT This report contains information that may help you evaluate your investment in the Fund. It includes details about the Fund and presents data and analysis that provide insight into the Fund's performance and investment approach. By reading the portfolio commentary from the portfolio management team of the Fund, you may obtain an understanding of how the market environment affected the Fund's performance. The statistical information that follows may help you understand the Fund's performance compared to that of a relevant market benchmark. It is important to keep in mind that the opinions expressed by personnel of the Advisor are just that: informed opinions. They should not be considered to be promises or advice. The opinions, like the statistics, cover the period through the date on the cover of this report. The material risks of investing in the Fund are spelled out in the prospectus, the statement of additional information, and other Fund regulatory filings. <PAGE> -------------------------------------------------------------------------------- SHAREHOLDER LETTER -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) ANNUAL LETTER FROM THE CHAIRMAN AND CEO OCTOBER 31, 2020 Dear Shareholders: First Trust is pleased to provide you with the annual report for the First Trust Enhanced Short Maturity ETF (the "Fund"), which contains detailed information about the Fund for the twelve months ended October 31, 2020. As I was collecting my thoughts for this annual roundup it occurred to me that my message this year should touch on the tone of the markets and the investing climate rather than belabor all the news and events that brought us to this juncture. We all know how tumultuous our lives have become over the past eight or so months. The phrase "shelter-at-home" says it all. I would rather talk about why I believe investors should be optimistic about where we could be headed. Having said that, allow me to at least acknowledge the two elephants in the room: the coronavirus ("COVID-19") and the election. In the first 12 days of November, we learned the following: that we likely have a new president-elect (Joe Biden), though it may not be official for some time because it is being contested by President Donald Trump and some of his loyal backers in the Republican Party citing voter fraud in certain states; that we still do not know which political party will have control of the Senate due to a couple of run-offs in Georgia to be held on January 5, 2021; and, that it looks as though we may be fortunate enough to have an FDA-approved COVID-19 vaccine by either the end of 2020 or the start of 2021, though that too is not yet official. It could be a game-changer in the COVID-19 battle. And, we may gain access to additional vaccines as well. The key to getting the economy back to running on all cylinders is to fully reopen, and a vaccine is "what the doctor ordered." With respect to the tone of the markets and investment climate, to say that I am encouraged about what has transpired in 2020 would be an understatement. Despite the extraordinary challenges so far this year, the S&P 500(R) Index posted a total return of 2.77% over the first 10 months of 2020, this despite plunging 33.8% into bear market territory from February 19, 2020 through March 23, 2020, according to Bloomberg. As impressive as that feat is, the future looks even brighter. While Bloomberg's consensus earnings growth rate estimate for the S&P 500(R) Index for 2020 was -16.51%, as of November 13, 2020, its 2021 and 2022 estimates were 21.74% and 16.95%, respectively. That is a strong take on the prospects for a rebound in Corporate America over the next 24 months. One of the tailwinds that is providing a good deal of support to the economy and markets is the decision by the Federal Reserve (the "Fed") to keep interest rates artificially low for as long as need be to meet both its employment and inflation targets. By keeping rates lower for longer, the Fed is essentially inviting investors to assume more risk to generate higher returns. Brian Wesbury, Chief Economist at First Trust, believes that the Fed could need until 2024 to accomplish its goals. That is a lot of runway for investors to reposition their portfolios, if needed, and a very generous, and perhaps unprecedented, amount of guidance from the Fed, in our opinion. Those investors with cash on the sidelines earning next to nothing have options if they choose to act. We are encouraged about the prospects for the economy and the markets, but investors should be prepared to weather some volatility until the COVID-19 pandemic is better contained. As always, we encourage investors to stay the course! Thank you for giving First Trust the opportunity to play a role in your financial future. We value our relationship with you and will report on the Fund again in six months. Sincerely, /s/ James A. Bowen James A. Bowen Chairman of the Board of Trustees Chief Executive Officer of First Trust Advisors L.P. Page 1 <PAGE> -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) The investment objective of First Trust Enhanced Short Maturity ETF (the "Fund") is to seek current income, consistent with preservation of capital and daily liquidity. Under normal market conditions, the Fund intends to achieve its investment objective by investing at least 80% of its net assets in a portfolio of U.S. dollar-denominated fixed- and variable-rate debt securities, including securities issued or guaranteed by the U.S. government or its agencies, instrumentalities or U.S. government-sponsored entities, residential and commercial mortgage-backed securities, asset-backed securities, U.S. corporate bonds, fixed income securities issued by non-U.S. corporations and governments, municipal obligations, privately issued securities and other debt securities bearing fixed or floating interest rates. The Fund may also invest in money market securities. Shares of the Fund are listed on The Nasdaq Stock Market LLC under the ticker symbol "FTSM." The Fund's investment advisor, First Trust Advisors L.P. (the "Advisor"), selects securities for the portfolio by evaluating fixed income sectors and macro market trends while completing bottom-up analysis of individual securities. Portfolio securities are selected based upon relative value in the context of overall portfolio duration. Key inputs for the screens in the securities selection process include, but are not limited to, credit quality, yield, interest rate sensitivity and liquidity. The Fund's holdings are systematically monitored for meaningful changes in performance and risk measures. A security will generally be sold when the Advisor believes that a security can be substituted for a similar investment that represents better relative value; it lacks adequate compensation for embedded credit risk; or when rebalancing the portfolio to maintain diversification. Under normal market conditions, the Fund's average duration is expected to be less than one year and the average maturity of the Fund's portfolio is expected to be less than three years.<TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL CUMULATIVE TOTAL RETURNS TOTAL RETURNS 1 Year Ended 5 Years Ended Inception (8/5/14) 5 Years Ended Inception (8/5/14) 10/31/20 10/31/20 to 10/31/20 10/31/20 to 10/31/20 <S> <C> <C> <C> <C> <C> FUND PERFORMANCE NAV 1.34% 1.67% 1.41% 8.63% 9.12% Market Price 1.34% 1.69% 1.41% 8.72% 9.14% INDEX PERFORMANCE ICE BofA 0-1 Year U.S. Treasury Index 1.37% 1.40% 1.15% 7.19% 7.39% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> Total returns for the period since inception are calculated from the inception date of the Fund. "Average Annual Total Returns" represent the average annual change in value of an investment over the period indicated. "Cumulative Total Returns" represent the total change in value of an investment over the period indicated. The Fund's per share net asset value ("NAV") is the value of one share of the Fund and is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of outstanding shares. The price used to calculate market return ("Market Price") is determined by using the midpoint of the national best bid and offer price ("NBBO") as of the time that the Fund's NAV is calculated. Under SEC rules, the NBBO consists of the highest displayed buy and lowest sell prices among the various exchanges trading the Fund at the time the Fund's NAV is calculated. Prior to January 1, 2019, the price used was the midpoint between the highest bid and the lowest offer on the stock exchange on which shares of the Fund were listed for trading as of the time that the Fund's NAV was calculated. Since shares of the Fund did not trade in the secondary market until after the Fund's inception, for the period from inception to the first day of secondary market trading in shares of the Fund, the NAV of the Fund is used as a proxy for the secondary market trading price to calculate market returns. NAV and market returns assume that all distributions have been reinvested in the Fund at NAV and Market Price, respectively. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The total returns presented reflect the reinvestment of dividends on securities in the indices. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future performance. Page 2 <PAGE> --------------------------------------------------------------------------------FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) -------------------------------------------------------- % OF TOTAL ASSET CLASSIFICATION INVESTMENTS & CASH -------------------------------------------------------- Corporate Bonds and Notes 40.04% Commercial Paper 24.56 Foreign Corporate Bonds and Notes 16.38 Asset-Backed Securities 11.97 U.S. Government Agency Mortgage- Backed Securities 4.35 Mortgage-Backed Securities 1.30 U.S. Government Notes 0.78 Certificate of Deposit 0.29 U.S. Treasury Bills 0.29 Cash 0.04 ------- Total 100.00% ======= -------------------------------------------------------- % OF TOTAL CREDIT QUALITY(1) INVESTMENTS & CASH -------------------------------------------------------- Government and Agency 5.42% AAA 7.12 AA+ 1.84 AA 0.67 AA- 3.67 A+ 6.04 A 7.28 A- 9.86 BBB+ 16.20 BBB 9.62 BBB- 1.62 Not Rated 30.62 Cash 0.04 ------- Total 100.00% ======= -------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS INVESTMENTS -------------------------------------------------------- ETP Legacy, L.P., 0.61% - 0.69%, 11/02/2020 0.87% U.S. Treasury Note, 1.50%, 11/30/2021 0.78 Flagship Credit Auto Trust, Series 2020-4, Class A 0.62 TransCanada PipeLines Ltd. 0.60 Verizon Owner Trust, Series 2020-B, Class A 0.57 CVS Health Corp. 0.50 Enbridge Energy Partners, L.P. 0.50 Nutrien Ltd. 0.50 Verizon Communications, Inc., 3 Mo. LIBOR + 1.00% 0.49 Government National Mortgage Association, Series 2020-144, Class GP 0.49 ------- Total 5.92% ======= ----------------------------- (1) The ratings are by Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc. A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO) of the creditworthiness of an issuer with respect to debt obligations. Ratings are measured highest to lowest on a scale that generally ranges from AAA to D for long-term ratings and A-1+ to C for short-term ratings. Investment grade is defined as those issuers that have a long-term credit rating of BBB- or higher or a short-term credit rating of A-3 or higher. The credit ratings shown relate to the credit worthiness of the issuers of the underlying securities in the Fund, and not to the Fund or its shares. U.S. Treasury and U.S. Agency mortgage-backed securities appear under "Government". Credit ratings are subject to change. Page 3 <PAGE> --------------------------------------------------------------------------------FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT AUGUST 5, 2014 - OCTOBER 31, 2020 First Trust Enhanced ICE BofA 0-1 Year Short Maturity ETF U.S. Treasury Index <S> <C> <C> 8/5/14 $10,000 $10,000 10/31/14 10,016 10,002 4/30/15 10,047 10,011 10/31/15 10,045 10,020 4/30/16 10,079 10,045 10/31/16 10,139 10,073 4/30/17 10,206 10,096 10/31/17 10,289 10,147 4/30/18 10,371 10,207 10/31/18 10,486 10,311 4/30/19 10,624 10,449 10/31/19 10,767 10,594 4/30/20 10,780 10,732 10/31/20 10,912 10,739 </TABLE> Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 4 <PAGE> -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) ANNUAL REPORT OCTOBER 31, 2020 (UNAUDITED) ADVISOR First Trust Advisors L.P. ("First Trust") is the investment advisor to the First Trust Enhanced Short Maturity ETF (the "Fund" or "FTSM"). In this capacity, First Trust is responsible for the selection and ongoing monitoring of the investments in the Fund's portfolio and certain other services necessary for the management of the portfolio. PORTFOLIO MANAGEMENT TEAM TODD LARSON, CFA - SENIOR VICE PRESIDENT, PORTFOLIO MANAGER, FIRST TRUST INVESTMENT GRADE FIXED INCOME GROUP JEREMIAH CHARLES - SENIOR VICE PRESIDENT, SENIOR PORTFOLIO MANAGER, FIRST TRUST SECURITIZED PRODUCTS GROUP JAMES SNYDER - SENIOR VICE PRESIDENT, SENIOR PORTFOLIO MANAGER, FIRST TRUST SECURITIZED PRODUCTS GROUP ERIC MAISEL, CFA - SENIOR VICE PRESIDENT, PORTFOLIO MANAGER, FIRST TRUST INVESTMENT GRADE FIXED INCOME GROUP COMMENTARY The Fund is an actively-managed exchange-traded fund ("ETF"). Its investment objective is to seek current income, consistent with preservation of capital and daily liquidity. MARKET RECAP The front-end of the U.S. bond market improved over the 12 month-period ended October 31, 2020. The ICE BofA 0-1 Year U.S. Treasury Index and ICE BofA 0-1 Year U.S. Corporate Index, two broad measures of market performance, had returns of 1.37% and 1.99%, respectively, for the period. However, those returns were earned through turbulence the market and economy had not witnessed since the 2008-2009 Global Financial Crisis ("GFC"). Solid estimates for 2020 growth abounded to start the year, only to be abruptly undone in March 2020 as the outbreak of the coronavirus ("COVID-19") upended markets and whole economies. Investor sentiment eroded sharply, and markets turned extraordinarily volatile. Industry-wide demand for cash led to forced selling, subsequently causing severe illiquidity in all markets, including in Treasuries and agency mortgage-backed securities. By mid-March, spreads on all credit sectors had quickly gapped out to levels not seen since the GFC. A potential liquidity crisis in U.S. credit markets was headed off by the U.S. Federal Reserve (the "Fed"), which slashed interest rates and unleashed an array of programs designed to ensure the flow of credit in the private and public sectors. Meanwhile, Congress enacted a fiscal stimulus bill valued at $2 trillion, a sum equal to nearly 10% of the U.S. gross domestic product ("GDP"), in an effort to support businesses, employees, and households. Collectively, these measures proved to be a game-changer for the market and the result was a rapid improvement in sentiment and asset prices. Over the subsequent months of the reporting period, credit spreads in front-end bond markets improved and returned to levels seen in January-February 2020. During this time, issuance of new bonds increased to record levels as many high-quality companies issued long-term debt to weather the uncertain outlook. New issuance was easily absorbed as investors sought higher yields amid falling interest rates and low yields on U.S. Treasury bonds. In aggregate, high-grade bond funds and ETFs reported inflows for every week between the beginning of April through the end of October. Having re-established the Zero Interest Rate Policy regime in the wake of the pandemic, the Fed also adopted a new, flexible average-inflation-targeting framework during the third quarter of 2020. We expect this to result in policy rates remaining at low levels for another two or three years. The Fed's policy announcement came as the U.S. economy is rebounding from the sharp pullback experienced in the first half of 2020. While the labor market has yet to fully heal, employment has continued to bounce back. Non-farm payrolls recouped 12 million jobs from April through October and retail sales were also robust, doubtlessly aided by economic stimulus measures. As the reporting period came to a close, it was reported U.S. economic growth jumped to an annualized rate of 33.1% in the third quarter, up from -31.4% in the second quarter and -5.0% in the first quarter. PERFORMANCE ANALYSIS The Fund's net asset value ("NAV") and market performance for the 12-month period ended October 31, 2020 was 1.34%, versus the ICE BofA 0-1 Year U.S. Treasury Index's (the "Benchmark") return of 1.37%. The distribution declared on October 29, 2020 of $0.035 represented an annualized distribution rate of 0.70% based on the Fund's closing market price of $60.04 on October 30, 2020. The Fund's distribution rate is not constant and is subject to change over time based on market conditions and performance of the Fund. Page 5 <PAGE> -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) ANNUAL REPORT OCTOBER 31, 2020 (UNAUDITED) The allocation to securitized debt was a source of outperformance with the best results coming from Agency collateralized mortgage-backed obligations ("CMOs"), Agency commercial mortgage-backed securities ("CMBS"), and Auto asset-backed securities ("ABS"). The Fund's relatively small allocation to Treasury securities was another contributor to outperformance versus the Benchmark. On the other hand, cash equivalents and corporate bonds moderately underperformed on a relative basis. Within corporates, the leading detractor was investments in the Energy sector. Holdings in ten other corporate sectors positively contributed to relative performance including finance companies, electric utilities, consumer non-cyclicals, and banking. From a rating quality perspective, "A" rated corporate bonds delivered slightly better returns compared to "BBB" rated corporate bonds. Throughout the 12-month period ended October 31, 2020, the Fund maintained a diversified allocation with an emphasis on securities having a high level of liquidity. Overall credit risk was kept low as the investment strategy focused on high quality, short-term holdings. The Fund's weighted average maturity was kept around one year and weighted average effective duration between 0.3 and 0.6 years. MARKET AND FUND OUTLOOK Despite uncertainty surrounding COVID-19, our outlook for the front-end fixed income markets and economy is generally positive. We anticipate drug companies will successfully produce vaccines and therapies for COVID-19 in the near term and that those will serve as catalysts for a return to more normal social behavior and more rapid economic growth. From a policy perspective, we expect lawmakers to provide another round of fiscal stimulus to support households and small businesses. We also believe the Fed will continue to anchor the front-end of the Treasury yield curve and short-term funding rates by keeping the Fed Funds rate at zero. As a result, our outlook is the economy will continue to recover and that has supportive implications for credit fundamentals. We are also encouraged by the strong technical backdrop seen in the front-end given steady flows into funds and ETFs. From a strategy perspective, as we head into the closing months of 2020, we believe credit spreads reflect a great deal of this positive outlook and, as such, we are cautious about increasing risk exposures significantly. Because our outlook is for anchored front-end rates, we do not believe yield curve positioning will have a material impact on performance. Credit spreads are a different matter and we await opportunities to initiate positions at more attractive levels. In the corporate space, we remain focused on lending to leading companies with relatively noncyclical revenues, robust free cash flow, durable balance sheets, multiple degrees of freedom, and prudent management. We believe high quality mortgage-backed and asset-backed securities represent some of the best opportunities in the front-end at this time, given falling unemployment and our expectation that fiscal stimulus measures will continue supporting household balance sheets. As always, capital preservation remains a focus and we expect to maintain a laddered maturity profile of commercial paper to support liquidity and stable NAV, although low yields in the very front end of the curve remain a challenge. As we evaluate new investment opportunities, our research will seek to identify opportunities that we believe offer the best risk/reward balance, and decisions will continue to be based on the analysis of data that results in sound, evidence-based conclusions. Page 6 <PAGE> FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) UNDERSTANDING YOUR FUND EXPENSES OCTOBER 31, 2020 (UNAUDITED) As a shareholder of First Trust Enhanced Short Maturity ETF (the "Fund"), you incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, if any, and other Fund expenses. This Example is intended to help you understand your ongoing costs of investing in the Fund and to compare these costs with the ongoing costs of investing in other funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held through the six-month period ended October 31, 2020. ACTUAL EXPENSES The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Six-Month Period" to estimate the expenses you paid on your account during this six-month period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the following table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as brokerage commissions. Therefore, the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.<TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------ ANNUALIZED EXPENSE RATIO EXPENSES PAID BEGINNING ENDING BASED ON THE DURING THE ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH MAY 1, 2020 OCTOBER 31, 2020 PERIOD (a) PERIOD (b) ------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) Actual $1,000.00 $1,012.20 0.36% $1.82 Hypothetical (5% return before expenses) $1,000.00 $1,023.33 0.36% $1.83 </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 (May 1, 2020 through October 31, 2020), multiplied by 184/366 (to reflect the six-month period). Page 7 <PAGE>FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ ---------------- <S> <C> <C> <C> <C> CORPORATE BONDS AND NOTES -- 40.3% AEROSPACE/DEFENSE -- 0.2% $ 10,000,000 L3Harris Technologies, Inc...................................... 4.95% 02/15/21 $ 10,033,279 1,492,000 Northrop Grumman Corp........................................... 2.55% 10/15/22 1,551,829 ---------------- 11,585,108 ---------------- AGRICULTURE -- 1.1% 12,648,000 Altria Group, Inc............................................... 4.75% 05/05/21 12,937,894 15,000,000 Altria Group, Inc............................................... 2.85% 08/09/22 15,620,907 12,452,000 BAT Capital Corp., 3 Mo. LIBOR + 0.88% (a)...................... 1.16% 08/15/22 12,520,742 1,550,000 Philip Morris International, Inc................................ 2.38% 08/17/22 1,603,631 12,960,000 Reynolds American, Inc.......................................... 4.00% 06/12/22 13,687,731 ---------------- 56,370,905 ---------------- AUTO MANUFACTURERS -- 4.7% 3,800,000 American Honda Finance Corp., Medium-Term Note, 3 Mo. LIBOR + 0.47% (a)...................................... 0.70% 01/08/21 3,803,351 3,000,000 American Honda Finance Corp., Medium-Term Note, 3 Mo. LIBOR + 0.35% (a)...................................... 0.60% 06/11/21 3,006,023 2,000,000 American Honda Finance Corp., Medium-Term Note.................. 0.40% 10/21/22 2,000,392 20,000,000 American Honda Finance Corp., Medium-Term Note, 3 Mo. LIBOR + 0.37% (a)...................................... 0.61% 05/10/23 20,018,749 10,925,000 BMW US Capital LLC, 3 Mo. LIBOR + 0.41% (a) (b)................. 0.63% 04/12/21 10,939,933 4,400,000 BMW US Capital LLC, 3 Mo. LIBOR + 0.50% (a) (b)................. 0.75% 08/13/21 4,409,222 565,000 BMW US Capital LLC (b).......................................... 1.85% 09/15/21 571,650 5,730,000 Daimler Finance North America LLC, 3 Mo. LIBOR + 0.43% (a) (b)................................................ 0.69% 02/12/21 5,732,804 640,000 Daimler Finance North America LLC, 3 Mo. LIBOR + 0.45% (a) (b)................................................ 0.71% 02/22/21 640,496 5,130,000 Daimler Finance North America LLC (b)........................... 3.35% 05/04/21 5,203,449 5,000,000 Daimler Finance North America LLC, 3 Mo. LIBOR + 0.67% (a) (b)................................................ 0.92% 11/05/21 5,012,210 7,000,000 Daimler Finance North America LLC (b)........................... 3.75% 11/05/21 7,218,718 2,000,000 Daimler Finance North America LLC, 3 Mo. LIBOR + 0.90% (a) (b)................................................ 1.18% 02/15/22 2,013,380 5,000,000 Daimler Finance North America LLC (b)........................... 1.75% 03/10/23 5,105,993 3,000,000 General Motors Financial Co., Inc., 3 Mo. LIBOR + 0.54% (a).................................................... 0.79% 11/06/20 3,000,051 11,270,000 General Motors Financial Co., Inc............................... 4.20% 03/01/21 11,354,578 13,401,000 General Motors Financial Co., Inc............................... 3.20% 07/06/21 13,583,138 6,763,000 General Motors Financial Co., Inc............................... 4.38% 09/25/21 6,973,048 8,000,000 General Motors Financial Co., Inc., 3 Mo. LIBOR + 1.10% (a).................................................... 1.35% 11/06/21 7,998,394 4,000,000 General Motors Financial Co., Inc............................... 4.20% 11/06/21 4,121,871 12,736,000 Hyundai Capital America (b)..................................... 3.95% 02/01/22 13,202,979 6,885,000 Hyundai Capital America (b)..................................... 2.38% 02/10/23 7,086,727 6,910,000 Hyundai Capital America (b)..................................... 1.25% 09/18/23 6,931,062 1,050,000 Nissan Motor Acceptance Corp. (b)............................... 1.90% 09/14/21 1,054,933 1,800,000 PACCAR Financial Corp., Medium-Term Note........................ 2.25% 02/25/21 1,811,359 2,000,000 PACCAR Financial Corp., Medium-Term Note, 3 Mo. LIBOR + 0.26% (a)............................................ 0.50% 05/10/21 2,002,790 4,000,000 Toyota Motor Credit Corp., Medium-Term Note, 3 Mo. LIBOR + 0.28% (a)............................................ 0.50% 04/13/21 4,004,853 15,000,000 Toyota Motor Credit Corp., Medium-Term Note, 3 Mo. LIBOR + 0.29% (a)............................................ 0.51% 10/07/21 15,033,804 </TABLE> Page 8 See Notes to Financial Statements <PAGE> FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ ---------------- <S> <C> <C> <C> <C> CORPORATE BONDS AND NOTES (CONTINUED) AUTO MANUFACTURERS (CONTINUED) $ 9,677,000 Toyota Motor Credit Corp., Medium-Term Note..................... 1.80% 10/07/21 $ 9,816,460 10,000,000 Toyota Motor Credit Corp., Medium-Term Note..................... 1.15% 05/26/22 10,127,597 18,370,000 Volkswagen Group of America Finance LLC, 3 Mo. LIBOR + 0.77% (a) (b)........................................ 1.02% 11/13/20 18,373,675 10,000,000 Volkswagen Group of America Finance LLC, 3 Mo. LIBOR + 0.86% (a) (b)........................................ 1.08% 09/24/21 10,048,070 11,828,000 Volkswagen Group of America Finance LLC (b)...................................................... 2.50% 09/24/21 12,038,479 1,931,000 Volkswagen Group of America Finance LLC (b)..................... 4.00% 11/12/21 1,999,373 7,253,000 Volkswagen Group of America Finance LLC (b)..................... 2.90% 05/13/22 7,491,485 1,202,000 Volkswagen Group of America Finance LLC (b)..................... 2.70% 09/26/22 1,246,219 ---------------- 244,977,315 ---------------- BANKS -- 8.0% 6,239,000 Bank of America Corp., 3 Mo. LIBOR + 0.38% (a).................. 0.59% 01/23/22 6,242,743 5,000,000 Bank of America Corp. (c)....................................... 2.74% 01/23/22 5,026,364 5,000,000 Bank of America Corp., Global Medium-Term Note, 3 Mo. LIBOR + 1.42% (a)...................................... 1.64% 04/19/21 5,031,496 20,447,000 Bank of America Corp., Global Medium-Term Note (c).............. 2.82% 07/21/23 21,207,811 18,560,000 Bank of America Corp., Medium-Term Note, 3 Mo. LIBOR + 0.65% (a)............................................ 0.88% 06/25/22 18,624,135 12,000,000 Bank of America Corp., Medium-Term Note (c)..................... 0.81% 10/24/24 12,017,071 3,385,000 Capital One N.A., 3 Mo. LIBOR + 0.82% (a)....................... 1.06% 08/08/22 3,410,313 9,505,000 Capital One N.A................................................. 2.15% 09/06/22 9,784,413 10,760,000 Citibank N.A., 3 Mo. LIBOR + 0.35% (a).......................... 0.61% 02/12/21 10,767,415 15,000,000 Citibank N.A., 3 Mo. LIBOR + 0.60% (a).......................... 0.85% 05/20/22 15,037,767 1,000,000 Citigroup, Inc., 3 Mo. LIBOR + 1.19% (a)........................ 1.40% 08/02/21 1,008,284 2,000,000 Citigroup, Inc., 3 Mo. LIBOR + 1.07% (a)........................ 1.32% 12/08/21 2,019,135 9,959,000 Citigroup, Inc., 3 Mo. LIBOR + 0.96% (a)........................ 1.17% 04/25/22 10,062,830 5,000,000 Citigroup, Inc., SOFR + 0.87% (a)............................... 0.96% 11/04/22 5,025,776 9,440,000 Citigroup, Inc. (c)............................................. 2.31% 11/04/22 9,612,577 5,500,000 Citigroup, Inc. (c)............................................. 2.88% 07/24/23 5,709,268 3,000,000 Citigroup, Inc. (c)............................................. 1.68% 05/15/24 3,074,298 2,250,000 Citizens Bank N.A./Providence RI, Medium-Term Note.............. 2.55% 05/13/21 2,272,549 5,000,000 Fifth Third Bancorp............................................. 2.60% 06/15/22 5,167,641 7,725,000 Fifth Third Bank/Cincinnati OH, 3 Mo. LIBOR + 0.44% (a).................................................... 0.65% 07/26/21 7,744,189 6,000,000 Goldman Sachs Group, (The), Inc................................. 2.60% 12/27/20 6,020,488 10,308,000 Goldman Sachs Group, (The), Inc., 3 Mo. LIBOR + 1.17% (a).................................................... 1.45% 11/15/21 10,312,196 5,000,000 Goldman Sachs Group, (The), Inc., 3 Mo. LIBOR + 1.11% (a).................................................... 1.32% 04/26/22 5,019,192 5,000,000 Goldman Sachs Group, (The), Inc................................. 3.00% 04/26/22 5,061,965 11,500,000 Goldman Sachs Group, (The), Inc. (c)............................ 2.88% 10/31/22 11,774,807 10,000,000 Goldman Sachs Group, (The), Inc. (c)............................ 2.91% 07/24/23 10,388,933 15,970,000 JPMorgan Chase & Co. (c)........................................ 3.51% 06/18/22 16,273,483 10,365,000 JPMorgan Chase & Co............................................. 2.97% 01/15/23 10,689,008 6,935,000 JPMorgan Chase & Co. (c)........................................ 2.78% 04/25/23 7,176,906 9,053,000 JPMorgan Chase & Co. (c)........................................ 1.51% 06/01/24 9,252,818 3,300,000 KeyBank N.A./Cleveland OH, 3 Mo. LIBOR + 0.81% (a).................................................... 1.07% 11/22/21 3,325,329 15,784,000 Morgan Stanley, 3 Mo. LIBOR + 1.18% (a)......................... 1.40% 01/20/22 15,818,184 5,815,000 Morgan Stanley.................................................. 2.75% 05/19/22 6,023,419 </TABLE> See Notes to Financial Statements Page 9 <PAGE>FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ ---------------- <S> <C> <C> <C> <C> CORPORATE BONDS AND NOTES (CONTINUED) BANKS (CONTINUED) $ 11,000,000 Morgan Stanley, Global Medium-Term Note, 3 Mo. LIBOR + 1.40% (a)............................................ 1.61% 04/21/21 $ 11,068,342 5,333,000 Morgan Stanley, Global Medium-Term Note......................... 2.50% 04/21/21 5,386,703 25,000,000 Morgan Stanley, Global Medium-Term Note, SOFR + 0.70% (a).................................................... 0.79% 01/20/23 25,091,222 5,000,000 Morgan Stanley, Global Medium-Term Note......................... 3.13% 01/23/23 5,287,032 4,900,000 National Securities Clearing Corp. (b).......................... 1.20% 04/23/23 4,995,235 3,990,000 State Street Corp. (b) (c)...................................... 2.83% 03/30/23 4,126,194 10,000,000 Truist Bank, 3 Mo. LIBOR + 0.59% (a)............................ 0.87% 05/17/22 10,059,943 3,000,000 Truist Bank, SOFR + 0.73% (a)................................... 0.82% 03/09/23 3,024,615 2,852,000 Truist Financial Corp., Medium-Term Note, 3 Mo. LIBOR + 0.22% (a)............................................ 0.43% 02/01/21 2,852,988 12,137,000 Truist Financial Corp., Medium-Term Note........................ 3.05% 06/20/22 12,640,990 2,000,000 US Bank N.A./Cincinnati OH, 3 Mo. LIBOR + 0.32% (a).................................................... 0.53% 04/26/21 2,002,311 6,952,000 Wells Fargo & Co., 3 Mo. LIBOR + 0.93% (a)...................... 1.18% 02/11/22 6,966,628 17,857,000 Wells Fargo & Co................................................ 3.07% 01/24/23 18,400,098 5,000,000 Wells Fargo & Co., Medium-Term Note............................. 3.00% 01/22/21 5,028,049 10,000,000 Wells Fargo & Co., Medium-Term Note............................. 3.50% 03/08/22 10,414,105 10,646,000 Wells Fargo Bank N.A. (c)....................................... 2.08% 09/09/22 10,796,840 ---------------- 414,124,098 ---------------- BEVERAGES -- 0.4% 20,254,000 Keurig Dr Pepper, Inc........................................... 3.55% 05/25/21 20,619,506 ---------------- BIOTECHNOLOGY -- 0.4% 5,000,000 Gilead Sciences, Inc., 3 Mo. LIBOR + 0.15% (a).................. 0.37% 09/17/21 5,003,627 3,000,000 Gilead Sciences, Inc., 3 Mo. LIBOR + 0.52% (a).................. 0.74% 09/29/23 3,005,328 10,000,000 Gilead Sciences, Inc............................................ 0.75% 09/29/23 10,025,830 ---------------- 18,034,785 ---------------- CHEMICALS -- 0.2% 10,527,000 DuPont de Nemours, Inc., 3 Mo. LIBOR + 0.71% (a)................ 0.99% 11/15/20 10,529,523 ---------------- COMMERCIAL SERVICES -- 0.2% 788,000 Equifax, Inc.................................................... 2.30% 06/01/21 795,228 7,561,000 Global Payments, Inc............................................ 3.80% 04/01/21 7,648,616 ---------------- 8,443,844 ---------------- COMPUTERS -- 0.8% 3,000,000 Apple, Inc...................................................... 1.55% 08/04/21 3,025,981 7,000,000 Apple, Inc...................................................... 0.75% 05/11/23 7,072,859 19,905,000 Hewlett Packard Enterprise Co., 3 Mo. LIBOR + 0.68% (a).................................................... 0.93% 03/12/21 19,938,584 3,000,000 Hewlett Packard Enterprise Co., 3 Mo. LIBOR + 0.72% (a).................................................... 0.95% 10/05/21 3,000,410 10,000,000 International Business Machines Corp., 3 Mo. LIBOR + 0.40% (a).................................................... 0.65% 05/13/21 10,019,498 ---------------- 43,057,332 ---------------- DIVERSIFIED FINANCIAL SERVICES -- 1.6% 4,100,000 AIG Global Funding, 3 Mo. LIBOR + 0.65% (a) (b)................. 0.87% 01/22/21 4,105,485 3,235,000 AIG Global Funding (b).......................................... 3.35% 06/25/21 3,299,637 4,000,000 AIG Global Funding (b).......................................... 0.80% 07/07/23 4,030,815 1,000,000 Air Lease Corp.................................................. 2.50% 03/01/21 1,006,518 </TABLE> Page 10 See Notes to Financial Statements <PAGE> FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ ---------------- <S> <C> <C> <C> <C> CORPORATE BONDS AND NOTES (CONTINUED) DIVERSIFIED FINANCIAL SERVICES (CONTINUED) $ 6,000,000 American Express Co., 3 Mo. LIBOR + 0.53% (a)................... 0.81% 05/17/21 $ 6,014,007 11,000,000 American Express Co., 3 Mo. LIBOR + 0.60% (a)................... 0.85% 11/05/21 11,052,388 14,495,000 American Express Co., 3 Mo. LIBOR + 0.62% (a)................... 0.87% 05/20/22 14,591,850 8,226,000 Capital One Financial Corp...................................... 3.45% 04/30/21 8,332,238 7,667,000 Capital One Financial Corp...................................... 2.60% 05/11/23 8,039,088 10,505,000 Charles Schwab (The) Corp., 3 Mo. LIBOR + 0.32% (a)............. 0.57% 05/21/21 10,518,342 2,500,000 Intercontinental Exchange, Inc.................................. 2.35% 09/15/22 2,585,445 10,000,000 Intercontinental Exchange, Inc., 3 Mo. LIBOR + 0.65% (a).................................................... 0.90% 06/15/23 10,043,530 ---------------- 83,619,343 ---------------- ELECTRIC -- 2.4% 10,410,000 Alabama Power Co., Series 17A................................... 2.45% 03/30/22 10,697,527 4,567,000 American Electric Power Co., Inc., Series I..................... 3.65% 12/01/21 4,721,853 2,080,000 Appalachian Power Co............................................ 4.60% 03/30/21 2,093,553 11,000,000 Consolidated Edison Co. of New York Inc., Series C, 3 Mo. LIBOR + 0.40% (a)...................................... 0.63% 06/25/21 11,022,429 11,351,000 Consolidated Edison, Inc........................................ 2.00% 05/15/21 11,440,177 8,510,000 Dominion Energy, Inc., Series B................................. 2.75% 01/15/22 8,725,365 2,342,000 Dominion Energy, Inc., Series C................................. 2.00% 08/15/21 2,368,609 7,000,000 Dominion Energy, Inc., Series D, 3 Mo. LIBOR + 0.53% (a).................................................... 0.78% 09/15/23 7,020,560 10,300,000 DTE Energy Co., Series B........................................ 2.60% 06/15/22 10,642,545 5,000,000 Duke Energy Corp., 3 Mo. LIBOR + 0.50% (a) (b).................. 0.76% 05/14/21 5,011,167 3,170,000 Duke Energy Corp................................................ 3.55% 09/15/21 3,233,757 5,900,000 Duke Energy Corp., 3 Mo. LIBOR + 0.65% (a)...................... 0.90% 03/11/22 5,935,722 3,000,000 Duke Energy Florida LLC, Series A, 3 Mo. LIBOR + 0.25% (a).................................................... 0.48% 11/26/21 3,004,152 5,000,000 Florida Power & Light Co., 3 Mo. LIBOR + 0.38% (a).............. 0.60% 07/28/23 5,002,544 4,000,000 Georgia Power Co................................................ 2.40% 04/01/21 4,027,426 7,425,000 NextEra Energy Capital Holdings, Inc............................ 2.40% 09/01/21 7,553,571 4,520,000 NextEra Energy Capital Holdings, Inc., 3 Mo. LIBOR + 0.72% (a).................................................... 0.97% 02/25/22 4,555,943 1,100,000 Public Service Enterprise Group, Inc............................ 2.00% 11/15/21 1,116,706 3,860,000 Public Service Enterprise Group, Inc............................ 2.65% 11/15/22 4,033,647 12,514,000 Southern (The) Co............................................... 2.35% 07/01/21 12,657,223 ---------------- 124,864,476 ---------------- ELECTRONICS -- 0.6% 19,563,000 Fortive Corp.................................................... 2.35% 06/15/21 19,757,242 2,000,000 Honeywell International, Inc., 3 Mo. LIBOR + 0.37% (a).......... 0.61% 08/08/22 2,008,272 7,085,000 Roper Technologies, Inc......................................... 3.00% 12/15/20 7,084,351 4,000,000 Roper Technologies, Inc......................................... 2.80% 12/15/21 4,099,648 ---------------- 32,949,513 ---------------- ENVIRONMENTAL CONTROL -- 0.3% 14,855,000 Waste Management, Inc........................................... 4.60% 03/01/21 14,904,177 ---------------- FOOD -- 0.4% 13,477,000 General Mills, Inc., 3 Mo. LIBOR + 0.54% (a).................... 0.77% 04/16/21 13,499,893 1,759,000 General Mills, Inc.............................................. 3.15% 12/15/21 1,800,977 5,348,000 Kroger (The) Co................................................. 2.60% 02/01/21 5,363,605 ---------------- 20,664,475 ---------------- </TABLE> See Notes to Financial Statements Page 11 <PAGE>FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ ---------------- <S> <C> <C> <C> <C> CORPORATE BONDS AND NOTES (CONTINUED) GAS -- 0.7% $ 13,057,000 Dominion Energy Gas Holdings LLC................................ 2.80% 11/15/20 $ 13,066,498 18,010,000 Dominion Energy Gas Holdings LLC, Series A, 3 Mo. LIBOR + 0.60% (a)............................................ 0.85% 06/15/21 18,066,959 5,000,000 Southern California Gas Co., 3 Mo. LIBOR + 0.35% (a)............ 0.57% 09/14/23 5,001,943 ---------------- 36,135,400 ---------------- HEALTH CARE SERVICES -- 0.9% 17,383,000 Anthem, Inc..................................................... 2.50% 11/21/20 17,402,244 5,900,000 Anthem, Inc..................................................... 3.70% 08/15/21 6,007,460 5,000,000 Anthem, Inc..................................................... 3.13% 05/15/22 5,206,669 9,300,000 Humana, Inc..................................................... 2.50% 12/15/20 9,321,992 1,001,000 UnitedHealth Group, Inc......................................... 2.13% 03/15/21 1,007,864 6,156,000 UnitedHealth Group, Inc., 3 Mo. LIBOR + 0.26% (a)............... 0.51% 06/15/21 6,166,179 ---------------- 45,112,408 ---------------- INSURANCE -- 3.5% 1,000,000 Allstate (The) Corp., 3 Mo. LIBOR + 0.43% (a)................... 0.65% 03/29/21 1,001,662 8,742,000 American International Group, Inc............................... 3.30% 03/01/21 8,806,668 13,125,000 Athene Global Funding, 3 Mo. LIBOR + 1.23% (a) (b).............. 1.46% 07/01/22 13,222,781 5,108,000 Athene Global Funding (b)....................................... 3.00% 07/01/22 5,264,436 9,640,000 Athene Global Funding (b)....................................... 1.20% 10/13/23 9,658,350 11,510,000 Jackson National Life Global Funding, 3 Mo. LIBOR + 0.48% (a) (b)................................................ 0.73% 06/11/21 11,534,344 4,200,000 MassMutual Global Funding II (b)................................ 2.45% 11/23/20 4,205,732 10,000,000 MassMutual Global Funding II (b)................................ 0.85% 06/09/23 10,099,904 25,000,000 MET Tower Global Funding, SOFR + 0.55% (a) (b).................. 0.64% 01/17/23 25,119,961 10,000,000 Metropolitan Life Global Funding I, 3 Mo. LIBOR + 0.23% (a) (b)................................................ 0.46% 01/08/21 10,004,750 2,000,000 Metropolitan Life Global Funding I, SOFR + 0.57% (a) (b)................................................ 0.66% 01/13/23 2,008,925 5,000,000 Metropolitan Life Global Funding I (b).......................... 0.90% 06/08/23 5,056,347 2,000,000 New York Life Global Funding, 3 Mo. LIBOR + 0.28% (a) (b)................................................ 0.50% 01/28/21 2,001,233 20,000,000 New York Life Global Funding, 3 Mo. LIBOR + 0.28% (a) (b)................................................ 0.49% 01/21/22 20,053,584 10,550,000 New York Life Global Funding, 3 Mo. LIBOR + 0.44% (a) (b)................................................ 0.66% 07/12/22 10,606,260 25,000,000 New York Life Global Funding, 3 Mo. LIBOR + 0.28% (a) (b)................................................ 0.50% 01/10/23 24,994,829 1,750,000 Principal Life Global Funding II (b)............................ 2.63% 11/19/20 1,752,949 14,300,000 Protective Life Global Funding, 3 Mo. LIBOR + 0.52% (a) (b)................................................ 0.75% 06/28/21 14,349,864 ---------------- 179,742,579 ---------------- INTERNET -- 0.1% 6,633,000 TD Ameritrade Holding Corp., 3 Mo. LIBOR + 0.43% (a).................................................... 0.64% 11/01/21 6,657,005 ---------------- LODGING -- 0.3% 1,850,000 Marriott International, Inc., 3 Mo. LIBOR + 0.65% (a)........... 0.90% 03/08/21 1,845,733 13,405,000 Marriott International, Inc., Series Y, 3 Mo. LIBOR + 0.60% (a).................................................... 0.85% 12/01/20 13,397,329 ---------------- 15,243,062 ---------------- </TABLE> Page 12 See Notes to Financial Statements <PAGE> FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ ---------------- <S> <C> <C> <C> <C> CORPORATE BONDS AND NOTES (CONTINUED) MACHINERY-CONSTRUCTION & MINING -- 0.7% $ 3,750,000 Caterpillar Financial Services Corp., Medium-Term Note, 3 Mo. LIBOR + 0.30% (a)...................................... 0.55% 03/08/21 $ 3,754,147 6,000,000 Caterpillar Financial Services Corp., Medium-Term Note, 3 Mo. LIBOR + 0.23% (a)...................................... 0.48% 03/15/21 6,005,598 9,879,000 Caterpillar Financial Services Corp., Medium-Term Note, 3 Mo. LIBOR + 0.28% (a)...................................... 0.53% 09/07/21 9,900,324 3,000,000 Caterpillar Financial Services Corp., Medium-Term Note.......... 0.95% 05/13/22 3,027,831 15,000,000 Caterpillar Financial Services Corp., Medium-Term Note, Series I, 3 Mo. LIBOR + 0.39% (a)............................ 0.67% 05/17/21 15,031,698 ---------------- 37,719,598 ---------------- MACHINERY-DIVERSIFIED -- 0.5% 15,000,000 John Deere Capital Corp., Medium-Term Note, 3 Mo. LIBOR + 0.49% (a)............................................ 0.74% 06/13/22 15,106,153 10,000,000 Otis Worldwide Corp., 3 Mo. LIBOR + 0.45% (a)................... 0.68% 04/05/23 10,003,142 ---------------- 25,109,295 ---------------- MEDIA -- 0.8% 22,810,000 NBCUniversal Enterprise, Inc., 3 Mo. LIBOR + 0.40% (a) (b)................................................ 0.63% 04/01/21 22,846,517 1,800,000 Time Warner Cable LLC........................................... 4.13% 02/15/21 1,803,739 4,235,000 TWDC Enterprises 18 Corp........................................ 2.30% 02/12/21 4,258,864 5,000,000 Walt Disney (The) Co., 3 Mo. LIBOR + 0.25% (a).................. 0.50% 09/01/21 5,009,537 5,000,000 Walt Disney (The) Co., 3 Mo. LIBOR + 0.39% (a).................. 0.64% 09/01/22 5,024,550 ---------------- 38,943,207 ---------------- MINING -- 0.2% 9,297,000 Newmont Corp.................................................... 3.63% 06/09/21 9,426,470 ---------------- MISCELLANEOUS MANUFACTURING -- 0.1% 1,000,000 General Electric Co., Medium-Term Note.......................... 4.65% 10/17/21 1,040,348 1,950,000 General Electric Co............................................. 2.70% 10/09/22 2,023,502 3,070,000 General Electric Co., Global Medium-Term Note................... 3.15% 09/07/22 3,203,954 ---------------- 6,267,804 ---------------- OIL & GAS -- 2.0% 9,169,000 BP Capital Markets America, Inc., 3 Mo. LIBOR + 0.65% (a).................................................... 0.88% 09/19/22 9,182,483 3,500,000 Chevron Corp., 3 Mo. LIBOR + 0.95% (a).......................... 1.23% 05/16/21 3,516,727 2,235,000 Chevron Corp., 3 Mo. LIBOR + 0.48% (a).......................... 0.73% 03/03/22 2,247,100 12,796,000 Chevron Corp.................................................... 2.41% 03/03/22 13,114,874 2,857,000 Chevron Corp.................................................... 1.14% 05/11/23 2,908,769 16,153,000 ConocoPhillips Co., 3 Mo. LIBOR + 0.90% (a)..................... 1.18% 05/15/22 16,252,114 2,540,000 EOG Resources, Inc.............................................. 4.10% 02/01/21 2,563,052 10,000,000 Exxon Mobil Corp., 3 Mo. LIBOR + 0.33% (a)...................... 0.61% 08/16/22 10,045,096 10,568,000 Marathon Petroleum Corp......................................... 3.40% 12/15/20 10,577,414 20,005,000 Marathon Petroleum Corp......................................... 5.13% 03/01/21 20,312,308 7,419,000 Phillips 66, 3 Mo. LIBOR + 0.60% (a)............................ 0.83% 02/26/21 7,420,096 3,289,000 Pioneer Natural Resources Co.................................... 3.45% 01/15/21 3,299,491 ---------------- 101,439,524 ---------------- PHARMACEUTICALS -- 3.4% 2,460,000 AbbVie, Inc..................................................... 2.30% 05/14/21 2,481,354 5,000,000 AbbVie, Inc., 3 Mo. LIBOR + 0.35% (a) (b)....................... 0.60% 05/21/21 5,005,149 </TABLE> See Notes to Financial Statements Page 13 <PAGE>FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ ---------------- <S> <C> <C> <C> <C> CORPORATE BONDS AND NOTES (CONTINUED) PHARMACEUTICALS (CONTINUED) $ 5,000,000 AbbVie, Inc., 3 Mo. LIBOR + 0.46% (a) (b)....................... 0.73% 11/19/21 $ 5,012,305 18,715,000 AbbVie, Inc. (b)................................................ 2.15% 11/19/21 19,054,379 12,000,000 AbbVie, Inc., 3 Mo. LIBOR + 0.65% (a) (b)....................... 0.90% 11/21/22 12,057,968 5,000,000 Bayer US Finance II LLC, 3 Mo. LIBOR + 0.63% (a) (b)................................................ 0.86% 06/25/21 5,011,384 21,157,000 Bayer US Finance II LLC (b)..................................... 3.50% 06/25/21 21,522,673 17,761,000 Bristol-Myers Squibb Co., 3 Mo. LIBOR + 0.20% (a)............... 0.48% 11/16/20 17,762,828 6,255,000 Bristol-Myers Squibb Co......................................... 2.55% 05/14/21 6,331,853 6,000,000 Bristol-Myers Squibb Co., 3 Mo. LIBOR + 0.38% (a)............... 0.66% 05/16/22 6,023,972 5,600,000 Cigna Corp...................................................... 3.40% 09/17/21 5,749,890 1,000,000 Cigna Corp...................................................... 3.90% 02/15/22 1,043,331 11,000,000 Cigna Corp., Series WI, 3 Mo. LIBOR + 0.65% (a)................. 0.90% 09/17/21 11,002,200 6,000,000 CVS Health Corp., 3 Mo. LIBOR + 0.72% (a)....................... 0.96% 03/09/21 6,012,177 25,924,000 CVS Health Corp................................................. 3.35% 03/09/21 26,194,270 6,631,000 CVS Health Corp................................................. 2.13% 06/01/21 6,688,777 4,148,000 CVS Health Corp................................................. 3.50% 07/20/22 4,343,091 2,500,000 Express Scripts Holding Co., 3 Mo. LIBOR + 0.75% (a)............ 1.01% 11/30/20 2,500,553 1,573,000 Express Scripts Holding Co...................................... 2.60% 11/30/20 1,575,680 6,961,000 Upjohn, Inc. (b)................................................ 1.13% 06/22/22 7,026,413 4,439,000 Zoetis, Inc..................................................... 3.25% 08/20/21 4,543,007 ---------------- 176,943,254 ---------------- PIPELINES -- 1.0% 25,577,000 Enbridge Energy Partners, L.P................................... 4.20% 09/15/21 26,166,892 12,098,000 Enterprise Products Operating LLC............................... 2.80% 02/15/21 12,188,267 6,442,000 Enterprise Products Operating LLC............................... 3.50% 02/01/22 6,687,139 4,876,000 Southern Natural Gas Co. LLC / Southern Natural Issuing Corp......................................................... 4.40% 06/15/21 4,941,907 ---------------- 49,984,205 ---------------- REAL ESTATE INVESTMENT TRUSTS -- 0.1% 5,483,000 Boston Properties, L.P.......................................... 4.13% 05/15/21 5,541,407 ---------------- RETAIL -- 0.4% 3,000,000 Home Depot (The), Inc........................................... 4.40% 04/01/21 3,020,479 7,916,000 Lowe's Cos., Inc................................................ 3.75% 04/15/21 7,971,931 10,000,000 McDonald's Corp., Medium-Term Note, 3 Mo. LIBOR + 0.43% (a).................................................... 0.65% 10/28/21 10,035,611 856,000 Starbucks Corp.................................................. 2.10% 02/04/21 858,418 ---------------- 21,886,439 ---------------- SEMICONDUCTORS -- 0.5% 10,000,000 Intel Corp., 3 Mo. LIBOR + 0.35% (a)............................ 0.60% 05/11/22 10,047,599 8,572,000 Maxim Integrated Products, Inc.................................. 3.38% 03/15/23 9,057,270 5,000,000 Xilinx, Inc..................................................... 3.00% 03/15/21 5,039,327 ---------------- 24,144,196 ---------------- SOFTWARE -- 1.1% 5,177,000 Fidelity National Information Services, Inc..................... 3.50% 04/15/23 5,509,757 8,387,000 Fiserv, Inc..................................................... 4.75% 06/15/21 8,543,166 23,195,000 Infor, Inc. (b)................................................. 1.45% 07/15/23 23,543,563 5,500,000 Oracle Corp..................................................... 2.80% 07/08/21 5,596,403 8,474,000 Oracle Corp..................................................... 1.90% 09/15/21 8,581,734 6,000,000 Oracle Corp..................................................... 2.50% 10/15/22 6,253,105 ---------------- 58,027,728 ---------------- </TABLE> Page 14 See Notes to Financial Statements <PAGE> FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ ---------------- <S> <C> <C> <C> <C> CORPORATE BONDS AND NOTES (CONTINUED) TELECOMMUNICATIONS -- 1.5% $ 7,940,000 AT&T, Inc., 3 Mo. LIBOR + 0.75% (a)............................. 1.00% 06/01/21 $ 7,970,329 21,600,000 AT&T, Inc., 3 Mo. LIBOR + 0.95% (a)............................. 1.19% 07/15/21 21,735,118 12,118,000 AT&T, Inc....................................................... 3.00% 06/30/22 12,580,275 9,049,000 Cisco Systems, Inc.............................................. 2.90% 03/04/21 9,135,072 25,385,000 Verizon Communications, Inc., 3 Mo. LIBOR + 1.00% (a).................................................... 1.24% 03/16/22 25,718,971 ---------------- 77,139,765 ---------------- TRANSPORTATION -- 0.6% 6,435,000 Ryder System, Inc., Medium-Term Note............................ 3.50% 06/01/21 6,550,538 350,000 Ryder System, Inc., Medium-Term Note............................ 2.25% 09/01/21 354,714 7,004,000 Union Pacific Corp.............................................. 4.00% 02/01/21 7,004,000 18,802,000 Union Pacific Corp.............................................. 3.20% 06/08/21 19,117,997 ---------------- 33,027,249 ---------------- TRUCKING & LEASING -- 0.6% 7,365,000 Aviation Capital Group LLC, 3 Mo. LIBOR + 0.95% (a) (b)................................................ 1.20% 06/01/21 7,258,990 3,802,000 GATX Corp....................................................... 4.85% 06/01/21 3,892,623 8,300,000 GATX Corp., 3 Mo. LIBOR + 0.72% (a)............................. 0.97% 11/05/21 8,294,816 9,163,000 Penske Truck Leasing Co., L.P. / PTL Finance Corp. (b).......... 3.65% 07/29/21 9,351,136 ---------------- 28,797,565 ---------------- TOTAL CORPORATE BONDS AND NOTES.............................................................. 2,082,032,560 (Cost $2,073,159,172) ---------------- </TABLE> <TABLE> <CAPTION> ANNUALIZED PRINCIPAL YIELD ON DATE STATED VALUE DESCRIPTION OF PURCHASE MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ ---------------- <S> <C> <C> <C> <C> COMMERCIAL PAPER -- 24.7% AGRICULTURE -- 0.9% 10,000,000 BAT International Finance PLC................................... 0.36% 11/06/20 9,999,514 25,000,000 BAT International Finance PLC................................... 0.31% 11/23/20 24,995,416 10,100,000 BAT International Finance PLC................................... 0.27% 12/02/20 10,097,652 ---------------- 45,092,582 ---------------- AUTO MANUFACTURERS -- 2.3% 5,000,000 American Honda Finance Corp..................................... 0.26% 01/21/21 4,997,075 15,000,000 American Honda Finance Corp..................................... 0.27% 01/27/21 14,990,212 7,000,000 General Motors Financial Co., Inc............................... 0.46% 11/02/20 6,999,912 10,000,000 General Motors Financial Co., Inc............................... 0.50% 11/13/20 9,998,333 5,000,000 General Motors Financial Co., Inc............................... 0.71% 01/13/21 4,992,902 10,000,000 General Motors Financial Co., Inc............................... 0.75% 01/20/21 9,983,333 15,000,000 Harley-Davidson Financial Services, Inc......................... 0.27% 11/10/20 14,998,987 15,000,000 Harley-Davidson Financial Services, Inc......................... 0.31% 11/17/20 14,998,000 14,000,000 Harley-Davidson Financial Services, Inc......................... 0.33% 12/02/20 13,996,142 10,000,000 Harley-Davidson Financial Services, Inc......................... 0.51% 01/11/21 9,990,137 15,200,000 Hyundai Capital America......................................... 0.27% 01/13/21 15,191,678 ---------------- 121,136,711 ---------------- BANKS -- 0.8% 15,000,000 National Bank of Canada......................................... 0.13% 11/12/20 14,999,404 25,000,000 National Securities Clearing Corp............................... 0.15% 12/03/20 24,996,667 ---------------- 39,996,071 ---------------- </TABLE> See Notes to Financial Statements Page 15 <PAGE>FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> ANNUALIZED PRINCIPAL YIELD ON DATE STATED VALUE DESCRIPTION OF PURCHASE MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ ---------------- <S> <C> <C> <C> <C> COMMERCIAL PAPER (CONTINUED) CHEMICALS -- 3.1% $ 20,000,000 Albemarle Corp.................................................. 0.32% 11/12/20 $ 19,998,105 20,000,000 Dow Chemical (The) Co........................................... 0.19% 11/02/20 19,999,894 10,000,000 Dow Chemical (The) Co........................................... 0.18% 11/04/20 9,999,850 20,000,000 Dow Chemical (The) Co........................................... 0.21% 11/12/20 19,998,716 11,700,000 Eastman Chemical Co............................................. 0.27% 11/06/20 11,699,561 15,000,000 Eastman Chemical Co............................................. 0.31% 11/09/20 14,999,000 5,000,000 Eastman Chemical Co............................................. 0.31% 11/20/20 4,999,208 15,000,000 EI du Pont de Nemours and Co.................................... 0.17% 12/04/20 14,997,663 26,000,000 Nutrien Ltd..................................................... 0.18% 11/20/20 25,997,530 20,000,000 Nutrien Ltd..................................................... 0.20% 12/16/20 19,995,000 ---------------- 162,684,527 ---------------- DIVERSIFIED FINANCIAL SERVICES -- 1.9% 15,000,000 CNPC Finance HK Ltd............................................. 0.45% 11/04/20 14,999,450 10,000,000 CNPC Finance HK Ltd............................................. 0.45% 11/16/20 9,998,166 10,000,000 CNPC Finance HK Ltd............................................. 0.46% 11/18/20 9,997,875 15,000,000 CNPC Finance HK Ltd............................................. 0.45% 11/30/20 14,994,683 15,000,000 CNPC Finance HK Ltd............................................. 0.45% 12/08/20 14,993,063 10,000,000 CNPC Finance HK Ltd............................................. 0.45% 12/10/20 9,995,233 15,000,000 Intercontinental Exchange, Inc.................................. 0.31% 11/17/20 14,997,999 10,000,000 Intercontinental Exchange, Inc.................................. 0.38% 01/14/21 9,992,393 ---------------- 99,968,862 ---------------- ELECTRIC -- 2.0% 9,000,000 Duke Energy Corp................................................ 0.12% 11/04/20 8,999,910 10,500,000 Duke Energy Corp................................................ 0.15% 12/04/20 10,498,556 20,000,000 Enel Finance America LLC........................................ 0.33% 01/19/21 19,985,955 15,000,000 Enel Finance America LLC........................................ 0.42% 02/18/21 14,981,374 10,000,000 Entergy Corp.................................................... 0.21% 12/14/20 9,997,492 10,000,000 Entergy Corp.................................................... 0.26% 01/21/21 9,994,150 10,000,000 Entergy Corp.................................................... 0.25% 01/28/21 9,993,888 18,500,000 Ontario Power Generation, Inc................................... 0.18% 11/03/20 18,499,815 ---------------- 102,951,140 ---------------- ELECTRONICS -- 1.6% 10,000,000 Jabil, Inc...................................................... 0.71% 11/04/20 9,999,416 20,000,000 Jabil, Inc...................................................... 0.71% 11/05/20 19,998,444 15,000,000 Jabil, Inc...................................................... 0.71% 11/06/20 14,998,541 20,000,000 Jabil, Inc...................................................... 0.71% 11/09/20 19,996,887 10,000,000 Jabil, Inc...................................................... 0.70% 11/13/20 9,997,667 10,000,000 Jabil, Inc...................................................... 0.70% 11/19/20 9,996,550 ---------------- 84,987,505 ---------------- FOOD -- 0.7% 25,000,000 Conagra Brands, Inc............................................. 0.30% 11/17/20 24,996,666 12,100,000 Smithfield Foods, Inc........................................... 0.20% 11/02/20 12,099,933 ---------------- 37,096,599 ---------------- HEALTH CARE SERVICES -- 0.4% 20,000,000 Humana, Inc..................................................... 0.26% 11/13/20 19,998,266 ---------------- MINING -- 1.2% 20,000,000 Glencore Funding LLC............................................ 0.41% 11/18/20 19,996,221 10,000,000 Glencore Funding LLC............................................ 0.42% 12/11/20 9,995,333 10,000,000 Glencore Funding LLC............................................ 0.54% 01/15/21 9,988,957 20,000,000 Glencore Funding LLC............................................ 0.54% 01/21/21 19,976,146 ---------------- 59,956,657 ---------------- </TABLE> Page 16 See Notes to Financial Statements <PAGE> FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> ANNUALIZED PRINCIPAL YIELD ON DATE STATED VALUE DESCRIPTION OF PURCHASE MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ ---------------- <S> <C> <C> <C> <C> COMMERCIAL PAPER (CONTINUED) OIL & GAS -- 5.9% $ 10,000,000 Canadian Natural Resources Ltd.................................. 0.23% 11/05/20 $ 9,999,744 7,000,000 Canadian Natural Resources Ltd.................................. 0.20% 11/09/20 6,999,689 10,000,000 Canadian Natural Resources Ltd.................................. 0.19% 11/10/20 9,999,525 11,800,000 Canadian Natural Resources Ltd.................................. 0.19% 11/19/20 11,798,879 25,000,000 Canadian Natural Resources Ltd.................................. 0.22% 11/20/20 24,997,097 17,000,000 Eni Finance USA, Inc............................................ 0.37% - 0.38% 01/14/21 16,987,212 20,000,000 Eni Finance USA, Inc............................................ 0.38% 01/20/21 19,983,552 10,000,000 Eni Finance USA, Inc............................................ 0.38% 01/26/21 9,991,160 15,000,000 Exxon Mobil Corp................................................ 0.40% 02/16/21 14,982,584 10,000,000 Motiva Enterprises LLC.......................................... 0.21% 11/10/20 9,999,475 20,000,000 Motiva Enterprises LLC.......................................... 0.20% 11/18/20 19,998,111 20,000,000 Motiva Enterprises LLC.......................................... 0.28% 12/09/20 19,994,089 15,000,000 Shell International Finance B.V................................. 2.12% 02/03/21 14,918,867 24,250,000 Sinopec Century Bright Capital Investment America LLC........... 0.31% - 0.36% 11/16/20 24,246,671 25,000,000 Sinopec Century Bright Capital Investment America LLC........... 0.41% 12/16/20 24,987,498 20,000,000 Sinopec Century Bright Capital Investment Ltd................... 0.39% 11/19/20 19,996,199 8,000,000 Suncor Energy, Inc.............................................. 0.22% 11/09/20 7,999,609 19,000,000 Suncor Energy, Inc.............................................. 0.25% 01/12/21 18,990,499 10,000,000 Suncor Energy, Inc.............................................. 0.26% 01/20/21 9,994,222 9,500,000 Suncor Energy, Inc.............................................. 0.26% 01/27/21 9,494,031 ---------------- 306,358,713 ---------------- OIL & GAS SERVICES -- 0.4% 22,000,000 Schlumberger Holdings Corp...................................... 0.41% 02/11/21 21,975,044 ---------------- PHARMACEUTICALS -- 1.0% 25,000,000 Cigna Corp...................................................... 0.23% - 0.26% 11/10/20 24,998,487 14,500,000 Cigna Corp...................................................... 0.24% 12/01/20 14,497,100 10,000,000 Cigna Corp...................................................... 0.24% 12/14/20 9,997,133 ---------------- 49,492,720 ---------------- PIPELINES -- 1.8% 45,000,000 ETP Legacy, L.P................................................. 0.61% - 0.69% 11/02/20 44,999,228 31,000,000 TransCanada PipeLines Ltd....................................... 0.21% - 0.25% 12/15/20 30,991,554 15,000,000 TransCanada PipeLines Ltd....................................... 0.30% 01/15/21 14,990,937 ---------------- 90,981,719 ---------------- REAL ESTATE INVESTMENT TRUSTS -- 0.7% 14,135,000 Alexandria Real Estate Equities, Inc............................ 0.20% 11/04/20 14,134,764 20,000,000 Alexandria Real Estate Equities, Inc............................ 0.23% 11/18/20 19,997,828 ---------------- 34,132,592 ---------------- TOTAL COMMERCIAL PAPER....................................................................... 1,276,809,708 (Cost $1,276,809,708) ---------------- </TABLE> <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ ---------------- <S> <C> <C> <C> <C> FOREIGN CORPORATE BONDS AND NOTES -- 16.5% AEROSPACE/DEFENSE -- 0.1% 4,822,000 BAE Systems PLC (b)............................................. 4.75% 10/11/21 5,013,092 ---------------- AUTO MANUFACTURERS -- 0.1% 5,500,000 BMW Finance N.V., 3 Mo. LIBOR + 0.79% (a) (b)................... 1.05% 08/12/22 5,536,783 ---------------- </TABLE> See Notes to Financial Statements Page 17 <PAGE>FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ ---------------- <S> <C> <C> <C> <C> FOREIGN CORPORATE BONDS AND NOTES (CONTINUED) BANKS -- 13.3% $ 16,095,000 ABN AMRO Bank N.V., 3 Mo. LIBOR + 0.41% (a) (b)................. 0.63% 01/19/21 $ 16,112,209 7,158,000 ABN AMRO Bank N.V., 3 Mo. LIBOR + 0.57% (a) (b)................. 0.82% 08/27/21 7,191,627 5,000,000 ANZ New Zealand Int'l Ltd./London (b)........................... 2.75% 01/22/21 5,027,246 2,500,000 ANZ New Zealand Int'l Ltd./London, 3 Mo. LIBOR + 1.00% (a) (b)................................................ 1.22% 01/25/22 2,526,596 12,090,000 Australia & New Zealand Banking Group Ltd., 3 Mo. LIBOR + 0.46% (a) (b)........................................ 0.74% 05/17/21 12,120,106 3,000,000 Australia & New Zealand Banking Group Ltd., 3 Mo. LIBOR + 0.99% (a) (b)........................................ 1.24% 06/01/21 3,015,864 4,000,000 Australia & New Zealand Banking Group Ltd., 3 Mo. LIBOR + 0.49% (a) (b)........................................ 0.74% 11/21/22 4,025,447 6,130,000 Australia & New Zealand Banking Group Ltd., Medium- Term Note.................................................... 2.05% 11/21/22 6,340,226 2,000,000 Bank of Montreal, Medium-Term Note, 3 Mo. LIBOR + 0.79% (a).................................................... 1.04% 08/27/21 2,013,090 13,026,000 Bank of Montreal, Medium-Term Note, Series D, 3 Mo. LIBOR + 0.46% (a)............................................ 0.68% 04/13/21 13,053,384 17,867,000 Bank of Nova Scotia (The), 3 Mo. LIBOR + 0.44% (a).............. 0.66% 04/20/21 17,900,562 3,000,000 Bank of Nova Scotia (The)....................................... 1.63% 05/01/23 3,082,017 1,770,000 Barclays Bank PLC, 3 Mo. LIBOR + 0.46% (a)...................... 0.68% 01/11/21 1,770,787 5,860,000 Barclays Bank PLC............................................... 2.65% 01/11/21 5,874,683 3,181,000 Barclays Bank PLC............................................... 1.70% 05/12/22 3,241,404 6,775,000 BNP Paribas S.A................................................. 5.00% 01/15/21 6,839,979 15,000,000 BNP Paribas S.A., 3 Mo. LIBOR + 0.39% (a) (b)................... 0.63% 08/07/21 15,043,744 25,000,000 BPCE S.A., Medium-Term Note, 3 Mo. LIBOR + 0.88% (a).................................................... 1.14% 05/31/22 25,266,022 17,625,000 Canadian Imperial Bank of Commerce, SOFR + 0.80% (a).................................................... 0.89% 03/17/23 17,746,771 7,000,000 Commonwealth Bank of Australia, 3 Mo. LIBOR + 0.70% (a) (b)................................................ 0.95% 03/10/22 7,051,717 5,200,000 Cooperatieve Rabobank UA/NY, 3 Mo. LIBOR + 0.43% (a).................................................... 0.64% 04/26/21 5,209,860 2,100,000 Cooperatieve Rabobank UA/NY..................................... 3.13% 04/26/21 2,129,224 9,816,000 Cooperatieve Rabobank UA/NY, 3 Mo. LIBOR + 0.83% (a).................................................... 1.05% 01/10/22 9,901,989 20,000,000 Credit Agricole Corporate & Investment Bank S.A., Medium-Term Note, 3 Mo. LIBOR + 0.40% (a) (b)................ 0.62% 05/03/21 20,036,482 2,500,000 Credit Suisse AG/New York NY.................................... 2.10% 11/12/21 2,544,373 7,707,000 Credit Suisse AG/New York NY.................................... 1.00% 05/05/23 7,805,104 17,000,000 Credit Suisse Group Funding Guernsey Ltd........................ 3.13% 12/10/20 17,047,363 5,500,000 Credit Suisse Group Funding Guernsey Ltd., 3 Mo. LIBOR + 2.29% (a).................................................. 2.51% 04/16/21 5,554,880 1,125,000 Credit Suisse Group Funding Guernsey Ltd........................ 3.45% 04/16/21 1,140,935 500,000 Danske Bank A/S (b) (c)......................................... 3.00% 09/20/22 508,841 6,000,000 Danske Bank A/S (b)............................................. 1.23% 06/22/24 6,063,842 11,915,000 Danske Bank A/S, Medium-Term Note (b)........................... 2.80% 03/10/21 12,018,990 2,500,000 Deutsche Bank AG/New York NY.................................... 3.13% 01/13/21 2,510,694 12,625,000 Deutsche Bank AG/New York NY.................................... 3.15% 01/22/21 12,687,184 6,000,000 DNB Bank ASA, 3 Mo. LIBOR + 0.62% (a) (b)....................... 0.86% 12/02/22 6,048,669 2,000,000 HSBC Holdings PLC, 3 Mo. LIBOR + 2.24% (a)...................... 2.49% 03/08/21 2,015,091 17,000,000 HSBC Holdings PLC............................................... 3.40% 03/08/21 17,177,025 3,000,000 HSBC Holdings PLC............................................... 5.10% 04/05/21 3,059,351 </TABLE> Page 18 See Notes to Financial Statements <PAGE> FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ ---------------- <S> <C> <C> <C> <C> FOREIGN CORPORATE BONDS AND NOTES (CONTINUED) BANKS (CONTINUED) $ 2,980,000 ING Groep N.V., 3 Mo. LIBOR + 1.15% (a)......................... 1.37% 03/29/22 $ 3,011,072 9,135,000 ING Groep N.V................................................... 3.15% 03/29/22 9,491,938 6,000,000 ING Groep N.V., 3 Mo. LIBOR + 1.00% (a)......................... 1.23% 10/02/23 6,089,603 3,410,000 Lloyds Banking Group PLC, 3 Mo. LIBOR + 0.80% (a)............... 1.03% 06/21/21 3,424,641 14,217,000 Lloyds Banking Group PLC........................................ 3.10% 07/06/21 14,484,415 10,000,000 Lloyds Banking Group PLC (c).................................... 2.86% 03/17/23 10,287,939 8,712,000 Macquarie Bank Ltd. (b)......................................... 6.63% 04/07/21 8,923,119 19,221,000 Mitsubishi UFJ Financial Group, Inc., 3 Mo. LIBOR + 0.65% (a).................................................... 0.86% 07/26/21 19,302,766 1,500,000 Mitsubishi UFJ Financial Group, Inc., 3 Mo. LIBOR + 0.92% (a).................................................... 1.18% 02/22/22 1,514,230 13,685,000 Mitsubishi UFJ Financial Group, Inc., 3 Mo. LIBOR + 0.79% (a).................................................... 1.00% 07/25/22 13,804,560 10,991,000 Mitsubishi UFJ Financial Group, Inc., 3 Mo. LIBOR + 0.74% (a).................................................... 0.98% 03/02/23 11,057,394 6,000,000 Mitsubishi UFJ Financial Group, Inc............................. 3.76% 07/26/23 6,501,941 3,635,000 Mitsubishi UFJ Financial Group, Inc. (c)........................ 0.85% 09/15/24 3,641,645 500,000 Mizuho Financial Group, Inc., 3 Mo. LIBOR + 1.48% (a) (b)................................................ 1.70% 04/12/21 503,284 5,000,000 Mizuho Financial Group, Inc. (b)................................ 2.63% 04/12/21 5,051,523 9,200,000 Mizuho Financial Group, Inc., 3 Mo. LIBOR + 1.14% (a).................................................... 1.39% 09/13/21 9,282,641 1,000,000 National Australia Bank Ltd..................................... 3.38% 09/20/21 1,027,450 5,000,000 National Australia Bank Ltd., 3 Mo. LIBOR + 0.41% (a) (b)................................................ 0.66% 12/13/22 5,021,294 12,820,000 National Bank of Canada (c)..................................... 0.90% 08/15/23 12,901,085 2,175,000 NatWest Markets PLC, 3 Mo. LIBOR + 1.40% (a) (b)................ 1.62% 09/29/22 2,194,595 13,980,000 Royal Bank of Canada, Global Medium-Term Note, 3 Mo. LIBOR + 0.39% (a)............................................ 0.60% 04/30/21 14,005,670 9,000,000 Royal Bank of Canada, Global Medium-Term Note, 3 Mo. LIBOR + 0.47% (a)............................................ 0.68% 04/29/22 9,044,797 1,875,000 Royal Bank of Canada, Global Medium-Term Note, 3 Mo. LIBOR + 0.36% (a)............................................ 0.58% 01/17/23 1,881,353 1,042,000 Royal Bank of Canada, Medium-Term Note, 3 Mo. LIBOR + 0.40% (a).................................................. 0.61% 01/25/21 1,042,979 7,087,000 Santander UK Group Holdings PLC................................. 3.13% 01/08/21 7,121,219 3,900,000 Santander UK PLC................................................ 2.13% 11/03/20 3,900,000 3,850,000 Santander UK PLC................................................ 3.40% 06/01/21 3,917,947 4,800,000 Skandinaviska Enskilda Banken AB (b)............................ 2.63% 11/17/20 4,804,538 1,000,000 Skandinaviska Enskilda Banken AB................................ 2.63% 03/15/21 1,008,942 9,000,000 Skandinaviska Enskilda Banken AB, 3 Mo. LIBOR + 0.43% (a) (b)................................................ 0.71% 05/17/21 9,020,638 4,000,000 Skandinaviska Enskilda Banken AB, 3 Mo. LIBOR + 0.65% (a) (b)................................................ 0.89% 12/12/22 4,037,889 1,000,000 Societe Generale S.A., 3 Mo. LIBOR + 1.33% (a) (b).............. 1.56% 04/08/21 1,005,756 8,604,000 Standard Chartered PLC, 3 Mo. LIBOR + 1.20% (a) (b)............. 1.45% 09/10/22 8,633,173 9,975,000 Standard Chartered PLC, 3 Mo. LIBOR + 1.15% (a) (b)............. 1.37% 01/20/23 10,007,626 2,932,000 Sumitomo Mitsui Financial Group, Inc., 3 Mo. LIBOR + 1.68% (a).................................................... 1.92% 03/09/21 2,947,995 9,500,000 Sumitomo Mitsui Financial Group, Inc............................ 2.93% 03/09/21 9,588,022 7,328,000 Sumitomo Mitsui Financial Group, Inc., 3 Mo. LIBOR + 1.11% (a).................................................... 1.34% 07/14/21 7,381,535 </TABLE> See Notes to Financial Statements Page 19 <PAGE>FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ ---------------- <S> <C> <C> <C> <C> FOREIGN CORPORATE BONDS AND NOTES (CONTINUED) BANKS (CONTINUED) $ 4,674,000 Sumitomo Mitsui Financial Group, Inc., 3 Mo. LIBOR + 1.14% (a).................................................... 1.36% 10/19/21 $ 4,719,814 11,758,000 Sumitomo Mitsui Financial Group, Inc............................ 2.44% 10/19/21 11,999,988 4,139,000 Sumitomo Mitsui Financial Group, Inc., 3 Mo. LIBOR + 0.97% (a).................................................... 1.19% 01/11/22 4,175,811 5,000,000 Svenska Handelsbanken AB (b).................................... 0.63% 06/30/23 5,018,642 4,500,000 Svenska Handelsbanken AB, Medium-Term Note...................... 2.45% 03/30/21 4,540,569 3,500,000 Svenska Handelsbanken AB, Medium-Term Note, 3 Mo. LIBOR + 0.47% (a)............................................ 0.73% 05/24/21 3,509,379 25,000,000 Toronto-Dominion Bank (The), Medium-Term Note, 3 Mo. LIBOR + 0.30% (a)............................................ 0.51% 07/30/21 25,046,628 6,800,000 UBS AG/London, 3 Mo. LIBOR + 0.48% (a) (b)...................... 0.73% 12/01/20 6,800,629 11,482,000 UBS AG/London (b)............................................... 1.75% 04/21/22 11,690,421 15,681,000 UBS Group AG, 3 Mo. LIBOR + 1.53% (a) (b)....................... 1.74% 02/01/22 15,944,595 5,800,000 UBS Group AG (b) (c)............................................ 1.01% 07/30/24 5,825,560 6,000,000 UBS Group Funding Switzerland AG, 3 Mo. LIBOR + 1.78% (a) (b)................................................ 2.00% 04/14/21 6,045,012 8,261,000 Westpac Banking Corp., 3 Mo. LIBOR + 0.34% (a).................. 0.55% 01/25/21 8,266,607 8,275,000 Westpac Banking Corp............................................ 2.65% 01/25/21 8,320,703 5,000,000 Westpac Banking Corp., 3 Mo. LIBOR + 0.71% (a).................. 0.94% 06/28/22 5,046,710 7,000,000 Westpac Banking Corp., 3 Mo. LIBOR + 0.39% (a).................. 0.61% 01/13/23 7,037,284 ---------------- 689,558,944 ---------------- BEVERAGES -- 0.1% 3,400,000 Heineken N.V. (b)............................................... 2.75% 04/01/23 3,560,360 3,561,000 Pernod Ricard S.A. (b).......................................... 5.75% 04/07/21 3,640,993 ---------------- 7,201,353 ---------------- CHEMICALS -- 0.1% 5,575,000 Nutrien Ltd..................................................... 1.90% 05/13/23 5,755,489 ---------------- DIVERSIFIED FINANCIAL SERVICES -- 0.1% 5,000,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust........................................................ 4.50% 05/15/21 5,089,261 ---------------- HEALTH CARE PRODUCTS -- 0.3% 14,880,000 DH Europe Finance II Sarl....................................... 2.05% 11/15/22 15,356,947 ---------------- MISCELLANEOUS MANUFACTURING -- 0.2% 9,200,000 Siemens Financieringsmaatschappij N.V., 3 Mo. LIBOR + 0.61% (a) (b)................................................ 0.85% 03/16/22 9,257,137 ---------------- OIL & GAS -- 0.7% 10,000,000 BP Capital Markets PLC, 3 Mo. LIBOR + 0.25% (a)................. 0.51% 11/24/20 10,002,158 2,000,000 BP Capital Markets PLC, 3 Mo. LIBOR + 0.87% (a)................. 1.11% 09/16/21 2,012,272 12,466,000 BP Capital Markets PLC.......................................... 2.50% 11/06/22 12,976,840 2,730,000 Canadian Natural Resources Ltd.................................. 3.45% 11/15/21 2,788,424 6,909,000 Suncor Energy, Inc.............................................. 2.80% 05/15/23 7,224,308 ---------------- 35,004,002 ---------------- PHARMACEUTICALS -- 1.0% 13,475,000 AstraZeneca PLC................................................. 2.38% 11/16/20 13,485,989 19,937,000 Mylan N.V....................................................... 3.15% 06/15/21 20,226,842 13,406,000 Shire Acquisitions Investments Ireland DAC...................... 2.40% 09/23/21 13,624,294 2,647,000 Takeda Pharmaceutical Co. Ltd................................... 4.00% 11/26/21 2,738,690 ---------------- 50,075,815 ---------------- </TABLE> Page 20 See Notes to Financial Statements <PAGE> FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ ---------------- <S> <C> <C> <C> <C> FOREIGN CORPORATE BONDS AND NOTES (CONTINUED) SEMICONDUCTORS -- 0.2% $ 8,530,000 Broadcom Corp. / Broadcom Cayman Finance Ltd.................... 2.65% 01/15/23 $ 8,874,655 ---------------- TELECOMMUNICATIONS -- 0.3% 15,000,000 Telefonica Emisiones S.A........................................ 5.46% 02/16/21 15,212,944 ---------------- TOTAL FOREIGN CORPORATE BONDS AND NOTES...................................................... 851,936,422 (Cost $848,381,640) ---------------- ASSET-BACKED SECURITIES -- 12.0% American Credit Acceptance Receivables Trust 12,796,388 Series 2020-3, Class A (b)................................... 0.62% 10/13/23 12,803,195 25,000,000 Series 2020-4, Class A (b)................................... 0.53% 03/13/24 25,007,383 Ameriquest Mortgage Securities, Inc. 3,794 Series 2004-R9, Class M2, 1 Mo. LIBOR + 0.98% (a)............ 1.12% 10/25/34 3,799 Avis Budget Rental Car Funding AESOP LLC 4,146,667 Series 2015-2A, Class A (b).................................. 2.63% 12/20/21 4,153,651 15,815,000 Series 2016-1A, Class A (b).................................. 2.99% 06/20/22 15,953,755 8,060,000 Series 2016-2A, Class A (b).................................. 2.72% 11/20/22 8,168,568 BMW Vehicle Lease Trust 2,432,375 Series 2018-1, Class A3...................................... 3.26% 07/20/21 2,441,399 BMW Vehicle Owner Trust 552,307 Series 2018-A, Class A3...................................... 2.35% 04/25/22 554,570 California Republic Auto Receivables Trust 313,054 Series 2017-1, Class A4...................................... 2.28% 06/15/22 313,773 Canadian Pacer Auto Receivables Trust 2,413,391 Series 2018-1A, Class A3 (b)................................. 3.00% 11/19/21 2,420,996 3,287,241 Series 2019-1A, Class A2 (b)................................. 2.78% 03/21/22 3,299,402 Carmax Auto Owner Trust 327,008 Series 2017-3, Class A3...................................... 1.97% 04/15/22 328,013 15,000,000 Series 2020-3, Class A2A..................................... 0.49% 06/15/23 15,022,457 Carvana Auto Receivables Trust 2,023,104 Series 2019-4A, Class A2 (b)................................. 2.20% 07/15/22 2,029,703 Countrywide Asset-Backed Certificates 1,434,406 Series 2004-SD4, Class M1, 1 Mo. LIBOR + 0.75% (a) (b)................................................ 0.90% 12/25/34 1,436,011 Dell Equipment Finance Trust 887,159 Series 2019-2, Class A2 (b).................................. 1.95% 12/22/21 893,669 23,750,000 Series 2020-2, Class A2 (b).................................. 0.47% 10/24/22 23,800,070 DT Auto Owner Trust 14,866,898 Series 2020-3A, Class A (b).................................. 0.54% 04/15/24 14,879,348 Element Rail Leasing I LLC 669,736 Series 2014-1A, Class A1 (b)................................. 2.30% 04/19/44 671,551 Exeter Automobile Receivables Trust 16,500,000 Series 2020-3A, Class A2..................................... 0.46% 10/17/22 16,505,516 11,000,000 Series 2020-3A, Class A3..................................... 0.52% 10/16/23 11,007,174 Flagship Credit Auto Trust 32,000,000 Series 2020-4, Class A (b)................................... 0.53% 04/15/25 32,038,557 Ford Credit Auto Lease Trust 1,268,162 Series 2018-B, Class A3...................................... 3.19% 12/15/21 1,271,605 7,589,805 Series 2019-A, Class A3...................................... 2.90% 05/15/22 7,651,302 17,450,000 Series 2020-A, Class A3...................................... 1.85% 03/15/23 17,715,366 5,750,000 Series 2020-B, Class A2A..................................... 0.50% 12/15/22 5,757,751 Ford Credit Auto Owner Trust 285,610 Series 2019-A, Class A2A..................................... 2.78% 02/15/22 286,294 8,185,382 Series 2019-C, Class A2A..................................... 1.88% 07/15/22 8,232,562 </TABLE> See Notes to Financial Statements Page 21 <PAGE>FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ ---------------- <S> <C> <C> <C> <C> ASSET-BACKED SECURITIES (CONTINUED) Foursight Capital Automobile Receivables Trust $ 3,276,686 Series 2019-1, Class A2 (b).................................. 2.58% 03/15/23 $ 3,292,591 13,612,873 Series 2020-1, Class A2 (b).................................. 1.97% 09/15/23 13,737,928 GM Financial Automobile Leasing Trust 75,410 Series 2018-3, Class A3...................................... 3.18% 06/21/21 75,517 8,332,000 Series 2018-3, Class B....................................... 3.48% 07/20/22 8,385,643 5,061,315 Series 2019-1, Class A3...................................... 2.98% 12/20/21 5,095,445 639,000 Series 2019-1, Class B....................................... 3.37% 12/20/22 651,674 GSAA Home Equity Trust 764,278 Series 2005-MTR1, Class A4, 1 Mo. LIBOR + 0.37% (a)................................................. 0.52% 10/25/35 755,916 GTE Auto Receivables Trust 8,917,461 Series 2019-1, Class A2 (b).................................. 2.17% 12/15/22 8,976,855 Honda Auto Receivables Owner Trust 9,417,324 Series 2020-1, Class A2...................................... 1.63% 10/21/22 9,484,745 HPEFS Equipment Trust 11,000,000 Series 2020-1A, Class A2 (b)................................. 1.73% 02/20/30 11,093,225 Hyundai Auto Lease Securitization Trust 1,100,000 Series 2018-B, Class A4 (b).................................. 3.20% 06/15/22 1,104,537 15,250,000 Series 2020-B, Class A3 (b).................................. 0.51% 09/15/23 15,283,407 Mercedes-Benz Auto Lease Trust 10,771,974 Series 2019-B, Class A2...................................... 2.01% 12/15/21 10,805,919 15,000,000 Series 2019-B, Class A3...................................... 2.00% 10/17/22 15,218,856 Mill City Mortgage Loan Trust 2,468,767 Series 2016-1, Class A1 (b).................................. 2.50% 04/25/57 2,495,851 Nationstar Home Equity Loan Trust 1,604,768 Series 2006-B, Class AV4, 1 Mo. LIBOR + 0.28% (a)............ 0.43% 09/25/36 1,599,801 Nissan Auto Lease Trust 2,768,005 Series 2018-A, Class A3...................................... 3.25% 09/15/21 2,776,987 OSCAR US Funding Trust IX LLC 4,879,501 Series 2018-2A, Class A3 (b)................................. 3.39% 09/12/22 4,933,472 6,130,000 Series 2018-2A, Class A4 (b)................................. 3.63% 09/10/25 6,413,376 OSCAR US Funding Trust V........................................ 9,748,548 Series 2016-2A, Class A4 (b)................................. 2.99% 12/15/23 9,819,835 OSCAR US Funding Trust VI LLC 5,656,974 Series 2017-1A, Class A4 (b)................................. 3.30% 05/10/24 5,732,913 OSCAR US Funding Trust VII LLC 164,362 Series 2017-2A, Class A3 (b)................................. 2.45% 12/10/21 164,543 3,580,000 Series 2017-2A, Class A4 (b)................................. 2.76% 12/10/24 3,639,595 OSCAR US Funding Trust VIII LLC 8,015,749 Series 2018-1A, Class A3 (b)................................. 3.23% 05/10/22 8,069,608 3,050,000 Series 2018-1A, Class A4 (b)................................. 3.50% 05/12/25 3,159,281 OSCAR US Funding X LLC 2,452,454 Series 2019-1A, Class A2 (b)................................. 3.10% 04/11/22 2,467,452 3,190,000 Series 2019-1A, Class A3 (b)................................. 3.18% 05/10/23 3,268,339 OSCAR US Funding XI LLC 10,483,795 Series 2019-2A, Class A2 (b)................................. 2.49% 08/10/22 10,565,997 7,600,000 Series 2019-2A, Class A3 (b)................................. 2.59% 09/11/23 7,810,953 Santander Consumer Auto Receivables Trust 1,187,216 Series 2020-AA, Class A (b).................................. 1.37% 10/15/24 1,198,592 10,500,000 Series 2020-BA, Class A3 (b)................................. 0.46% 08/15/24 10,509,914 Santander Drive Auto Receivables Trust 11,000,000 Series 2020-3, Class A2...................................... 0.46% 09/15/23 11,011,202 </TABLE> Page 22 See Notes to Financial Statements <PAGE> FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ ---------------- <S> <C> <C> <C> <C> ASSET-BACKED SECURITIES (CONTINUED) Santander Retail Auto Lease Trust $ 7,630,000 Series 2019-C, Class A4 (b).................................. 1.93% 11/20/23 $ 7,816,816 Securitized Term Auto Receivables Trust 10,585,056 Series 2017-2A, Class A4 (b)................................. 2.29% 03/25/22 10,625,963 491,148 Series 2018-1A, Class A3 (b)................................. 3.07% 01/25/22 493,883 1,249,230 Series 2018-2A, Class A3 (b)................................. 3.33% 08/25/22 1,263,251 3,900,222 Series 2019-1A, Class A3 (b)................................. 2.99% 02/27/23 3,968,557 Sierra Timeshare Receivables Funding LLC 3,646,710 Series 2016-3A, Class A (b).................................. 2.43% 10/20/33 3,668,029 Towd Point Mortgage Trust 12,115 Series 2015-1, Class AES (b)................................. 3.00% 10/25/53 12,107 260,647 Series 2015-2, Class 1A12 (b)................................ 2.75% 11/25/60 263,651 875,720 Series 2015-4, Class A1B (b)................................. 2.75% 04/25/55 880,753 12,881,845 Series 2015-5, Class A1B (b)................................. 2.75% 05/25/55 13,008,538 15,845,743 Series 2015-6, Class A1B (b)................................. 2.75% 04/25/55 16,140,565 1,914,162 Series 2016-1, Class A1B (b)................................. 2.75% 02/25/55 1,944,765 9,284,959 Series 2016-2, Class A1 (b).................................. 3.00% 08/25/55 9,554,262 2,803,423 Series 2016-3, Class A1 (b).................................. 2.25% 04/25/56 2,840,871 Verizon Owner Trust 2,750,000 Series 2018-A, Class A1A..................................... 3.23% 04/20/23 2,789,937 9,420,726 Series 2018-1A, Class A1A (b)................................ 2.82% 09/20/22 9,491,379 11,460,000 Series 2019-C, Class A1A..................................... 1.94% 04/22/24 11,729,269 29,500,000 Series 2020-B, Class A....................................... 0.47% 02/20/25 29,559,428 Westlake Automobile Receivables Trust 14,708,858 Series 2020-1A, Class A2 (b)................................. 1.44% 09/15/23 14,810,506 World Omni Auto Receivables Trust 9,499,000 Series 2019-B, Class A3...................................... 2.59% 07/15/24 9,692,992 15,000,000 Series 2020-C, Class A3...................................... 0.48% 11/17/25 15,032,469 World Omni Automobile Lease Securitization Trust 2,092,028 Series 2019-A, Class A2...................................... 2.89% 11/15/21 2,098,721 World Omni Select Auto Trust 13,500,000 Series 2020-A, Class A2...................................... 0.47% 06/17/24 13,514,488 7,000,000 Series 2020-A, Class A3...................................... 0.55% 07/15/25 7,016,074 ---------------- TOTAL ASSET-BACKED SECURITIES................................................................ 622,464,683 (Cost $620,287,210) ---------------- U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 4.4% COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.6% Federal Home Loan Mortgage Corporation 1,317,311 Series 2003-2723, Class KN................................... 5.00% 12/15/23 1,371,036 1,933,365 Series 2004-2783, Class YB................................... 5.00% 04/15/24 2,017,802 514 Series 2010-3755, Class AJ................................... 2.00% 11/15/20 514 512 Series 2010-3766, Class HE................................... 3.00% 11/15/20 512 535 Series 2010-3773, Class GK................................... 2.50% 12/15/20 535 46,588 Series 2011-3790, Class AP................................... 4.50% 01/15/37 46,806 1,270,690 Series 2012-4002, Class MA................................... 2.00% 01/15/39 1,273,518 35,930 Series 2012-4011, Class KM................................... 2.00% 03/15/22 36,122 1,759,810 Series 2013-4199, Class YV................................... 3.50% 05/15/26 1,795,880 1,278,409 Series 2014-4387, Class DE................................... 2.00% 01/15/32 1,303,926 9,459,477 Series 2018-4821, Class BC................................... 3.00% 12/15/44 9,610,051 Federal National Mortgage Association 51 Series 2008-59, Class KB..................................... 4.50% 07/25/23 51 6,484 Series 2009-14, Class EB..................................... 4.50% 03/25/24 6,671 </TABLE> See Notes to Financial Statements Page 23 <PAGE>FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <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) $ 5,019 Series 2009-52, Class AJ..................................... 4.00% 07/25/24 $ 5,150 1,602 Series 2010-145, Class MA.................................... 2.00% 12/25/20 1,601 841 Series 2011-13, Class AD..................................... 2.00% 07/25/21 841 1,960 Series 2011-15, Class HT..................................... 5.50% 03/25/26 1,980 10,414 Series 2011-60, Class UC..................................... 2.50% 09/25/39 10,415 3,585 Series 2011-71, Class KC..................................... 1.75% 08/25/21 3,588 7,913 Series 2011-86, Class DC..................................... 2.00% 09/25/21 7,930 3,054,849 Series 2012-6, Class E....................................... 3.00% 05/25/37 3,085,908 230,994 Series 2012-103, Class LE.................................... 1.75% 05/25/39 230,938 1,776,365 Series 2013-1, Class KC...................................... 2.00% 07/25/40 1,776,299 830,530 Series 2013-73, Class A...................................... 1.50% 06/25/30 830,203 5,914,853 Series 2013-74, Class EL..................................... 3.00% 04/25/41 6,121,886 1,756,183 Series 2013-74, Class HA..................................... 3.00% 10/25/37 1,769,228 5,450,625 Series 2014-20, Class NA..................................... 3.00% 06/25/33 5,722,389 5,677,741 Series 2015-28, Class GC..................................... 2.50% 06/25/34 5,870,274 Government National Mortgage Association 565,152 Series 2018-89, Class A...................................... 3.50% 06/20/39 568,132 25,116,521 Series 2020-144, Class GP.................................... 1.50% 09/20/50 25,595,468 14,909,811 Series 2020-144, Class LP.................................... 1.55% 09/20/50 15,211,123 ---------------- 84,276,777 ---------------- COMMERCIAL MORTGAGE-BACKED SECURITIES -- 2.7% Federal Home Loan Mortgage Corporation Multifamily Structured Pass Through Certificates 1,648,319 Series 2011-K011, Class A2................................... 4.08% 11/25/20 1,648,056 11,486,013 Series 2011-K013, Class A2................................... 3.97% 01/25/21 11,525,109 7,428,412 Series 2013-K025, Class A1................................... 1.88% 04/25/22 7,472,695 6,361,652 Series 2013-K027, Class A1................................... 1.79% 09/25/22 6,430,294 1,021,958 Series 2013-K029, Class A1................................... 2.84% 10/25/22 1,039,252 6,282,449 Series 2013-K032, Class A1................................... 3.02% 02/25/23 6,463,447 7,114,165 Series 2013-K034, Class A1................................... 2.67% 02/25/23 7,295,888 6,578,472 Series 2013-KSMC, Class A1................................... 1.95% 01/25/23 6,697,058 4,959,328 Series 2014-K036, Class A1................................... 2.78% 04/25/23 5,110,097 18,788,329 Series 2014-K715, Class A2................................... 2.86% 01/25/21 18,822,730 4,217,787 Series 2014-K716, Class A2................................... 3.13% 06/25/21 4,262,523 2,277,155 Series 2015-K718, Class A1................................... 2.38% 09/25/21 2,296,423 9,577,278 Series 2015-K720, Class A1................................... 2.32% 11/25/21 9,688,430 6,866,751 Series 2017-K727, Class A1................................... 2.63% 10/25/23 7,019,819 FREMF Mortgage Trust 3,822,000 Series 2011-K14, Class B (b) (d)............................. 5.18% 02/25/47 3,887,495 8,617,000 Series 2011-KAIV, Class B (b)................................ 4.94% 06/25/46 8,793,328 23,047,000 Series 2012-K17, Class B (b) (d)............................. 4.32% 12/25/44 23,869,010 8,195,000 Series 2014-K715, Class B (b) (d)............................ 4.00% 02/25/46 8,223,034 Government National Mortgage Association 5,633 Series 2014-28, Class A...................................... 2.00% 01/16/46 5,648 ---------------- 140,550,336 ---------------- PASS-THROUGH SECURITIES -- 0.1% Federal Home Loan Mortgage Corporation 103 Pool G11820.................................................. 5.50% 12/01/20 103 30 Pool G11966.................................................. 5.50% 11/01/20 30 </TABLE> Page 24 See Notes to Financial Statements <PAGE> FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <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) $ 869 Pool G12255.................................................. 5.50% 07/01/21 $ 876 32 Pool G12673.................................................. 5.00% 09/01/21 32 10,765 Pool G13204.................................................. 6.00% 11/01/22 10,929 52 Pool G13761.................................................. 5.50% 12/01/20 52 471 Pool G13812.................................................. 5.00% 12/01/20 473 27 Pool G14030.................................................. 4.50% 12/01/20 27 4,404 Pool G14035.................................................. 5.50% 12/01/21 4,424 11 Pool G14187.................................................. 5.50% 12/01/20 11 103,360 Pool G15435.................................................. 5.00% 11/01/24 109,095 17,044 Pool G15821.................................................. 5.00% 07/01/25 17,990 46,062 Pool G15874.................................................. 5.00% 06/01/26 48,618 Federal National Mortgage Association 5 Pool 745238.................................................. 6.00% 12/01/20 5 2,598 Pool 745735.................................................. 5.00% 03/01/21 2,742 60 Pool 745749.................................................. 5.50% 03/01/21 60 23,543 Pool 745832.................................................. 6.00% 04/01/21 23,612 29 Pool 844915.................................................. 4.50% 11/01/20 29 598 Pool 847919.................................................. 5.50% 11/01/20 597 193 Pool 888932.................................................. 4.50% 11/01/22 202 1 Pool 889191.................................................. 4.50% 04/01/21 1 13 Pool 889531.................................................. 4.50% 05/01/22 13 34 Pool 889847.................................................. 4.50% 04/01/21 36 15,609 Pool 890403.................................................. 6.00% 05/01/23 15,748 137,206 Pool 901931.................................................. 6.00% 10/01/21 139,117 108,414 Pool 962078.................................................. 4.50% 03/01/23 113,677 97 Pool 995158.................................................. 4.50% 12/01/20 98 42 Pool 995886.................................................. 6.00% 04/01/21 43 7,096 Pool AD0285.................................................. 5.00% 09/01/22 7,488 645 Pool AD0402.................................................. 5.00% 02/01/23 680 2,587 Pool AE0237.................................................. 5.50% 11/01/23 2,601 4,786 Pool AE0314.................................................. 5.00% 08/01/21 5,051 26 Pool AE0792.................................................. 5.00% 12/01/20 27 18,050 Pool AE0812.................................................. 5.00% 07/01/25 19,049 92,696 Pool AL5764.................................................. 5.00% 09/01/25 97,826 91,895 Pool AL5812.................................................. 5.50% 05/01/25 93,687 37,973 Pool AL6212.................................................. 4.50% 01/01/27 39,816 107,432 Pool AL6798.................................................. 5.00% 09/01/25 113,377 277 Pool AL8539.................................................. 4.50% 01/01/27 290 494,622 Pool BM1299.................................................. 5.00% 03/01/27 521,993 5,670 Pool MA0772.................................................. 4.00% 06/01/21 6,011 244,260 Pool MA1030.................................................. 3.00% 04/01/22 255,596 Government National Mortgage Association 19,628 Pool 783524.................................................. 5.00% 09/15/24 20,702 ---------------- 1,672,834 ---------------- TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES................................... 226,499,947 (Cost $226,492,758) ---------------- </TABLE> See Notes to Financial Statements Page 25 <PAGE>FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------- ------------ ---------------- <S> <C> <C> <C> <C> MORTGAGE-BACKED SECURITIES -- 1.3% COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.3% CIM Trust $ 10,125,775 Series 2019-INV1, Class A2, 1 Mo. LIBOR + 1.00% (a) (b)............................................. 1.15% 02/25/49 $ 10,143,492 3,589,094 Series 2019-INV2, Class A11, 1 Mo. LIBOR + 0.95% (a) (b)............................................. 1.10% 05/25/49 3,595,363 18,075,411 Series 2019-INV3, Class A11, 1 Mo. LIBOR + 1.00% (a) (b)............................................. 1.10% 08/25/49 18,106,891 JP Morgan Mortgage Trust 14,113,027 Series 2019-7, Class A11, 1 Mo. LIBOR + 0.90% (a) (b)............................................. 1.05% 02/25/50 14,129,223 1,131,463 Series 2019-8, Class A11, 1 Mo. LIBOR + 0.85% (a) (b)............................................. 1.00% 03/25/50 1,132,778 Merrill Lynch Mortgage Investors Trust 729,623 Series 2005-A6, Class 2A3, 1 Mo. LIBOR + 0.38% (a)................................................. 0.53% 08/25/35 731,777 OBX Trust 4,854,228 Series 2019-EXP3, Class 2A1A, 1 Mo. LIBOR + 0.90% (a) (b)............................................. 1.05% 10/25/59 4,867,292 7,560,251 Series 2020-INV1, Class A11, 1 Mo. LIBOR + 0.90% (a) (b)............................................. 1.05% 12/25/49 7,580,532 Sequoia Mortgage Trust 73,782 Series 2014-3, Class A14 (b)................................. 3.00% 10/25/44 73,903 WinWater Mortgage Loan Trust 7,026,112 Series 2015-5, Class A5 (b).................................. 3.50% 08/20/45 7,060,141 ---------------- TOTAL MORTGAGE-BACKED SECURITIES............................................................. 67,421,392 (Cost $67,471,871) ---------------- U.S. GOVERNMENT NOTES -- 0.8% 40,000,000 U.S. Treasury Note.............................................. 1.50% 11/30/21 40,586,719 ---------------- TOTAL U.S. GOVERNMENT NOTES.................................................................. 40,586,719 (Cost $39,966,696) ---------------- CERTIFICATES OF DEPOSIT -- 0.3% BANKS -- 0.3% 15,000,000 Nordea Bank Abp, 3 Mo. LIBOR + 0.32% (a)........................ 0.59% 11/19/21 15,043,323 ---------------- TOTAL CERTIFICATES OF DEPOSIT................................................................ 15,043,323 (Cost $15,000,000) ---------------- U.S. TREASURY BILLS -- 0.3% 15,000,000 U.S. Treasury Bill............................................. (e) 04/22/21 14,993,457 ---------------- TOTAL U.S. TREASURY BILLS.................................................................... 14,993,457 (Cost $14,990,285) ---------------- TOTAL INVESTMENTS -- 100.6%.................................................................. 5,197,788,211 (Cost $5,182,559,340) (f) ---------------- NET OTHER ASSETS AND LIABILITIES -- (0.6)%................................................... (29,005,294) ---------------- NET ASSETS -- 100.0%......................................................................... $ 5,168,782,917 ================ </TABLE> Page 26 See Notes to Financial Statements <PAGE> FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 ----------------------------- (a) Floating or variable rate security. (b) This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A of the Securities Act of 1933, as amended, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Pursuant to procedures adopted by the Trust's Board of Trustees, this security has been determined to be liquid by First Trust Advisors L.P., the Fund's Advisor. Although market instability can result in periods of increased overall market illiquidity, liquidity for each security is determined based on security specific factors and assumptions, which require subjective judgment. At October 31, 2020, securities noted as such amounted to $1,203,382,656 or 23.3% of net assets. (c) Fixed-to-floating security. The interest rate shown reflects the fixed rate in effect at October 31, 2020. At a predetermined date, the fixed rate will change to a floating rate. (d) Collateral Strip Rate security. Coupon is based on the weighted net interest rate of the investment's underlying collateral. The interest rate resets periodically. (e) Zero coupon security. (f) Aggregate cost for federal income tax purposes is $5,182,699,520. As of October 31, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $16,236,399 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $1,147,708. The net unrealized appreciation was $15,088,691. The amounts presented are inclusive of derivative contracts. 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 October 31, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): <TABLE> <CAPTION> LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 10/31/2020 PRICES INPUTS INPUTS -------------- -------------- -------------- -------------- <S> <C> <C> <C> <C> Corporate Bonds and Notes*......................... $2,082,032,560 $ -- $2,082,032,560 $ -- Commercial Paper*.................................. 1,276,809,708 -- 1,276,809,708 -- Foreign Corporate Bonds and Notes*................. 851,936,422 -- 851,936,422 -- Asset-Backed Securities............................ 622,464,683 -- 622,464,683 -- U.S. Government Agency Mortgage-Backed Securities...................................... 226,499,947 -- 226,499,947 -- Mortgage-Backed Securities......................... 67,421,392 -- 67,421,392 -- U.S. Government Notes.............................. 40,586,719 -- 40,586,719 -- Certificates of Deposit*........................... 15,043,323 -- 15,043,323 -- U.S. Treasury Bills................................ 14,993,457 -- 14,993,457 -- -------------- -------------- -------------- -------------- Total Investments.................................. $5,197,788,211 $ -- $5,197,788,211 $ -- ============== ============== ============== ============== </TABLE> * See Portfolio of Investments for industry breakout. See Notes to Financial Statements Page 27 <PAGE>FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 2020 <TABLE> <CAPTION> ASSETS: <S> <C> Investments, at value..................................................... $5,197,788,211 Cash...................................................................... 1,905,182 Interest receivable....................................................... 14,729,500 -------------- Total Assets........................................................... 5,214,422,893 -------------- LIABILITIES: Payables: Investment securities purchased ....................................... 41,541,019 Distributions to shareholders.......................................... 3,013,490 Investment advisory fees............................................... 1,085,467 -------------- Total Liabilities...................................................... 45,639,976 -------------- NET ASSETS................................................................ $5,168,782,917 ============== NET ASSETS CONSIST OF: Paid-in capital........................................................... $5,169,321,663 Par value................................................................. 860,997 Accumulated distributable earnings (loss)................................. (1,399,743) -------------- NET ASSETS................................................................ $5,168,782,917 ============== NET ASSET VALUE, per share................................................ $ 60.03 ============== Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share)............................................. 86,099,724 ============== Investments, at cost...................................................... $5,182,559,340 ============== </TABLE> Page 28 See Notes to Financial Statements <PAGE> FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 2020 <TABLE> <CAPTION> <S> <C> INVESTMENT INCOME: Interest.................................................................. $ 89,555,675 -------------- Total investment income................................................ 89,555,675 -------------- EXPENSES: Investment advisory fees.................................................. 22,493,150 -------------- Total expenses......................................................... 22,493,150 Less fees waived by the investment advisor............................. (3,485,866) -------------- Net expenses........................................................... 19,007,284 -------------- NET INVESTMENT INCOME (LOSS).............................................. 70,548,391 -------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on investments................................... (13,118,451) Net change in unrealized appreciation (depreciation) on investments....... 5,207,190 -------------- NET REALIZED AND UNREALIZED GAIN (LOSS)................................... (7,911,261) -------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................................................ $ 62,637,130 ============== </TABLE> See Notes to Financial Statements Page 29 <PAGE>FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) STATEMENTS OF CHANGES IN NET ASSETS <TABLE> <CAPTION> YEAR YEAR ENDED ENDED 10/31/2020 10/31/2019 -------------- -------------- <S> <C> <C> OPERATIONS: Net investment income (loss).............................................. $ 70,548,391 $ 106,098,351 Net realized gain (loss).................................................. (13,118,451) (719,958) Net change in unrealized appreciation (depreciation)...................... 5,207,190 10,123,036 -------------- -------------- Net increase (decrease) in net assets resulting from operations........... 62,637,130 115,501,429 -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations..................................................... (71,207,363) (105,441,956) -------------- -------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................................. 1,187,006,127 2,558,526,535 Cost of shares redeemed................................................... (1,075,402,505) (573,290,488) -------------- -------------- Net increase (decrease) in net assets resulting from shareholder transactions........................................................... 111,603,622 1,985,236,047 -------------- -------------- Total increase (decrease) in net assets................................... 103,033,389 1,995,295,520 NET ASSETS: Beginning of period....................................................... 5,065,749,528 3,070,454,008 -------------- -------------- End of period............................................................. $5,168,782,917 $5,065,749,528 ============== ============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period................................... 84,299,724 51,199,724 Shares sold............................................................... 19,850,000 42,650,000 Shares redeemed........................................................... (18,050,000) (9,550,000) -------------- -------------- Shares outstanding, end of period......................................... 86,099,724 84,299,724 ============== ============== </TABLE> Page 30 See Notes to Financial Statements <PAGE> FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD <TABLE> <CAPTION> YEAR ENDED OCTOBER 31, ----------------------------------------------------------------------- 2020 2019 2018 2017 2016 ------------ ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Net asset value, beginning of period.................... $ 60.09 $ 59.97 $ 60.02 $ 59.93 $ 59.94 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)............................ 0.85 1.48 1.15 0.76 0.47 Net realized and unrealized gain (loss)................. (0.05) 0.11 (0.01) 0.12 0.09 ---------- ---------- ---------- ---------- ---------- Total from investment operations........................ 0.80 1.59 1.14 0.88 0.56 ---------- ---------- ---------- ---------- ---------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income................................... (0.86) (1.47) (1.19) (0.79) (0.57) Return of capital....................................... -- -- (0.00)(a) -- -- ---------- ---------- ---------- ---------- ---------- Total distributions..................................... (0.86) (1.47) (1.19) (0.79) (0.57) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period.......................... $ 60.03 $ 60.09 $ 59.97 $ 60.02 $ 59.93 ========== ========== ========== ========== ========== TOTAL RETURN (b)........................................ 1.34% 2.68% 1.92% 1.48% 0.94% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's).................... $5,168,783 $5,065,750 $3,070,454 $1,158,324 $ 458,413 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets........... 0.45% 0.45% 0.45% 0.45% 0.45% Ratio of net expenses to average net assets............. 0.38% 0.39% 0.33% 0.25% 0.25% Ratio of net investment income (loss) to average net assets........................................... 1.41% 2.47% 2.04% 1.33% 1.06% Portfolio turnover rate (c)............................. 73% 73% 45% 56% 115% </TABLE> (a) Amount represents less than $0.01 per share. (b) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. The total returns would have been lower if certain fees had not been waived by the investment advisor. (c) 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 31 <PAGE> --------------------------------------------------------------------------------NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) OCTOBER 31, 2020 1. ORGANIZATION First Trust Exchange-Traded Fund IV (the "Trust") is an open-end management investment company organized as a Massachusetts business trust on September 15, 2010, and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust currently consists of nine funds that are offering shares. This report covers the First Trust Enhanced Short Maturity ETF (the "Fund"), a diversified series of the Trust, which trades under the ticker "FTSM" on The Nasdaq Stock Market LLC ("Nasdaq"). Unlike conventional mutual funds, the Fund issues and redeems shares on a continuous basis, at net asset value ("NAV"), only in large specified blocks consisting of 50,000 shares called a "Creation Unit." Creation Units are generally issued and redeemed for cash and, in certain circumstances, in-kind for securities in which the Fund invests, and only to and from broker-dealers and large institutional investors that have entered into participation agreements. Except when aggregated in Creation Units, the Fund's shares are not redeemable securities. The Fund is an actively managed exchange-traded fund ("ETF"). The Fund's investment objective is to seek current income, consistent with preservation of capital and daily liquidity. Under normal market conditions, the Fund intends to achieve its investment objective by investing at least 80% of its net assets in a portfolio of U.S. dollar-denominated fixed- and variable-rate debt securities, including securities issued or guaranteed by the U.S. government or its agencies, instrumentalities or U.S. government-sponsored entities, residential and commercial mortgage-backed securities, asset-backed securities, U.S. corporate bonds, fixed income securities issued by non-U.S. corporations and governments, municipal obligations, privately issued securities and other debt securities bearing fixed or floating interest rates. The Fund may also invest in money market securities. The Fund may invest in investment companies, such as ETFs, that invest primarily in debt securities. The Fund intends to limit its investments in privately-issued, non-agency sponsored mortgage- and asset-backed securities to 20% of its net assets. The Fund may also invest up to 20% of its net assets in floating rate loans representing amounts borrowed by companies or other entities from banks and other lenders. A significant portion of these loans may be rated below investment grade or unrated. Floating rate loans held by the Fund may be senior or subordinate obligations of the borrower and may or may not be secured by collateral. Under normal market conditions, the Fund's average duration is expected to be less than one year and the average maturity of the Fund's portfolio is expected to be less than three years. There can be no assurance that the Fund will achieve its investment objective. The Fund may not be appropriate for all investors. 2. SIGNIFICANT ACCOUNTING POLICIES The Fund is considered an investment company and follows accounting and reporting guidance under Financial Accounting Standards Board ("FASB") Accounting Standards Codification Topic 946, "Financial Services-Investment Companies." The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of the financial statements. The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. PORTFOLIO VALUATION The Fund's NAV is determined daily as of the close of regular trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV is determined as of that time. Domestic debt securities and foreign securities are priced using data reflecting the earlier closing of the principal markets for those securities. The Fund's NAV is calculated by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding. The Fund's investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Pricing Committee of the Fund's investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"), in accordance with valuation procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act. Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. The Fund's investments are valued as follows: Corporate bonds, corporate notes, U.S. government securities, mortgage-backed securities, asset-backed securities, certificates of deposit and other debt securities are fair valued on the basis of valuations provided by dealers who make markets in such securities or by a third-party pricing service approved by the Trust's Board of Trustees, which may use the following valuation inputs when available: 1) benchmark yields; 2) reported trades; Page 32 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) OCTOBER 31, 2020 3) broker/dealer quotes; 4) issuer spreads; 5) benchmark securities; 6) bids and offers; and 7) reference data including market research publications. Securities traded in an over-the-counter market are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price. Commercial paper is fair valued at cost adjusted for amortization of premiums and accretion of discounts (amortized cost), provided the Advisor's Pricing Committee has determined that the use of amortized cost is an appropriate reflection of fair value given market and issuer-specific conditions existing at the time of the determination. Factors that may be considered in determining the appropriateness of the use of amortized cost include, but are not limited to, the following: 1) the credit conditions in the relevant market and changes thereto; 2) the liquidity conditions in the relevant market and changes thereto; 3) the interest rate conditions in the relevant market and changes thereto (such as significant changes in interest rates); 4) issuer-specific conditions (such as significant credit deterioration); and 5) any other market-based data the Advisor's Pricing Committee considers relevant. In this regard, the Advisor's Pricing Committee may use last-obtained market-based data to assist it when valuing portfolio securities using amortized cost. Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Trust's Board of Trustees or its delegate, the Advisor's Pricing Committee, at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of the Fund's NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security's fair value. As a general principle, the current fair value of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities, including, but not limited to, the following: 1) the fundamental business data relating to the borrower/issuer; 2) an evaluation of the forces which influence the market in which these securities are purchased and sold; 3) the type, size and cost of a security; 4) the financial statements of the borrower/issuer; 5) the credit quality and cash flow of the borrower/issuer, based on the Advisor's or external analysis; 6) the information as to any transactions in or offers for the security; 7) the price and extent of public trading in similar securities of the borrower/issuer, or comparable companies; 8) the coupon payments; 9) the quality, value and salability of collateral, if any, securing the security; 10) the business prospects of the borrower/issuer, including any ability to obtain money or resources from a parent or affiliate and an assessment of the borrower's/issuer's management (for corporate debt only); 11) the prospects for the borrower's/issuer's industry, and multiples (of earnings and/or cash flows) being paid for similar businesses in that industry (for corporate debt only); 12) the borrower's/issuer's competitive position within the industry; 13) the borrower's/issuer's ability to access additional liquidity through public and/or private markets; and 14) other relevant factors. The Fund is subject to fair value accounting standards that define fair value, establish the framework for measuring fair value and provide a three-level hierarchy for fair valuation based upon the inputs to the valuation as of the measurement date. The three levels of the fair value hierarchy are as follows: o Level 1 - Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Page 33 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) OCTOBER 31, 2020 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 October 31, 2020, is included with the Fund's Portfolio of Investments. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income is recorded daily on the accrual basis. Amortization of premiums and accretion of discounts are recorded using the effective interest method. In July 2017, the Financial Conduct Authority ("FCA") announced that it will no longer persuade or compel banks to submit rates for the calculations of the London Interbank Offered Rates ("LIBOR") after 2021. Further, the FCA has subsequently stated, as recently as March 2020, that the central assumption continues to be that firms should not rely on LIBOR being published after the end of 2021. In the United States, the Alternative Reference Rates Committee (the "ARRC"), a group of market participants convened by the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of New York in cooperation with other federal and state government agencies, has since 2014 undertaken efforts to identify U.S. dollar reference interest rates as alternatives to LIBOR and to facilitate the mitigation of LIBOR-related risks. In June 2017, the ARRC identified the Secured Overnight Financing Rate ("SOFR"), a broad measure of the cost of cash overnight borrowing collateralized by U.S. Treasury securities, as the preferred alternative for U.S. dollar LIBOR. The Federal Reserve Bank of New York began daily publishing of SOFR in April 2018. At this time, it is not possible to predict the full impact of the elimination of LIBOR and the establishment of an alternative reference rate on the Fund or its investments. C. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment income, if any, are declared and paid monthly by the Fund, or as the Board of Trustees may determine from time to time. Distributions of net realized gains earned by the Fund, if any, are distributed at least annually. Distributions in cash may be reinvested automatically in additional whole shares only if the broker through whom the shares were purchased makes such option available. Such shares will generally be reinvested by the broker based upon the market price of those shares and investors may be subject to customary brokerage commissions charged by the broker. Distributions from net investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on portfolio securities held by the Fund and have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will reverse at some time in the future. The tax character of distributions paid during the fiscal years ended October 31, 2020 and 2019 was as follows: Distributions paid from: 2020 2019 Ordinary income................................ $ 77,424,693 $ 96,211,136 Capital gains.................................. -- -- Return of capital.............................. -- -- Page 34 <PAGE> --------------------------------------------------------------------------------NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) OCTOBER 31, 2020 As of October 31, 2020, the components of distributable earnings on a tax basis for the Fund were as follows: Undistributed ordinary income.................. $ (2,577) Accumulated capital and other gain (loss)...... (16,485,857) Net unrealized appreciation (depreciation)..... 15,088,691 D. INCOME TAXES The Fund intends to continue to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, which includes distributing substantially all of its net investment income and net realized gains to shareholders. Accordingly, no provision has been made for federal and state income taxes. However, due to the timing and amount of distributions, the Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of the Fund's taxable income exceeds the distributions from such taxable income for the calendar year. The Fund is subject to accounting standards that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. The taxable years ended 2017, 2018, 2019, and 2020 remain open to federal and state audit. As of October 31, 2020, management has evaluated the application of these standards to the Fund and has determined that no provision for income tax is required in the Fund's financial statements for uncertain tax positions. The Fund intends to utilize provisions of the federal income tax laws, which allow it to carry a realized capital loss forward indefinitely following the year of the loss and offset such loss against any future realized capital gains. The Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. At October 31, 2020, the Fund had non-expiring capital loss carryforwards available for federal income tax purposes of $16,485,857. Certain losses realized during the current fiscal year may be deferred and treated as occurring on the first day of the following fiscal year for federal income tax purposes. For the fiscal year ended October 31, 2020, the Fund had no net late year ordinary or capital losses. In order to present paid-in capital and accumulated distributable earnings (loss) (which consists of accumulated net investment income (loss), accumulated net realized gain (loss) on investments and net unrealized appreciation (depreciation) on investments) on the Statement of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to paid-in capital, accumulated net investment income (loss) and accumulated net realized gain (loss) on investments. For the fiscal year ended October 31, 2020, there were no tax adjustments made to accumulated distributable earnings (loss) accounts due to differences between book and tax treatments. E. EXPENSES Expenses, other than the investment advisory fee and other excluded expenses, are paid by the Advisor (see Note 3). F. NEW ACCOUNTING PRONOUNCEMENT On March 30, 2017, the FASB issued Accounting Standards Update ("ASU") 2017-08 "Premium Amortization on Purchased Callable Debt Securities", which amends the amortization period for certain purchased callable debt securities held at a premium by shortening such period to the earliest call date. The new guidance requires an entity to amortize the premium on a callable debt security within its scope to the earliest call date, unless the guidance for considering estimated prepayments is applied. If the call option is not exercised at the earliest call date, the yield is reset to the effective yield using the payment terms of the security. If the security has more than one call date and the premium was amortized to a call price greater than the next call price, any excess of the amortized cost basis over the amount repayable at the next call date will be amortized to that date. If there are no other call dates, any excess of the amortized cost basis over the par amount will be amortized to maturity. Discounts on purchased callable debt securities will continue to be amortized to the security's maturity date. The ASU 2017-08 is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. ASU 2017-08 was adopted for these financial statements and did not have a material impact. 3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS First Trust, the investment advisor to the Fund, is a limited partnership with one limited partner, Grace Partners of DuPage L.P., and one general partner, The Charger Corporation. The Charger Corporation is an Illinois corporation controlled by James A. Bowen, Chief Executive Officer of First Trust. First Trust is responsible for the selection and ongoing monitoring of the securities in the Fund's portfolio, managing the Fund's business affairs and providing certain administrative services necessary for the management of the Fund. Page 35 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) OCTOBER 31, 2020 Pursuant to the Investment Management Agreement between the Trust and Advisor, First Trust manages the investment of the Fund's assets and is responsible for the Fund's expenses, including the cost of transfer agency, custody, fund administration, legal, audit and other services, but excluding fee payments under the Investment Management Agreement, interest, taxes, acquired fund fees and expenses with the exception of those attributable to affiliated funds, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses. The Fund has agreed to pay First Trust an annual unitary management fee equal to 0.45% of its average daily net assets. Pursuant to two separate contractual agreements, First Trust has agreed to waive management fees of 0.05% and 0.15% of average daily net assets until March 1, 2022. The waiver agreement may be terminated by action of the Trust's Board of Trustees at any time upon 60 days' written notice by the Trust on behalf of the Fund or by the Fund's investment advisor only after March 1, 2022. Pursuant to a contractual agreement between the Trust, on behalf of the Fund, and First Trust, the management fees paid to First Trust will be reduced by the portion of the management fees earned by First Trust from the Fund for assets invested in other investment companies advised by First Trust. This contractual agreement shall continue until the earlier of (i) its termination at the direction of the Trust's Board of Trustees or (ii) upon termination of the Fund's management agreement with First Trust; however, it is expected to remain in place at least until March 1, 2021. First Trust does not have the right to recover the fees waived that are attributable to the assets invested in other investment companies advised by First Trust. During the fiscal year ended October 31, 2020, the Advisor waived fees of $3,485,866. The Trust has multiple service agreements with The Bank of New York Mellon ("BNYM"). Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services, and transfer agency services for the Fund. As custodian, BNYM is responsible for custody of the Fund's assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of the Fund's securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for the Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company. Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund a defined-outcome fund, or is an index fund. Additionally, the Lead Independent Trustee and the Chairmen of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and Committee Chairmen will rotate every three years. The officers and "Interested" Trustee receive no compensation from the Trust for acting in such capacities. 4. PURCHASES AND SALES OF SECURITIES The costs of purchases of U.S. Government securities and non-U.S. Government securities, excluding short-term investments, for the fiscal year ended October 31, 2020, were $390,493,452 and $2,327,771,552, respectively. The proceeds from sales and paydowns of U.S. Government securities and non-U.S. Government securities, excluding short-term investments, for the fiscal year ended October 31, 2020, were $423,467,474 and $1,987,028,246, respectively. For the fiscal year ended October 31, 2020, the Fund had no in-kind transactions. 5. CREATIONS, REDEMPTIONS AND TRANSACTION FEES Shares are created and redeemed by the Fund only in Creation Unit size aggregations of 50,000 shares in transactions with broker dealers or large institutional investors that have entered into a participation agreement (an "Authorized Participant"). Due to the nature of the Fund's investments, the Fund's Creation Units are generally issued and redeemed for cash, although Creation Units may be issued in-kind for securities in which the Fund invests in limited circumstances. Authorized Participants purchasing Creation Units must pay to BNYM, as transfer agent, a creation transaction fee (the "Creation Transaction Fee") regardless of the number of Creation Units purchased in the transaction. The Creation Transaction Fee may increase or decrease with changes in the Fund's portfolio. The price for each Creation Unit will equal the daily NAV per share times the number of shares in a Creation Unit plus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees or stamp taxes. When Creation Units are issued for cash, the Authorized Participant may also be assessed an amount to cover the cost of purchasing portfolio securities, including operational processing and brokerage costs, transfer fees, stamp taxes, and part or all of the spread between the expected bid and offer side of the market related to such securities. Page 36 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) OCTOBER 31, 2020 Authorized Participants redeeming Creation Units must pay to BNYM, as transfer agent, a standard redemption transaction fee (the "Redemption Transaction Fee"), regardless of the number of Creation Units redeemed in the transaction. The Redemption Transaction Fee may increase or decrease with changes in the Fund's portfolio. When shares are redeemed for cash, the Authorized Participant may also be assessed an amount to cover other costs, including operational processing and brokerage costs, transfer fees, stamp taxes and part or all of the spread between the expected bid and offer side of the market related to portfolio securities sold in connection with the redemption. 6. DISTRIBUTION PLAN The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Fund is authorized to pay an amount up to 0.25% of its average daily net assets each year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the Fund, for amounts expended to finance activities primarily intended to result in the sale of Creation Units or the provision of investor services. FTP may also use this amount to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and educational and promotional services. No 12b-1 fees are currently paid by the Fund, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before March 31, 2022. 7. INDEMNIFICATION The Trust, on behalf of the Fund, has a variety of indemnification obligations under contracts with its service providers. The Trust's maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 8. OTHER MATTERS By operation of law, the Fund now operates as a diversified open-end management investment company as defined in Section 5(b) of the 1940 Act. 9. SUBSEQUENT EVENTS Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued, and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements that have not already been disclosed. Page 37 <PAGE> --------------------------------------------------------------------------------REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED FUND IV: OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS We have audited the accompanying statement of assets and liabilities of First Trust Enhanced Short Maturity ETF (the "Fund"), a series of the First Trust Exchange-Traded Fund IV, including the portfolio of investments, as of October 31, 2020, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2020, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended in conformity with accounting principles generally accepted in the United States of America. BASIS FOR OPINION These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund's financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2020, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP Chicago, Illinois December 22, 2020 We have served as the auditor of one or more First Trust investment companies since 2001. Page 38 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) OCTOBER 31, 2020 (UNAUDITED) PROXY VOTING POLICIES AND PROCEDURES A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how the Fund voted proxies relating to its portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on the Fund's website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov. PORTFOLIO HOLDINGS The Fund files portfolio holdings information for each month in a fiscal quarter within 60 days after the end of the relevant fiscal quarter on Form N-PORT. Portfolio holdings information for the third month of each fiscal quarter will be publicly available on the SEC's website at www.sec.gov. The Fund's complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year is included in the semi-annual and annual reports to shareholders, respectively, and is filed with the SEC on Form N-CSR. The semi-annual and annual report for the Fund is available to investors within 60 days after the period to which it relates. The Fund's Forms N-PORT and Forms N-CSR are available on the SEC's website listed above. FEDERAL TAX INFORMATION Distributions paid to foreign shareholders during the Fund's fiscal year ended October 31, 2020 that were properly designated by the Fund as "interest-related dividends" or "short-term capital gain dividends," may not be subject to federal income tax provided that the income was earned directly by such foreign shareholders. Of the ordinary income (including short-term capital gain) distributions made by the Fund during the fiscal year ended October 31, 2020, none qualify for the corporate dividends received deduction available to corporate shareholders or as qualified dividend income. RISK CONSIDERATIONS RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE, RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND. CONCENTRATION RISK. To the extent that a fund is able to invest a large percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund's investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund's corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is not concentrated. CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer's ability to make such payments. CYBER SECURITY RISK. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. In addition, cyber security breaches of a fund's third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or issuers in which the fund invests, can also subject a fund to many of the same risks associated with direct cyber security breaches. DERIVATIVES RISK. To the extent a fund uses derivative instruments such as futures contracts, options contracts and swaps, the fund may experience losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivative. These risks are heightened when a fund's portfolio managers use derivatives to enhance the fund's return or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the fund. Page 39 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) OCTOBER 31, 2020 (UNAUDITED) 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 CONSTITUENT RISK. Certain funds may be a constituent of one or more indices. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could significantly increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, a fund's net asset value could be negatively impacted and the fund's market price may be significantly below its net asset value during certain periods. INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject to Index Provider Risk. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, maintained, constructed, reconstituted, rebalanced, composed, calculated or disseminated accurately. To correct any such error, the Index Provider may carry out an unscheduled rebalance or other modification of the Index constituents or weightings, which may increase the fund's costs. The Index Provider does not provide any representation or warranty in relation to the quality, accuracy or completeness of data in the Index, and it does not guarantee that the Index will be calculated in accordance with its stated methodology. Losses or costs associated with any Index Provider errors generally will be borne by the fund and its shareholders. INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of other investment vehicles, the fund will incur additional fees and expenses that would not be present in a direct investment in those investment vehicles. Furthermore, the fund's investment performance and risks are directly related to the investment performance and risks of the investment vehicles in which the fund invests. LIBOR RISK. To the extent a fund invests in floating or variable rate obligations that use the London Interbank Offered Rate ("LIBOR") as a reference interest rate, it is subject to LIBOR Risk. In 2017, the United Kingdom's Financial Conduct Authority announced that LIBOR will cease to be available for use after 2021. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition away from LIBOR on the fund or on certain instruments in which the fund invests can be difficult to ascertain, and they may vary depending on a variety of factors. Any such effects of the transition away from LIBOR, as well as other unforeseen effects, could result in losses to the fund. MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund's investment portfolio, the fund's portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective. Page 40 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) OCTOBER 31, 2020 (UNAUDITED) MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than others. The outbreak of the respiratory disease designated as COVID-19 in December 2019 has caused significant volatility and declines in global financial markets, which have caused losses for investors. The COVID-19 pandemic may last for an extended period of time and will continue to impact the economy for the foreseeable future. NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic issuers. Non-U.S. securities are subject to higher volatility than securities of domestic issuers due to: possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries. PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets. NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE ADVISORY AGREEMENT BOARD CONSIDERATIONS REGARDING APPROVAL OF CONTINUATION OF INVESTMENT MANAGEMENT AGREEMENT The Board of Trustees of First Trust Exchange-Traded Fund IV (the "Trust"), including the Independent Trustees, unanimously approved the continuation of the Investment Management Agreement (the "Agreement") with First Trust Advisors L.P. (the "Advisor") on behalf of the First Trust Enhanced Short Maturity ETF (the "Fund"). The Board approved the continuation of the Agreement for a one-year period ending June 30, 2021 at a meeting held on June 8, 2020. The Board determined that the continuation of the Agreement is in the best interests of the Fund in light of the nature, extent and quality of the services provided and such other matters as the Board considered to be relevant in the exercise of its reasonable business judgment. To reach this determination, the Board considered its duties under the Investment Company Act of 1940, as amended (the "1940 Act"), as well as under the general principles of state law, in reviewing and approving advisory contracts; the requirements of the 1940 Act in such matters; the fiduciary duty of investment advisors with respect to advisory agreements and compensation; the standards used by courts in determining whether investment company boards have fulfilled their duties; and the factors to be considered by the Board in voting on such agreements. At meetings held on May 11, 2020 and June 8, 2020, the Board, including the Independent Trustees, reviewed materials provided by the Advisor 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 provided by the Advisor to the Fund (including the relevant personnel responsible for these services and their experience); the unitary fee rate payable by the Fund as compared to fees charged to a peer group of funds (the "Expense Group") and a broad peer universe of funds (the "Expense Universe"), each assembled by Broadridge Financial Solutions, Inc. ("Broadridge"), an independent source, and as compared to fees charged to other clients of the Advisor, including other exchange-traded funds ("ETFs") managed by the Advisor; the expense ratio of the Fund as compared to expense ratios of the funds in the Fund's Expense Group and Expense Universe; performance information for the Fund, including comparisons of the Fund's performance to that of one or more relevant benchmark indexes and to that of a performance group of funds and a broad performance universe of funds (the "Performance Universe"), each assembled by Broadridge; the nature of expenses incurred in providing services to the Fund and the potential for the Advisor to realize economies of scale, if any; profitability and other financial data for the Advisor; any fall-out benefits to the Advisor and its affiliate, First Trust Portfolios L.P. ("FTP"); and information on the Advisor's compliance program. The Board reviewed initial materials with the Advisor at the meeting held on May 11, 2020, prior to which the Independent Trustees and their counsel met separately to discuss the information provided by the Advisor. Following the May meeting, counsel to the Independent Trustees, on behalf of the Independent Trustees, requested certain clarifications and supplements to the materials Page 41 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) OCTOBER 31, 2020 (UNAUDITED) provided, and the information provided in response to those requests was considered at an executive session of the Independent Trustees and their counsel held prior to the June 8, 2020 meeting, as well as at the meeting held that day. The Board considered supplemental information provided by the Advisor on the operations of the Advisor and the performance of the Fund since the onset of the COVID-19 pandemic. The Board applied its business judgment to determine whether the arrangement between the Trust and the Advisor continues to be a reasonable business arrangement from the Fund's perspective. The Board determined that, given the totality of the information provided with respect to the Agreement, the Board had received sufficient information to renew the Agreement. The Board considered that shareholders chose to invest or remain invested in the Fund knowing that the Advisor manages the Fund and knowing the Fund's unitary fee. In reviewing the Agreement, the Board considered the nature, extent and quality of the services provided by the Advisor under the Agreement. The Board considered that the Advisor is responsible for the overall management and administration of the Trust and the Fund and reviewed all of the services provided by the Advisor to the Fund, as well as the background and experience of the persons responsible for such services. The Board noted that the Fund is an actively-managed ETF and considered the background and experience of the persons responsible for the day-to-day management of the Fund's investments. In reviewing the services provided, the Board noted the compliance program that had been developed by the Advisor and considered that it includes a robust program for monitoring the Advisor's and the Fund's compliance with the 1940 Act, as well as the Fund's compliance with its investment objective, policies and restrictions. The Board also considered a report from the Advisor with respect to its risk management functions related to the operation of the Fund. Finally, as part of the Board's consideration of the Advisor's services, the Advisor, in its written materials and at the May 11, 2020 meeting, described to the Board the scope of its ongoing investment in additional infrastructure and personnel to maintain and improve the quality of services provided to the Fund and the other funds in the First Trust Fund Complex. In light of the information presented and the considerations made, the Board concluded that the nature, extent and quality of the services provided to the Trust and the Fund by the Advisor under the Agreement have been and are expected to remain satisfactory and that the Advisor has managed the Fund consistent with its investment objective, policies and restrictions. The Board considered the unitary fee rate payable by the Fund under the Agreement for the services provided. The Board considered that as part of the unitary fee the Advisor is responsible for the Fund's expenses, including the cost of transfer agency, custody, fund administration, legal, audit and other services and license fees, if any, but excluding the fee payment under the Agreement and interest, taxes, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses, if any. The Board noted that the Advisor had previously agreed to waive a portion of its unitary fee in an amount equal to 0.05% of the Fund's average daily net assets until at least March 1, 2021 and to also reduce the unitary fee to the extent of acquired fund fees and expenses of shares of investment companies advised by the Advisor that are held by the Fund. The Board received and reviewed information showing the advisory or unitary fee rates and expense ratios of the peer funds in the Expense Group, as well as advisory and unitary fee rates charged by the Advisor to other fund (including ETFs) and non-fund clients, as applicable. Because the Fund pays 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, after taking into account the contractual fee waiver, was above the median total (net) expense ratio of the peer funds in the Expense Group. With respect to the Expense Group, the Board, at the May 11, 2020 meeting, discussed with Broadridge its methodology for assembling peer groups and discussed with the Advisor limitations in creating peer groups for actively-managed ETFs, including different business models that may affect the pricing of services among ETF sponsors. The Board took these limitations and differences into account in considering the peer data. With respect to fees charged to other non-ETF clients, the Board considered differences between the Fund and other non-ETF clients that limited their comparability. In considering the unitary fee rate overall, the Board also considered the Advisor's statement that it seeks to meet investor needs through innovative and value-added investment solutions and the Advisor's demonstrated long-term commitment to the Fund and the other funds in the First Trust Fund Complex. The Board considered performance information for the Fund. The Board noted the process it has established for monitoring the Fund's performance and portfolio risk on an ongoing basis, which includes quarterly performance reporting from the Advisor for the Fund. The Board determined that this process continues to be effective for reviewing the Fund's performance. The Board received and reviewed information comparing the Fund's performance for periods ended December 31, 2019 to the performance of the funds in the Performance Universe and to that of a benchmark index. Based on the information provided, the Board noted that the Fund underperformed the Performance Universe median for the one-, three- and five-year periods ended December 31, 2019. The Board also noted that the Fund outperformed the benchmark index for the one-, three- and five-year periods ended December 31, 2019. The Board noted the Advisor's discussion of the Fund's performance at the May 11, 2020 meeting. Page 42 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) OCTOBER 31, 2020 (UNAUDITED) On the basis of all the information provided on the unitary fee and performance of the Fund and the ongoing oversight by the Board, the Board concluded that the unitary fee for the Fund continues to be reasonable and appropriate in light of the nature, extent and quality of the services provided by the Advisor to the Fund under the Agreement. The Board considered information and discussed with the Advisor whether there were any economies of scale in connection with providing advisory services to the Fund and noted the Advisor's statement that it believes its expenses will likely increase over the next twelve months as the Advisor continues to hire personnel and build infrastructure, including technology, to improve the services to the Fund. The Board noted that any reduction in fixed costs associated with the management of the Fund would benefit the Advisor, but that the unitary fee structure provides a level of certainty in expenses for the Fund. The Board considered the revenues and allocated costs (including the allocation methodology) of the Advisor in serving as investment advisor to the Fund for the twelve months ended December 31, 2019 and the estimated profitability level for the Fund calculated by the Advisor based on such data, as well as complex-wide and product-line profitability data, for the same period. The Board noted the inherent limitations in the profitability analysis and concluded that, based on the information provided, the Advisor's profitability level for the Fund was not unreasonable. In addition, the Board considered fall-out benefits described by the Advisor that may be realized from its relationship with the Fund. The Board considered that the Advisor had identified as a fall-out benefit to the Advisor and FTP their exposure to investors and brokers who, absent their exposure to the Fund, may have had no dealings with the Advisor or FTP, and noted that the Advisor does not utilize soft dollars in connection with the Fund. The Board concluded that the character and amount of potential fall-out benefits to the Advisor were not unreasonable. Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, unanimously determined that the terms of the Agreement continue to be fair and reasonable and that the continuation of the Agreement 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. 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 May 11, 2020 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 June 1, 2019 (the initial compliance date for certain requirements of Rule 22e-4) through the Liquidity Committee's annual meeting held on March 20, 2020 and assessed the Program's adequacy and effectiveness of implementation during this period, including the operation of the highly liquid investment minimum for each fund that is required under the Program to have one, and any material changes to the Program. Note that because the Fund primarily holds assets that are highly liquid investments, the Fund has not adopted a highly liquid investment minimum. As stated in the written report, during the review period, no fund breached the 15% limitation on illiquid investments, no fund with a highly liquid investment minimum breached that minimum and no fund filed a Form N-LIQUID. The Advisor concluded that each fund's investment strategy is appropriate for an open-end fund; that the Program operated effectively in all material respects during the review period; and that the Program is reasonably designed to assess and manage the liquidity risk of each fund and to maintain compliance with Rule 22e-4. Page 43 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) OCTOBER 31, 2020 (UNAUDITED) REMUNERATION First Trust Advisors L.P. ("First Trust") is authorised and regulated by the U.S. Securities and Exchange Commission and is entitled to market shares of certain funds it manages, including First Trust Enhanced Short Maturity ETF (the "Fund"), in certain member states in the European Economic Area in accordance with the cooperation arrangements in Article 42 of the Alternative Investment Fund Managers Directive (the "Directive"). First Trust is required under the Directive to make disclosures in respect of remuneration. The following disclosures are made in line with First Trust's interpretation of currently available regulatory guidance on remuneration disclosures. During the year ended December 31, 2019, the amount of remuneration paid (or to be paid) by First Trust in respect of the Fund is $7,757,913. This figure is comprised of $1,486,412 paid (or to be paid) in fixed compensation and $6,271,501 paid (or to be paid) in variable compensation. There were a total of 19 beneficiaries of the remuneration described above. Those amounts include $1,032,165 paid (or to be paid) to senior management of First Trust and $6,725,748 paid (or to be paid) to other employees whose professional activities have a material impact on the risk profiles of First Trust or the Fund (collectively, "Code Staff"). Code Staff included in the aggregated figures disclosed above are rewarded in line with First Trust's remuneration policy (the "Remuneration Policy") which is determined and implemented by First Trust's senior management. The Remuneration Policy reflects First Trust's ethos of good governance and encapsulates the following principal objectives: i. to provide a clear link between remuneration and performance of First Trust and to avoid rewarding for failure; ii. to promote sound and effective risk management consistent with the risk profiles of the funds managed by First Trust; and iii. to remunerate staff in line with the business strategy, objectives, values and interests of First Trust and the funds managed by First Trust in a manner that avoids conflicts of interest. First Trust assesses various risk factors which it is exposed to when considering and implementing remuneration for Code Staff and considers whether any potential award to such person(s) would give rise to a conflict of interest. First Trust does not reward failure, or consider the taking of risk or failure to take risk in its remuneration of Code Staff. First Trust assesses performance for the purposes of determining payments in respect of performance-related remuneration of Code Staff by reference to a broad range of measures including (i) individual performance (using financial and non-financial criteria), and (ii) the overall performance of First Trust. Remuneration is not based upon the performance of the Fund. The elements of remuneration are balanced between fixed and variable and the senior management sets fixed salaries at a level sufficient to ensure that variable remuneration incentivises and rewards strong individual performance but does not encourage excessive risk taking. No individual is involved in setting his or her own remuneration. Page 44 <PAGE> -------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) OCTOBER 31, 2020 (UNAUDITED) The following tables identify the Trustees and Officers of the Trust. Unless otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite 400, Wheaton, IL 60187. The Trust's statement of additional information includes additional information about the Trustees and is available, without charge, upon request, by calling (800) 988-5891. <TABLE> <CAPTION> NUMBER OF OTHER PORTFOLIOS IN TRUSTEESHIPS OR THE FIRST TRUST DIRECTORSHIPS NAME, TERM OF OFFICE AND FUND COMPLEX HELD BY TRUSTEE YEAR OF BIRTH AND YEAR FIRST ELECTED PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST POSITION WITH THE TRUST OR APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ INDEPENDENT TRUSTEES ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 189 None (1951) Limited Partner, Gundersen Real Estate o Since Inception Limited Partnership (June 1992 to December 2016); Member, Sportsmed LLC (April 2007 to November 2015) Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 189 Director of ADM (1957) (Futures Commission Merchant) Investor Services, o Since Inception Inc., ADM Investor Services International, Futures Industry Association, and National Futures Association Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 189 Director of Trust (1956) and Management Consulting) Company of o Since Inception Illinois Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 189 None (1954) Managing Director and Chief Operating o Since Inception Officer (January 2015 to August 2018), Pelita Harapan Educational Foundation (Educational Product and Services) ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED TRUSTEE ------------------------------------------------------------------------------------------------------------------------------------ James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 189 None Chairman of the Board Advisors L.P. and First Trust Portfolios (1955) o Since Inception L.P., Chairman of the Board of Directors, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) </TABLE> ----------------------------- (1) Mr. Bowen is deemed an "interested person" of the Trust due to his position as Chief Executive Officer of First Trust Advisors L.P., investment advisor of the Trust. Page 45 <PAGE> --------------------------------------------------------------------------------BOARD OF TRUSTEES AND OFFICERS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) OCTOBER 31, 2020 (UNAUDITED) <TABLE> <CAPTION> NAME AND POSITION AND OFFICES TERM OF OFFICE AND PRINCIPAL OCCUPATIONS YEAR OF BIRTH WITH TRUST LENGTH OF SERVICE DURING PAST 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS(2) ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> James M. Dykas President and Chief Executive o Indefinite Term Managing Director and Chief Financial Officer (1966) Officer (January 2016 to Present), Controller (January 2011 o Since January 2016 to January 2016), Senior Vice President (April 2007 to January 2016), First Trust Advisors L.P. and First Trust Portfolios L.P.; Chief Financial Officer (January 2016 to Present), BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President (July 2016 to Present), Vice (1972) Officer and Chief President (April 2012 to July 2016), First Trust Accounting Officer o Since January 2016 Advisors L.P. and First Trust Portfolios L.P. W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and First (1960) Legal Officer Trust Portfolios L.P.; Secretary and General o Since Inception Counsel, BondWave LLC; Secretary, Stonebridge Advisors LLC Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and (1970) First Trust Portfolios L.P. o Since Inception Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P. (1966) and Assistant Secretary and First Trust Portfolios L.P. o Since Inception Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. (1966) and First Trust Portfolios L.P. o Since Inception Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. (1970) and First Trust Portfolios L.P. o Since Inception </TABLE> ----------------------------- (2) The term "officer" means the president, vice president, secretary, treasurer, controller or any other officer who performs a policy making function. Page 46 <PAGE> -------------------------------------------------------------------------------- PRIVACY POLICY -------------------------------------------------------------------------------- FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM) OCTOBER 31, 2020 (UNAUDITED) PRIVACY POLICY First Trust values our relationship with you and considers your privacy an important priority in maintaining that relationship. We are committed to protecting the security and confidentiality of your personal information. SOURCES OF INFORMATION We collect nonpublic personal information about you from the following sources: o Information we receive from you and your broker-dealer, investment advisor or financial representative through interviews, applications, agreements or other forms; o Information about your transactions with us, our affiliates or others; o Information we receive from your inquiries by mail, e-mail or telephone; and o Information we collect on our website through the use of "cookies". For example, we may identify the pages on our website that your browser requests or visits. INFORMATION COLLECTED The type of data we collect may include your name, address, social security number, age, financial status, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, investment objectives, marital status, family relationships and other personal information. DISCLOSURE OF INFORMATION We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. In addition to using this information to verify your identity (as required under law), the permitted uses may also include the disclosure of such information to unaffiliated companies for the following reasons: o In order to provide you with products and services and to effect transactions that you request or authorize, we may disclose your personal information as described above to unaffiliated financial service providers and other companies that perform administrative or other services on our behalf, such as transfer agents, custodians and trustees, or that assist us in the distribution of investor materials such as trustees, banks, financial representatives, proxy services, solicitors and printers. o We may release information we have about you if you direct us to do so, if we are compelled by law to do so, or in other legally limited circumstances (for example to protect your account from fraud). In addition, in order to alert you to our other financial products and services, we may share your personal information within First Trust. USE OF WEBSITE ANALYTICS We currently use third party analytics tools, Google Analytics and AddThis, to gather information for purposes of improving First Trust's website and marketing our products and services to you. These tools employ cookies, which are small pieces of text stored in a file by your web browser and sent to websites that you visit, to collect information, track website usage and viewing trends such as the number of hits, pages visited, videos and PDFs viewed and the length of user sessions in order to evaluate website performance and enhance navigation of the website. We may also collect other anonymous information, which is generally limited to technical and web navigation information such as the IP address of your device, internet browser type and operating system for purposes of analyzing the data to make First Trust's website better and more useful to our users. The information collected does not include any personal identifiable information such as your name, address, phone number or email address unless you provide that information through the website for us to contact you in order to answer your questions or respond to your requests. To find out how to opt-out of these services click on: Google Analytics and AddThis. CONFIDENTIALITY AND SECURITY With regard to our internal security procedures, First Trust restricts access to your nonpublic personal information to those First Trust employees who need to know that information to provide products or services to you. We maintain physical, electronic and procedural safeguards to protect your nonpublic personal information. POLICY UPDATES AND INQUIRIES As required by federal law, we will notify you of our privacy policy annually. We reserve the right to modify this policy at any time, however, if we do change it, we will tell you promptly. For questions about our policy, or for additional copies of this notice, please go to www.ftportfolios.com, or contact us at 1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust Advisors). March 2019 Page 47 <PAGE> This page intentionally left blank. <PAGE> FIRST TRUST First Trust Exchange-Traded Fund IV INVESTMENT ADVISOR First Trust Advisors L.P. 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 ADMINISTRATOR, CUSTODIAN, FUND ACCOUNTANT & TRANSFER AGENT The Bank of New York Mellon 240 Greenwich Street New York, NY 10286 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deloitte & Touche LLP 111 S. Wacker Drive Chicago, IL 60606 LEGAL COUNSEL Chapman and Cutler LLP 111 W. Monroe Street Chicago, IL 60603 <PAGE> [BLANK BACK COVER] <PAGE>
FIRST TRUST First Trust Exchange-Traded Fund IV -------------------------------------------------------------------------------- First Trust Strategic Income ETF (FDIV) Annual Report For the Year Ended October 31, 2020 <PAGE> --------------------------------------------------------------------------------TABLE OF CONTENTS -------------------------------------------------------------------------------- FIRST TRUST STRATEGIC INCOME ETF (FDIV) ANNUAL REPORT OCTOBER 31, 2020 Shareholder Letter........................................................... 1 Fund Performance Overview.................................................... 2 Portfolio Commentary......................................................... 4 Understanding Your Fund Expenses............................................. 7 Portfolio of Investments..................................................... 8 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 Report of Independent Registered Public Accounting Firm...................... 27 Additional Information....................................................... 28 Board of Trustees and Officers............................................... 34 Privacy Policy............................................................... 36 CAUTION REGARDING FORWARD-LOOKING STATEMENTS This report contains certain forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding the goals, beliefs, plans or current expectations of First Trust Advisors L.P. ("First Trust" or the "Advisor") and/or First Trust Global Portfolios Ltd. ("FTGP"); Energy Income Partners, LLC ("EIP"); Stonebridge Advisors LLC ("Stonebridge"); and/or Richard Bernstein Advisors LLC ("RBA") (each, a "Sub-Advisor" and together, the "Sub-Advisors") and their respective representatives, taking into account the information currently available to them. Forward-looking statements include all statements that do not relate solely to current or historical fact. For example, forward-looking statements include the use of words such as "anticipate," "estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or other words that convey uncertainty of future events or outcomes. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the series of First Trust Exchange-Traded Fund IV (the "Trust") described in this report (First Trust Strategic Income ETF; hereinafter referred to as the "Fund") to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. When evaluating the information included in this report, you are cautioned not to place undue reliance on these forward-looking statements, which reflect the judgment of the Advisor and/or Sub-Advisors and their respective representatives only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events and circumstances that arise after the date hereof. PERFORMANCE AND RISK DISCLOSURE There is no assurance that the Fund will achieve its investment objectives. The Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the Fund's shares may therefore be less than what you paid for them. Accordingly, you can lose money investing in the Fund. See "Risk Considerations" in the Additional Information section of this report for a discussion of other risks of investing in the Fund. Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. For the most recent month-end performance figures, please visit www.ftportfolios.com or speak with your financial advisor. Investment returns, net asset value and share price will fluctuate and Fund shares, when sold, may be worth more or less than their original cost. The Advisor may also periodically provide additional information on Fund performance on the Fund's webpage at www.ftportfolios.com. HOW TO READ THIS REPORT This report contains information that may help you evaluate your investment in the Fund. It includes details about the Fund and presents data and analysis that provide insight into the Fund's performance and investment approach. By reading the portfolio commentary from the portfolio management team of the Fund, you may obtain an understanding of how the market environment affected the Fund's performance. The statistical information that follows may help you understand the Fund's performance compared to that of relevant market benchmarks. It is important to keep in mind that the opinions expressed by personnel of the Advisor and/or Sub-Advisors are just that: informed opinions. They should not be considered to be promises or advice. The opinions, like the statistics, cover the period through the date on the cover of this report. The material risks of investing in the Fund are spelled out in the prospectus, the statement of additional information, and other Fund regulatory filings. <PAGE> -------------------------------------------------------------------------------- SHAREHOLDER LETTER -------------------------------------------------------------------------------- FIRST TRUST STRATEGIC INCOME ETF (FDIV) ANNUAL LETTER FROM THE CHAIRMAN AND CEO OCTOBER 31, 2020 Dear Shareholders: First Trust is pleased to provide you with the annual report for the First Trust Strategic Income ETF (the "Fund"), which contains detailed information about the Fund for the twelve months ended October 31, 2020. As I was collecting my thoughts for this annual roundup it occurred to me that my message this year should touch on the tone of the markets and the investing climate rather than belabor all the news and events that brought us to this juncture. We all know how tumultuous our lives have become over the past eight or so months. The phrase "shelter-at-home" says it all. I would rather talk about why I believe investors should be optimistic about where we could be headed. Having said that, allow me to at least acknowledge the two elephants in the room: the coronavirus ("COVID-19") and the election. In the first 12 days of November, we learned the following: that we likely have a new president-elect (Joe Biden), though it may not be official for some time because it is being contested by President Donald Trump and some of his loyal backers in the Republican Party citing voter fraud in certain states; that we still do not know which political party will have control of the Senate due to a couple of run-offs in Georgia to be held on January 5, 2021; and, that it looks as though we may be fortunate enough to have an FDA-approved COVID-19 vaccine by either the end of 2020 or the start of 2021, though that too is not yet official. It could be a game-changer in the COVID-19 battle. And, we may gain access to additional vaccines as well. The key to getting the economy back to running on all cylinders is to fully reopen, and a vaccine is "what the doctor ordered." With respect to the tone of the markets and investment climate, to say that I am encouraged about what has transpired in 2020 would be an understatement. Despite the extraordinary challenges so far this year, the S&P 500(R) Index posted a total return of 2.77% over the first 10 months of 2020, this despite plunging 33.8% into bear market territory from February 19, 2020 through March 23, 2020, according to Bloomberg. As impressive as that feat is, the future looks even brighter. While Bloomberg's consensus earnings growth rate estimate for the S&P 500(R) Index for 2020 was -16.51%, as of November 13, 2020, its 2021 and 2022 estimates were 21.74% and 16.95%, respectively. That is a strong take on the prospects for a rebound in Corporate America over the next 24 months. One of the tailwinds that is providing a good deal of support to the economy and markets is the decision by the Federal Reserve (the "Fed") to keep interest rates artificially low for as long as need be to meet both its employment and inflation targets. By keeping rates lower for longer, the Fed is essentially inviting investors to assume more risk to generate higher returns. Brian Wesbury, Chief Economist at First Trust, believes that the Fed could need until 2024 to accomplish its goals. That is a lot of runway for investors to reposition their portfolios, if needed, and a very generous, and perhaps unprecedented, amount of guidance from the Fed, in our opinion. Those investors with cash on the sidelines earning next to nothing have options if they choose to act. We are encouraged about the prospects for the economy and the markets, but investors should be prepared to weather some volatility until the COVID-19 pandemic is better contained. As always, we encourage investors to stay the course! Thank you for giving First Trust the opportunity to play a role in your financial future. We value our relationship with you and will report on the Fund again in six months. Sincerely, /s/ James A. Bowen James A. Bowen Chairman of the Board of Trustees Chief Executive Officer of First Trust Advisors L.P. Page 1 <PAGE> -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) -------------------------------------------------------------------------------- FIRST TRUST STRATEGIC INCOME ETF (FDIV) The primary investment objective of First Trust Strategic Income ETF (the "Fund") is to seek risk-adjusted income. The Fund's secondary investment objective is capital appreciation. The Fund is a multi-manager, multi-strategy actively managed exchange-traded fund. First Trust Advisors L.P. ("First Trust" or the "Advisor") serves as the Fund's investment advisor. The Advisor's Investment Committee determines the Fund's strategic allocation among various general investment categories and allocates the Fund's assets to portfolio management teams comprised of personnel of the Advisor and/or a sub-advisor (each, a "Management Team"), which employ their respective investment strategies. Shares of the Fund are listed on The Nasdaq Stock Market LLC under the ticker symbol "FDIV." The Fund's investment categories are: (i) high yield corporate bonds, commonly referred to as "junk" bonds, and first lien senior secured floating rate bank loans; (ii) mortgage-related investments; (iii) preferred securities; (iv) international sovereign bonds, including securities issued by emerging markets countries; (v) equity securities of Energy Infrastructure Companies(1), certain of which are master limited partnerships ("MLPs"); and (vi) dividend paying U.S. exchange-traded equity securities and depositary receipts. The Management Teams may utilize a related option overlay strategy and/or derivative instruments in implementing their respective investment strategies for the Fund. Additionally, the Management Teams may seek to gain exposure to the Fund's investment categories directly or through investments in exchange-traded funds. The Advisor expects that the Fund may at times invest significantly in other exchange-traded funds, including but not limited to, other exchange-traded funds that are advised by the Advisor; accordingly, the Fund may operate principally as a "fund of funds," but will not necessarily operate as such at all times. The Fund seeks to achieve its objectives by having each Management Team focus on those securities within its respective investment category. The Fund may add or remove investment categories or Management Teams at the discretion of the Advisor.<TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL CUMULATIVE TOTAL RETURNS TOTAL RETURNS 1 Year Ended 5 Years Ended Inception (8/13/14) 5 Years Ended Inception (8/13/14) 10/31/20 10/31/20 to 10/31/20 10/31/20 to 10/31/20 <S> <C> <C> <C> <C> <C> FUND PERFORMANCE NAV -7.19% 3.04% 2.42% 16.15% 16.02% Market Price -7.16% 3.17% 2.44% 16.86% 16.16% INDEX PERFORMANCE Blended Index(2) -5.91% 2.97% 1.94% 15.77% 12.70% Bloomberg Barclays U.S. Aggregate Bond Index 6.19% 4.08% 3.72% 22.14% 25.53% Russell 3000(R) Index 10.15% 11.48% 10.56% 72.21% 86.63% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> Total returns for the period since inception are calculated from the inception date of the Fund. "Average Annual Total Returns" represent the average annual change in value of an investment over the period indicated. "Cumulative Total Returns" represent the total change in value of an investment over the period indicated. The Fund's per share net asset value ("NAV") is the value of one share of the Fund and is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of outstanding shares. The price used to calculate market return ("Market Price") is determined by using the midpoint of the national best bid and offer price ("NBBO") as of the time that the Fund's NAV is calculated. Under SEC rules, the NBBO consists of the highest displayed buy and lowest sell prices among the various exchanges trading the Fund at the time the Fund's NAV is calculated. Prior to January 1, 2019, the price used was the midpoint between the highest bid and the lowest offer on the stock exchange on which shares of the Fund were listed for trading as of the time that the Fund's NAV was calculated. Since shares of the Fund did not trade in the secondary market until after the Fund's inception, for the period from inception to the first day of secondary market trading in shares of the Fund, the NAV of the Fund is used as a proxy for the secondary market trading price to calculate market returns. NAV and market returns assume that all distributions have been reinvested in the Fund at NAV and Market Price, respectively. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The total returns presented reflect the reinvestment of dividends on securities in the indices. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future performance. ----------------------------- (1) Energy Infrastructure Companies are publicly-traded MLPs or limited liability companies that are taxed as partnerships; entities that control MLPs, entities that own general partner interests in an MLP, or MLP affiliates (such as I-shares or I-units); U.S. and Canadian energy yield corporations ("yieldcos"); pipeline companies; utilities; and other companies that are involved in operating or providing services in support of infrastructure assets such as pipeline, power transmission, terminalling and petroleum and natural gas storage in the petroleum, natural gas and power generation industries. (2) The Blended Index is equally weighted to include these six indices: the Alerian MLP Index, Dow Jones U.S. Select Dividend Index, ICE BofA Fixed Rate Preferred Securities Index, ICE BofA U.S. High Yield Index, Bloomberg Barclays EM USD Aggregate Index and Bloomberg Barclays U.S. MBS Index. An index does not charge management fees or brokerage expenses, and no such fees or expenses were deducted from the index performance shown. Indices are unmanaged and an investor cannot invest directly in an index. The Blended Index returns are calculated by using the monthly return of the six indices during each period shown above. At the beginning of each month the six indices are rebalanced to a 16.66 percentage weighting for each index to account for divergence from the percentage weighting that occurred during the course of each month. The monthly returns are then compounded for each period shown above, giving the performance of the Blended Index for each period shown above. Page 2 <PAGE> --------------------------------------------------------------------------------FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST STRATEGIC INCOME ETF (FDIV) ----------------------------------------------------------- % OF TOTAL ASSET CLASSIFICATION INVESTMENTS ----------------------------------------------------------- Exchange-Traded Funds 58.12% Common Stocks 29.80 Master Limited Partnerships 6.74 U.S. Government Agency Mortgage- Backed Securities 2.99 Real Estate Investment Trusts 2.30 Asset-Backed Securities 0.03 Mortgage-Backed Securities 0.02 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS INVESTMENTS ----------------------------------------------------------- First Trust Tactical High Yield ETF 15.16% First Trust Preferred Securities and Income ETF 12.33 First Trust Emerging Markets Local Currency Bond ETF 11.57 First Trust Low Duration Opportunities ETF 9.07 iShares J.P. Morgan USD Emerging Markets Bond ETF 4.93 First Trust Institutional Preferred Securities and Income ETF 4.12 TC PipeLines, L.P. 1.43 Enterprise Products Partners, L.P. 1.32 TC Energy Corp. 1.30 Magellan Midstream Partners, L.P. 1.26 ------- Total 62.49% ======= <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT AUGUST 13, 2014 - OCTOBER 31, 2020 First Trust Strategic Blended Bloomberg Barclays U.S. Russell 3000(R) Income ETF Index Aggregate Bond Index Index <S> <C> <C> <C> <C> 8/13/14 $10,000 $10,002 $10,003 $10,000 10/31/14 10,177 10,129 10,080 10,371 4/30/15 10,330 10,191 10,288 10,863 10/31/15 9,989 9,735 10,280 10,837 4/30/16 10,436 10,006 10,571 10,844 10/31/16 10,856 10,446 10,731 11,297 4/30/17 11,275 10,981 10,659 12,859 10/31/17 11,442 11,058 10,827 14,006 4/30/18 11,340 11,029 10,625 14,537 10/31/18 11,303 11,093 10,605 14,929 4/30/19 12,100 11,766 11,187 16,379 10/31/19 12,502 11,977 11,826 16,942 4/30/20 11,156 10,915 12,401 16,208 10/31/20 11,604 11,270 12,558 18,662 </TABLE> Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 3 <PAGE> -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY -------------------------------------------------------------------------------- FIRST TRUST STRATEGIC INCOME ETF (FDIV) ANNUAL REPORT OCTOBER 31, 2020 (UNAUDITED) INVESTMENT ADVISOR First Trust Advisors L.P. ("First Trust" or the "Advisor") is the investment advisor to the First Trust Strategic Income ETF ("FDIV" or the "Fund"). The following serve as investment sub-advisors (each, a "Sub-Advisor") to the Fund: First Trust Global Portfolios Ltd. ("FTGP"); Energy Income Partners, LLC ("EIP"); Stonebridge Advisors LLC ("Stonebridge"); and Richard Bernstein Advisors LLC ("RBA"). The Advisor's Investment Committee determines the Fund's strategic allocation among various general investment categories and allocates the Fund's assets to portfolio management teams comprised of personnel of the Advisor and/or a Sub-Advisor, which employs their respective investment strategies. ADVISOR'S INVESTMENT COMMITTEE ADVISOR'S INVESTMENT COMMITTEE The Advisor's Investment Committee, which determines the Fund's strategic allocation among various general investment categories and allocates the Fund's assets, consists of: o DANIEL J. LINDQUIST, CHAIRMAN OF THE INVESTMENT COMMITTEE AND MANAGING DIRECTOR OF FIRST TRUST; o DAVID G. MCGAREL, CHIEF INVESTMENT OFFICER, CHIEF OPERATING OFFICER AND MANAGING DIRECTOR OF FIRST TRUST; o JON C. ERICKSON, SENIOR VICE PRESIDENT OF FIRST TRUST; o ROGER F. TESTIN, SENIOR VICE PRESIDENT OF FIRST TRUST; o TODD LARSON, CFA, SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER OF FIRST TRUST; o JOHN GAMBLA; CAF, FRM, PRM, SENIOR PORTFOLIO MANAGER OF FIRST TRUST; o ROB A. GUTTSCHOW, CFA, SENIOR PORTFOLIO MANAGER OF FIRST TRUST; AND o CHRIS A. PETERSON, CFA, SENIOR VICE PRESIDENT OF FIRST TRUST. ADVISOR PORTFOLIO MANAGERS o WILLIAM HOUSEY, CFA, SENIOR VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER OF FIRST TRUST, LEVERAGED FINANCE TEAM; o SCOTT D. FRIES, CFA, SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER OF FIRST TRUST, LEVERAGED FINANCE TEAM; o JEREMIAH CHARLES, SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER OF FIRST TRUST, SECURITIZED PRODUCTS GROUP; AND o JAMES SNYDER, SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER OF FIRST TRUST, SECURITIZED PRODUCTS GROUP. SUB-ADVISOR PORTFOLIO MANAGERS o JAMES J. MURCHIE, FOUNDER, CHIEF EXECUTIVE OFFICER, CO-PORTFOLIO MANAGER AND PRINCIPAL OF EIP. o EVA PAO, PORTFOLIO MANAGER AND PRINCIPAL OF EIP. o JOHN K. TYSSELAND, PORTFOLIO MANAGER AND PRINCIPAL OF EIP. o DEREK FULTON, CHIEF EXECUTIVE OFFICER AND CHIEF INVESTMENT OFFICER OF FTGP. o LEONARDO DACOSTA, PORTFOLIO MANAGER OF FTGP. o ANTHONY BEEVERS, PORTFOLIO MANAGER OF FTGP. o RICHARD BERNSTEIN, CHIEF EXECUTIVE OFFICER AND CHIEF INVESTMENT OFFICER OF RBA. o HENRY TIMMONS, CFA, DIRECTOR OF ETFS OF RBA. o MATTHEW GRISWOLD, CFA, DIRECTOR OF INVESTMENTS OF RBA. o SCOTT T. FLEMING, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF STONEBRIDGE. o ROBERT WOLF, SENIOR VICE PRESIDENT AND CHIEF INVESTMENT OFFICER OF STONEBRIDGE. COMMENTARY FIRST TRUST STRATEGIC INCOME ETF The Fund is an actively managed exchange-traded fund. The primary investment objective of the Fund is to seek risk-adjusted income. The Fund's secondary investment objective is capital appreciation. There is no assurance that the Fund's investment objectives will be achieved. The Fund may not be appropriate for all investors. MARKET RECAP Suffice it to say that much has changed with the state of the economy over the past 12 months. A year ago, a top concern was that U.S. economic growth was being tempered by the Trump Administration's aggressive use of trade tariffs against some of the major trading partners of the U.S. The trade tariff program was enacted in March 2018 with the initial intent of only targeting imported Page 4 <PAGE> -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST STRATEGIC INCOME ETF (FDIV) ANNUAL REPORT OCTOBER 31, 2020 (UNAUDITED) steel and aluminum. The program, however, quickly expanded to include hundreds of billions of dollars of other imported goods and services. The tariffs are largely still in place as of November 2020 which means the program has been operational for some 32 months. Throughout this period, the epicenter of the trade conflict has clearly been between the U.S. and China. While the goal in the Trump Administration was to grow the economy at a 3.00% or higher rate, after his tax reform bill was signed into law in December 2017, from June 30, 2018 (first full quarter of tariffs) through December 31, 2019, real U.S. gross domestic product ("GDP") averaged just 2.2%, according to data from the Bureau of Economic Analysis. The tariffs trumped lower tax rates, in our opinion. In February 2020, the White House admitted that President Donald J. Trump's stance on trade depressed economic growth and business investment, according to Bloomberg. On top of the tariffs, the world was introduced to a new coronavirus in the first quarter of 2020, known as COVID-19. Ironically, its origin was traced back to China, the poster country for the Trump Administration's trade war. Since most people are well aware of the evolution of the virus and its destructive nature, attention will be given to its impact on economic growth. To put it bluntly, COVID-19 threw the U.S. economy into recession. Real U.S. GDP growth came in at an annualized -5.0% and -31.4% in the first and second quarters of 2020, according to the Bureau of Economic Analysis. The good news is the damage looks like it may be limited to just those two quarters. Thanks in large part to the trillions of dollars of fiscal and monetary stimulus provided by the U.S. federal government, economic growth surged back by an annualized 33.1% in the third quarter of 2020. Americans have learned to adapt to COVID-19, especially when it comes to retail shopping. Adobe Analytics estimates that online holiday shopping in 2020 (November and December) will surge 33% year-over-year to a record $189 billion, according to CNBC. That equates to around two years of e-commerce growth in just one season. Adobe noted that online sales could exceed $200 billion if consumers receive another round of government stimulus checks or if brick-and-mortar stores are forced to shut down due to the spread of COVID-19. Americans are adept at adapting under pressure, in our opinion. Some health care experts, such as the World Health Organization, are hoping for a COVID-19 vaccine to be initially available by year-end, and then on a broader scale by the midpoint of 2021. If there is a silver lining from this ordeal it could be the extraordinary level of guidance offered by the Federal Reserve (the "Fed"), which is likely unprecedented. In September 2020, the Fed stated that it expects to hold short-term interest rates near zero until two things happen: (1) the U.S. unemployment rate is back to normal (around a 4.0% unemployment rate), and (2) inflation is running at or above 2.0%. Brian Wesbury, Chief Economist at First Trust Advisors L.P., notes that the Fed does not expect to achieve both goals until 2024. We believe that one of the Fed's motivations in promoting a multi-year commitment to a near zero interest rate monetary policy is to incentivize risk-taking. By holding interest rates low, the Fed is essentially disincentivizing saving. This suggests the Fed wants individuals to invest their capital in risk assets and is offering valuable guidance on its monetary policy to instill confidence in the markets, in our opinion. PERFORMANCE ANALYSIS/FUND The Fund generated a net asset value ("NAV") return of -7.19% for the 12-month period ended October 31, 2020. During the same period, the Blended Index generated a return of -5.91%. The Blended Index is equally weighted to include these six indices: the Alerian MLP Index, Dow Jones U.S. Select Dividend Index, ICE BofA Fixed Rate Preferred Securities Index, ICE BofA U.S. High Yield Index, Bloomberg Barclays EM USD Aggregate Index and Bloomberg Barclays U.S. MBS Index. The Fund invests in six investment categories which are: high-yield corporate bonds and first lien senior secured floating-rate bank loans, mortgage-related investments, preferred securities, international sovereign bonds, equity securities of Energy Infrastructure Companies, and dividend-paying U.S. exchange-traded equity securities and depositary receipts. The Fund may seek exposure to these investment categories directly or through investment in exchange-traded funds. The weight assigned to each investment category is determined on a periodic basis. As of October 31, 2020, the highest-weighted investment category was the dividend-paying U.S. exchange-traded equity securities and the lowest-weighted investment category was mortgage-related investments. The investment categories of mortgage-related investments, preferred securities, and high-yield corporate bonds and floating-rate bank loans were the only investment categories that had positive performance for the one-year period. The performance for the high-yield corporate bonds and floating-rate bank loans had a positive impact on the overall performance of the Fund. Specifically driving the bank loan high-yield bond performance within the Fund was the Fund's de minimis exposure to the energy industry, and strong performance in the healthcare industry. Partially offsetting these contributors were the Fund's allocation and asset selection within the leisure industry. Mortgage-related investments had the largest positive impact on the overall Fund performance during the 12-month period ended October 31, 2020. Mortgages outperformed due to the combination of declining interest rates and spread tightening associated with the Federal Reserve purchases of the sector. Going forward, we expect mortgage spreads to continue tightening which will improve Page 5 <PAGE> -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST STRATEGIC INCOME ETF (FDIV) ANNUAL REPORT OCTOBER 31, 2020 (UNAUDITED) outcomes for mortgage investments. We believe that potential for improved performance within the agency mortgage market is greatest for structure holdings within the collateral mortgage obligation (CMOs). The portfolio maintains investments in the CMO sector. In addition, we expect, over the near term, mild upward pressure on interest rates, but overall that general interest rates will remain stable and bounded by an accommodated Fed policy, which should minimize convexity costs and improve mortgage performance. The portfolio maintains a defensive duration but may increase risk should interest rates rise and mortgage securities become more attractive. In spite of volatile conditions in the market, the performance of preferred securities had a positive impact on the overall performance of the Fund. The preferred market began the period from a position of strength supported by solid underlying credit fundamentals and supportive central bank policies prior to the onset of the global pandemic. The harsh sell-off in the preferred securities market in response to the pandemic in March 2020 was fairly quickly reversed as rates dropped across the U.S. Treasury yield curve following the unprecedented response of global central banks. A consequence of the flattened yield curve was the outperformance of long duration securities, while floating rate and short duration securities underperformed. Spread decompression between investment grade and non-investment grade securities also occurred due to the economic slowdown. Nonetheless, we remain confident in the outlook for preferred securities held by the Fund, as issuer credit fundamentals are stable along with sufficient liquidity and an increase in the availability of favorable security structures. The performance of international sovereign bonds had a positive impact on the overall performance of the Fund. Over the past year, U.S. dollar denominated emerging market debt has outperformed local currency denominated emerging market debt primarily as emerging market currencies lagged the risk on rebound seen since the pandemic volatility witnessed in March. The international sovereign bond sleeve favored local currency debt over the period due to the deep undervaluation of emerging market currencies and despite the recent lagged performance this view is maintained. The weakening trend we have seen developing in the U.S. Dollar has helped the outlook for emerging market currencies and any strengthening in these currencies should act as a positive multiplier for local currency denominated debt going forward. The performance of the Energy Infrastructure Companies held in the Fund detracted from the overall performance. Negative sentiment across the entire energy sector weighed on the pipeline-related master limited partnerships ("MLPs") and C-Corporations more than offsetting the positive contributions from regulated utilities. The dividend-paying U.S. exchange-traded equity securities had the largest negative impact on overall Fund performance. In terms of sectors, performance was hurt most significantly by securities in the financials sector followed by utilities, real estate, materials and communication services sectors to a lesser extent, while it was helped only by industrials. In terms of industries, detractors were led by exposure to the following: banks, thrifts & mortgage finance, electric utilities, equity real estate investment trusts ("REITs"), distributors and diversified telecommunication services. Industry contributors included exposure to trading companies & distributors, hotels, restaurants & leisure and machinery. A breakdown of performance by market-cap reveals that all segments detracted from performance, led by small-cap holdings which dropped in value more than those held in the large and mid-cap market-segments. MARKET/FUND OUTLOOK We believe that income-oriented investors have been given the green light from the Fed to assume more risk in order to generate higher returns. Here are two barometers reflecting optimism with respect to Corporate America: Corporate Earnings/Revenue Growth: Bloomberg's consensus earnings growth rate estimates for 2021 and 2022 for the S&P 500(R) Index were 22.39% and 17.06%, respectively, as of October 30, 2020. These growth rates represent a significant rebound from the -17.70% estimate for 2020. We believe that corporate earnings determine the direction of stock prices over time. From 1926-2019, the S&P 500(R) Index posted an average annual total return of 10.20%, according to Morningstar/Ibbotson Associates. The 2021 and 2022 consensus revenue (sales) growth rate estimates for the S&P 500(R) Index were 7.89% and 6.90%, respectively, as of October 30, 2020, according to Bloomberg. These too represent an encouraging turnaround from the -3.49% estimate for 2020. S&P 500 Index Cash Holdings: In the first quarter of 2020 (most recent quarter available), preliminary data put S&P 500 Industrials (Old) cash and equivalents at an all-time high of $1.68 trillion, according to S&P Dow Jones Indices. The S&P 500(R) Industrials (Old) calculation does not include cash holdings from Financials, Utilities and Transportation companies. We believe that figure suggests that S&P 500 companies have a record amount of dry powder that could be used to either support or increase dividends, buy back stock, pay down debt, invest in plant and equipment or pursue mergers and acquisitions. Page 6 <PAGE> FIRST TRUST STRATEGIC INCOME ETF (FDIV) UNDERSTANDING YOUR FUND EXPENSES OCTOBER 31, 2020 (UNAUDITED) As a shareholder of First Trust Strategic Income ETF (the "Fund"), you incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, if any, and other Fund expenses. This Example is intended to help you understand your ongoing costs of investing in the Fund and to compare these costs with the ongoing costs of investing in other funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held through the six-month period ended October 31, 2020. ACTUAL EXPENSES The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Six-Month Period" to estimate the expenses you paid on your account during this six-month period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the following table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as brokerage commissions. Therefore, the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.<TABLE> <CAPTION> --------------------------------------------------------------------------------------------------------------------------- ANNUALIZED EXPENSE RATIO EXPENSES PAID BEGINNING ENDING BASED ON THE DURING THE ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH MAY 1, 2020 OCTOBER 31, 2020 PERIOD (a) (b) PERIOD (b) (c) --------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> FIRST TRUST STRATEGIC INCOME ETF (FDIV) Actual $1,000.00 $1,040.20 0.44% $2.26 Hypothetical (5% return before expenses) $1,000.00 $1,022.92 0.44% $2.24 </TABLE> (a) These expense ratios reflect expense waivers. See Note 3 in the Notes to Financial Statements. (b) Annualized expense ratio and expenses paid during the six-month period do not include fees and expenses of the underlying funds in which the Fund invests. (c) Expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (May 1, 2020 through October 31, 2020), multiplied by 184/366 (to reflect the six-month period). Page 7 <PAGE>FIRST TRUST STRATEGIC INCOME ETF (FDIV) PORTFOLIO OF INVESTMENTS OCTOBER 31, 2020 <TABLE> <CAPTION> SHARES DESCRIPTION VALUE ---------------- --------------------------------------------------------------------------------------------- --------------- <S> <C> <C> EXCHANGE-TRADED FUNDS -- 56.6% CAPITAL MARKETS -- 56.6% 198,848 First Trust Emerging Markets Local Currency Bond ETF (a)..................................... $ 6,834,406 125,406 First Trust Institutional Preferred Securities and Income ETF (a)............................ 2,432,876 18,000 First Trust Long Duration Opportunities ETF (a).............................................. 525,330 104,000 First Trust Low Duration Opportunities ETF (a)............................................... 5,357,040 379,838 First Trust Preferred Securities and Income ETF (a).......................................... 7,281,495 189,993 First Trust Tactical High Yield ETF (a)...................................................... 8,954,370 300 iShares 7-10 Year Treasury Bond ETF.......................................................... 36,018 26,482 iShares J.P. Morgan USD Emerging Markets Bond ETF............................................ 2,913,550 --------------- TOTAL EXCHANGE-TRADED FUNDS.................................................................. 34,335,085 (Cost $34,643,212) --------------- COMMON STOCKS -- 29.0% AEROSPACE & DEFENSE -- 0.8% 5,786 National Presto Industries, Inc.............................................................. 480,759 --------------- BANKS -- 4.2% 25,526 Associated Banc-Corp......................................................................... 349,451 2,974 City Holding Co.............................................................................. 179,719 5,854 Horizon Bancorp, Inc......................................................................... 72,590 4,935 Independent Bank Corp........................................................................ 282,726 7,417 Independent Bank Group, Inc.................................................................. 382,569 3,542 Park National Corp........................................................................... 324,624 6,244 Prosperity Bancshares, Inc................................................................... 344,107 17,305 Simmons First National Corp., Class A........................................................ 294,012 3,311 Stock Yards Bancorp, Inc..................................................................... 126,546 4,138 Westamerica Bancorporation................................................................... 216,707 --------------- 2,573,051 --------------- CHEMICALS -- 0.6% 3,869 International Flavors & Fragrances, Inc...................................................... 397,192 --------------- COMMERCIAL SERVICES & SUPPLIES -- 0.8% 45,208 Kimball International, Inc., Class B......................................................... 465,642 --------------- CONSTRUCTION & ENGINEERING -- 0.2% 1,948 Quanta Services, Inc......................................................................... 121,614 --------------- ELECTRIC UTILITIES -- 7.9% 10,784 Alliant Energy Corp.......................................................................... 596,139 2,773 American Electric Power Co., Inc............................................................. 249,376 1,793 Duke Energy Corp............................................................................. 165,153 1,267 Emera, Inc. (CAD)............................................................................ 50,545 4,824 Evergy, Inc.................................................................................. 266,285 5,085 Eversource Energy............................................................................ 443,768 2,913 Exelon Corp.................................................................................. 116,200 6,383 Fortis, Inc. (CAD)........................................................................... 252,148 7,274 Hawaiian Electric Industries, Inc............................................................ 240,333 6,294 IDACORP, Inc................................................................................. 552,173 3,189 MGE Energy, Inc.............................................................................. 207,349 4,897 NextEra Energy, Inc.......................................................................... 358,509 6,422 Otter Tail Corp.............................................................................. 246,284 3,249 Pinnacle West Capital Corp................................................................... 265,021 6,849 Portland General Electric Co................................................................. 269,166 7,687 PPL Corp..................................................................................... 211,392 </TABLE> Page 8 See Notes to Financial Statements <PAGE> FIRST TRUST STRATEGIC INCOME ETF (FDIV) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> SHARES DESCRIPTION VALUE ---------------- --------------------------------------------------------------------------------------------- --------------- <S> <C> <C> COMMON STOCKS (CONTINUED) ELECTRIC UTILITIES (CONTINUED) 2,899 Southern (The) Co............................................................................ $ 166,548 2,271 Xcel Energy, Inc............................................................................. 159,038 --------------- 4,815,427 --------------- ELECTRICAL EQUIPMENT -- 1.6% 18,755 ABB Ltd., ADR................................................................................ 455,559 3,449 Hubbell, Inc................................................................................. 501,864 --------------- 957,423 --------------- GAS UTILITIES -- 2.3% 12,913 AltaGas Ltd. (CAD)........................................................................... 163,702 4,466 Atmos Energy Corp............................................................................ 409,398 1,860 Chesapeake Utilities Corp.................................................................... 180,811 5,838 New Jersey Resources Corp.................................................................... 170,353 6,557 ONE Gas, Inc................................................................................. 452,695 --------------- 1,376,959 --------------- IT SERVICES -- 1.7% 3,413 Automatic Data Processing, Inc............................................................... 539,117 5,968 Paychex, Inc................................................................................. 490,868 --------------- 1,029,985 --------------- MULTI-UTILITIES -- 3.4% 1,799 ATCO Ltd., Class I (CAD)..................................................................... 50,082 2,171 Canadian Utilities Ltd., Class A (CAD)....................................................... 50,743 846 CMS Energy Corp.............................................................................. 53,577 1,994 Dominion Energy, Inc......................................................................... 160,198 1,810 DTE Energy Co................................................................................ 223,390 10,801 MDU Resources Group, Inc..................................................................... 256,632 7,567 Public Service Enterprise Group, Inc......................................................... 440,021 3,996 Sempra Energy................................................................................ 500,939 3,033 WEC Energy Group, Inc........................................................................ 304,968 --------------- 2,040,550 --------------- OIL, GAS & CONSUMABLE FUELS -- 2.6% 7,112 Enbridge, Inc................................................................................ 196,007 9,036 Equitrans Midstream Corp..................................................................... 65,601 6,774 Keyera Corp. (CAD)........................................................................... 96,147 25,127 Kinder Morgan, Inc........................................................................... 299,011 976 ONEOK, Inc................................................................................... 28,304 19,499 TC Energy Corp............................................................................... 769,431 5,190 Williams (The) Cos., Inc..................................................................... 99,596 --------------- 1,554,097 --------------- PHARMACEUTICALS -- 0.7% 6,894 Novo Nordisk A/S, ADR........................................................................ 440,458 --------------- THRIFTS & MORTGAGE FINANCE -- 1.8% 46,062 Meridian Bancorp, Inc........................................................................ 573,472 52,247 Northfield Bancorp, Inc...................................................................... 530,829 --------------- 1,104,301 --------------- WATER UTILITIES -- 0.4% 6,031 Essential Utilities, Inc..................................................................... 248,477 --------------- TOTAL COMMON STOCKS.......................................................................... 17,605,935 (Cost $17,144,639) --------------- </TABLE> See Notes to Financial Statements Page 9 <PAGE>FIRST TRUST STRATEGIC INCOME ETF (FDIV) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> UNITS DESCRIPTION VALUE ---------------- --------------------------------------------------------------------------------------------- --------------- <S> <C> <C> MASTER LIMITED PARTNERSHIPS -- 6.6% CHEMICALS -- 0.4% 13,708 Westlake Chemical Partners, L.P.............................................................. $ 248,389 --------------- INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 0.7% 6,938 NextEra Energy Partners, L.P. (b)............................................................ 435,706 --------------- OIL, GAS & CONSUMABLE FUELS -- 5.5% 4,652 Cheniere Energy Partners, L.P................................................................ 167,705 5,594 Energy Transfer, L.P......................................................................... 28,809 46,904 Enterprise Products Partners, L.P............................................................ 777,199 24,767 Holly Energy Partners, L.P................................................................... 283,830 20,936 Magellan Midstream Partners, L.P............................................................. 744,065 8,880 Phillips 66 Partners, L.P.................................................................... 208,414 8,701 Plains All American Pipeline, L.P............................................................ 54,381 21,676 Shell Midstream Partners, L.P................................................................ 189,665 29,912 TC PipeLines, L.P............................................................................ 842,023 --------------- 3,296,091 --------------- TOTAL MASTER LIMITED PARTNERSHIPS............................................................ 3,980,186 (Cost $4,478,987) --------------- </TABLE> <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ----------- -------------- --------------- <S> <C> <C> <C> <C> U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 2.9% COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.0% Federal Home Loan Mortgage Corporation $ 7,941 Series 1998-192, Class IO, IO, STRIPS........................ 6.50% 02/01/28 1,163 75,000 Series 2003-2669, Class LL................................... 5.50% 08/15/33 86,613 87,482 Series 2006-3114, Class GI, IO, 1 Mo. LIBOR (x) -1 + 6.60% (c)................................................. 6.45% 02/15/36 17,119 5,900 Series 2006-3200, Class PO, PO............................... (d) 08/15/36 5,640 7,264 Series 2007-3373, Class TO, PO............................... (d) 04/15/37 6,802 23,704 Series 2011-3817, Class MA................................... 4.50% 10/15/37 23,911 6,836 Series 2011-3917, Class AI, IO............................... 4.50% 07/15/26 292 935,419 Series 2016-4619, Class IB, IO............................... 4.00% 12/15/47 34,197 Federal National Mortgage Association 1,889 Series 1992-205, Class Z..................................... 7.00% 11/25/22 1,973 9,954 Series 1993-176, Class E, PO................................. (d) 08/25/23 9,910 8,717 Series 1993-247, Class 2, IO, STRIPS......................... 7.50% 10/25/23 576 48,372 Series 1997-22, Class PC..................................... 4.50% 03/18/27 51,905 4,380 Series 2002-1, Class HC...................................... 6.50% 02/25/22 4,460 61,092 Series 2003-339, Class 12, IO, STRIPS........................ 6.00% 06/25/33 10,627 11,955 Series 2003-W2, Class 1A1.................................... 6.50% 07/25/42 14,114 38,620 Series 2004-T2, Class 1PO, PO................................ (d) 11/25/43 36,680 8,284 Series 2006-125, Class FA, 1 Mo. LIBOR + 0.28% (e)........... 0.43% 01/25/37 8,287 51,257 Series 2007-32, Class KT..................................... 5.50% 04/25/37 59,581 13,470 Series 2007-42, Class AO, PO................................. (d) 05/25/37 12,610 10,861 Series 2008-44, Class PO, PO................................. (d) 05/25/38 9,879 66,705 Series 2012-409, Class C17, IO, STRIPS....................... 4.00% 11/25/41 9,131 112,463 Series 2015-14, Class IK, IO................................. 0.75% 03/25/45 10,148 16,514 Series 2015-72, Class PC..................................... 3.00% 10/25/43 16,553 Government National Mortgage Association 19,806 Series 2003-7, Class TA...................................... 4.50% 11/16/32 20,450 20,693 Series 2003-52, Class AP, PO................................. (d) 06/16/33 19,772 </TABLE> Page 10 See Notes to Financial Statements <PAGE> FIRST TRUST STRATEGIC INCOME ETF (FDIV) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <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) $ 45,175 Series 2004-47, Class PD..................................... 6.00% 06/16/34 $ 50,241 2,896 Series 2004-109, Class BC.................................... 5.00% 11/20/33 2,894 6,570 Series 2005-17, Class AD..................................... 5.00% 02/20/35 7,148 10,000 Series 2010-84, Class YB..................................... 4.00% 07/20/40 10,901 41,362 Series 2010-111, Class JA.................................... 2.50% 09/16/40 42,216 24,541 Series 2013-20, Class KI, IO................................. 5.00% 01/20/43 2,844 1,734 Series 2013-31, Class TH, 1 Mo. LIBOR + 4.35% (e)............ 4.50% 08/20/39 1,737 24,289 Series 2013-67, Class PI, IO................................. 4.00% 12/16/42 2,500 NCUA Guaranteed Notes Trust 25,002 Series 2010-R3, Class 1A, 1 Mo. LIBOR + 0.56% (e)............ 0.70% 12/08/20 24,987 --------------- 617,861 --------------- PASS-THROUGH SECURITIES -- 1.9% Federal Home Loan Mortgage Corporation 57,629 Pool A47829.................................................. 4.00% 08/01/35 62,690 64,961 Pool A80290.................................................. 5.00% 11/01/35 75,038 43,730 Pool A94951.................................................. 4.00% 11/01/40 48,873 24,392 Pool A95134.................................................. 4.50% 11/01/40 27,455 22,605 Pool A97601.................................................. 4.50% 03/01/41 25,952 11,027 Pool G03523.................................................. 6.00% 11/01/37 12,971 28,579 Pool G06501.................................................. 4.00% 04/01/41 31,504 38,585 Pool G07286.................................................. 6.50% 09/01/39 45,378 82 Pool G11973.................................................. 5.50% 02/01/21 82 15,394 Pool G13124.................................................. 6.00% 12/01/22 15,908 9,139 Pool G13465.................................................. 6.00% 01/01/24 9,394 17,856 Pool G13790.................................................. 4.50% 04/01/25 18,863 20,632 Pool G13844.................................................. 4.50% 07/01/25 21,865 11,254 Pool G14184.................................................. 5.00% 07/01/25 11,878 22,998 Pool G15725.................................................. 4.50% 09/01/26 24,367 6,959 Pool O20138.................................................. 5.00% 11/01/30 7,634 26,832 Pool Q05201.................................................. 4.00% 12/01/41 29,760 Federal National Mortgage Association 77,069 Pool 724888.................................................. 5.50% 06/01/33 86,319 2,611 Pool 879398.................................................. 5.50% 02/01/21 2,622 13,103 Pool 888112.................................................. 6.50% 12/01/36 15,643 6,187 Pool 889780.................................................. 5.50% 03/01/23 6,405 52 Pool 890206.................................................. 5.50% 10/01/21 52 7,769 Pool 897936.................................................. 5.50% 08/01/21 7,843 21,064 Pool 923171.................................................. 7.50% 03/01/37 24,630 21,834 Pool 977130.................................................. 5.50% 08/01/23 22,725 10,935 Pool 983629.................................................. 4.50% 05/01/23 11,466 13,868 Pool 995400.................................................. 7.00% 06/01/23 14,366 41,745 Pool 995700.................................................. 6.50% 03/01/27 46,624 23,355 Pool AB2265.................................................. 4.00% 02/01/41 26,384 7,633 Pool AI1191.................................................. 4.50% 04/01/41 8,582 25,708 Pool AI7800.................................................. 4.50% 07/01/41 28,939 20,815 Pool AJ5299.................................................. 4.00% 11/01/41 23,514 35,958 Pool AJ5300.................................................. 4.00% 11/01/41 39,903 33,298 Pool AK3103.................................................. 4.00% 02/01/42 36,777 47,489 Pool AL1024.................................................. 4.50% 07/01/26 51,295 </TABLE> See Notes to Financial Statements Page 11 <PAGE>FIRST TRUST STRATEGIC INCOME ETF (FDIV) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <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) $ 9,952 Pool AL6304.................................................. 5.50% 09/01/25 $ 10,363 44,807 Pool AU4726.................................................. 4.00% 09/01/43 49,822 Government National Mortgage Association 13,703 Pool 3500.................................................... 5.50% 01/20/34 16,266 7,625 Pool 3513.................................................... 5.00% 02/20/34 8,679 16,444 Pool 3555.................................................... 5.00% 05/20/34 18,735 43,758 Pool 3975.................................................... 5.50% 04/20/37 51,943 14,254 Pool 4230.................................................... 6.00% 09/20/23 15,011 34,301 Pool 609116.................................................. 4.50% 02/15/44 39,886 12,541 Pool MA2293.................................................. 3.50% 10/20/44 13,029 --------------- 1,147,435 --------------- TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES...................................... 1,765,296 (Cost $1,752,043) --------------- </TABLE> <TABLE> <CAPTION> SHARES DESCRIPTION VALUE ---------------- --------------------------------------------------------------------------------------------- --------------- <S> <C> <C> REAL ESTATE INVESTMENT TRUSTS -- 2.2% EQUITY REAL ESTATE INVESTMENT TRUSTS -- 2.2% 7,426 Agree Realty Corp............................................................................ 460,932 7,885 National Health Investors, Inc............................................................... 441,954 7,827 Realty Income Corp........................................................................... 452,870 --------------- TOTAL REAL ESTATE INVESTMENT TRUSTS.......................................................... 1,355,756 (Cost $1,440,351) --------------- </TABLE> <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ----------- -------------- --------------- <S> <C> <C> <C> <C> ASSET-BACKED SECURITIES -- 0.0% First Alliance Mortgage Loan Trust $ 15,592 Series 1999-1, Class A1...................................... 7.18% 06/20/30 15,792 --------------- TOTAL ASSET-BACKED SECURITIES................................................................ 15,792 (Cost $15,592) --------------- MORTGAGE-BACKED SECURITIES -- 0.0% COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.0% Residential Accredit Loans, Inc. 1,653 Series 2003-QS5, Class A2, 1 Mo. LIBOR (x) -1.83 + 14.76% (c)................................................ 14.48% 03/25/18 1,570 1,539 Series 2003-QS14, Class A1................................... 5.00% 07/25/18 1,538 769 Series 2003-QS20, Class CB................................... 5.00% 11/25/18 791 Structured Asset Securities Corp. 8,559 Series 2003-37A, Class 3A7 (f)............................... 3.05% 12/25/33 8,721 --------------- TOTAL MORTGAGE-BACKED SECURITIES............................................................. 12,620 (Cost $12,544) --------------- TOTAL INVESTMENTS -- 97.3%.................................................................... 59,070,670 (Cost $59,487,368) (g) NET OTHER ASSETS AND LIABILITIES -- 2.7%...................................................... 1,647,987 --------------- NET ASSETS -- 100.0%.......................................................................... $ 60,718,657 =============== </TABLE> Page 12 See Notes to Financial Statements <PAGE> FIRST TRUST STRATEGIC INCOME ETF (FDIV) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 ----------------------------- (a) Investments in an affiliated fund. (b) This security is taxed as a "C" corporation for federal income tax purposes. (c) Inverse floating rate security. (d) Zero coupon security. (e) Floating or variable rate security. (f) Collateral Strip Rate security. Coupon is based on the weighted net interest rate of the investment's underlying collateral. The interest rate resets periodically. (g) Aggregate cost for federal income tax purposes is $60,337,455. As of October 31, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $1,614,410 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $2,881,195. The net unrealized depreciation was $1,266,785. ADR American Depositary Receipt. IO Interest-Only Security - Principal amount shown represents par value on which interest payments are based. LIBOR London Interbank Offered Rate PO Principal-Only Security STRIPS Separate Trading of Registered Interest and Principal of Securities Currency Abbreviations: CAD Canadian Dollar ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of October 31, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): <TABLE> <CAPTION> LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 10/31/2020 PRICES INPUTS INPUTS --------------- --------------- --------------- --------------- <S> <C> <C> <C> <C> Exchange-Traded Funds*............................ $ 34,335,085 $ 34,335,085 $ -- $ -- Common Stocks*.................................... 17,605,935 17,605,935 -- -- Master Limited Partnerships*...................... 3,980,186 3,980,186 -- -- U.S. Government Agency Mortgage-Backed Securities..................................... 1,765,296 -- 1,765,296 -- Real Estate Investment Trusts*.................... 1,355,756 1,355,756 -- -- Asset-Backed Securities........................... 15,792 -- 15,792 -- Mortgage-Backed Securities........................ 12,620 -- 12,620 -- --------------- --------------- --------------- --------------- Total Investments................................. $ 59,070,670 $ 57,276,962 $ 1,793,708 $ -- =============== =============== =============== =============== </TABLE> * See Portfolio of Investments for industry breakout. See Notes to Financial Statements Page 13 <PAGE>FIRST TRUST STRATEGIC INCOME ETF (FDIV) STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 2020 <TABLE> <CAPTION> ASSETS: <S> <C> Investments, at value - Unaffiliated................................... $ 27,685,153 Investments, at value - Affiliated..................................... 31,385,517 ---------------- Total investments, at value............................................ 59,070,670 Cash................................................................... 901,078 Due from broker........................................................ 60,591 Foreign currency, at value............................................. 5,045 Receivables: Capital shares sold................................................. 11,244,641 Investment securities sold.......................................... 93,176 Dividends........................................................... 81,542 Interest............................................................ 10,072 Reclaims............................................................ 2,623 ---------------- Total Assets..................................................... 71,469,438 ---------------- LIABILITIES: Payables: Investment securities purchased..................................... 10,732,740 Investment advisory fees............................................ 18,041 ---------------- Total Liabilities................................................ 10,750,781 ---------------- NET ASSETS............................................................. $ 60,718,657 ================ NET ASSETS CONSIST OF: Paid-in capital........................................................ $ 68,063,456 Par value.............................................................. 13,500 Accumulated distributable earnings (loss).............................. (7,358,299) ---------------- NET ASSETS............................................................. $ 60,718,657 ================ NET ASSET VALUE, per share............................................. $ 44.98 ================ Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share).......................................... 1,350,002 ================ Investments, at cost - Unaffiliated.................................... $ 27,813,515 ================ Investments, at cost - Affiliated...................................... $ 31,673,853 ================ Total investments, at cost............................................. $ 59,487,368 ================ Foreign currency, at cost (proceeds)................................... $ 6,097 ================ </TABLE> Page 14 See Notes to Financial Statements <PAGE> FIRST TRUST STRATEGIC INCOME ETF (FDIV) STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 2020 <TABLE> <CAPTION> INVESTMENT INCOME: <S> <C> Dividends - Unaffiliated............................................... $ 904,433 Dividends - Affiliated................................................. 1,428,277 Interest............................................................... 85,872 Foreign withholding tax................................................ (13,555) ---------------- Total investment income............................................. 2,405,027 ---------------- EXPENSES: Investment advisory fees............................................... 577,708 ---------------- Total expenses...................................................... 577,708 Less fees waived by the investment advisor.......................... (265,076) ---------------- Net expenses........................................................ 312,632 ---------------- NET INVESTMENT INCOME (LOSS)........................................... 2,092,395 ---------------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments - Unaffiliated.......................................... (5,031,685) Investments - Affiliated............................................ (1,359,644) In-kind redemptions - Unaffiliated.................................. 147,843 In-kind redemptions - Affiliated.................................... (370,959) Futures contracts................................................... 8,634 Foreign currency transactions....................................... 7 ---------------- Net realized gain (loss)............................................... (6,605,804) ---------------- Net change in unrealized appreciation (depreciation) on: Investments - Unaffiliated.......................................... (2,049,126) Investments - Affiliated............................................ (686,817) Foreign currency translation........................................ (204) ---------------- Net change in unrealized appreciation (depreciation)................... (2,736,147) ---------------- NET REALIZED AND UNREALIZED GAIN (LOSS)................................ (9,341,951) ---------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS..................................................... $ (7,249,556) ================ </TABLE> See Notes to Financial Statements Page 15 <PAGE>FIRST TRUST STRATEGIC INCOME ETF (FDIV) STATEMENT OF CHANGES IN NET ASSETS <TABLE> <CAPTION> YEAR YEAR ENDED ENDED 10/31/2020 10/31/2019 ---------------- ---------------- <S> <C> <C> OPERATIONS: Net investment income (loss)........................................... $ 2,092,395 $ 2,621,165 Net realized gain (loss)............................................... (6,605,804) 577,341 Net change in unrealized appreciation (depreciation)................... (2,736,147) 4,790,638 ---------------- ---------------- Net increase (decrease) in net assets resulting from operations........ (7,249,556) 7,989,144 ---------------- ---------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations.................................................. (2,785,206) (3,409,004) Return of capital...................................................... (88,048) -- ---------------- ---------------- Total distributions to shareholders.................................... (2,873,254) (3,409,004) ---------------- ---------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold.............................................. 11,244,641 17,620,172 Cost of shares redeemed................................................ (31,523,585) (14,583,948) ---------------- ---------------- Net increase (decrease) in net assets resulting from shareholder transactions....................................... (20,278,944) 3,036,224 ---------------- ---------------- Total increase (decrease) in net assets................................ (30,401,754) 7,616,364 NET ASSETS: Beginning of period.................................................... 91,120,411 83,504,047 ---------------- ---------------- End of period.......................................................... $ 60,718,657 $ 91,120,411 ================ ================ CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period................................ 1,800,002 1,750,002 Shares sold............................................................ 250,000 350,000 Shares redeemed........................................................ (700,000) (300,000) ---------------- ---------------- Shares outstanding, end of period...................................... 1,350,002 1,800,002 ================ ================ </TABLE> Page 16 See Notes to Financial Statements <PAGE> FIRST TRUST STRATEGIC INCOME ETF (FDIV) FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD <TABLE> <CAPTION> YEAR ENDED OCTOBER 31, -------------------------------------------------------------------------------------- 2020 2019 2018 2017 2016 -------------- -------------- -------------- -------------- -------------- <S> <C> <C> <C> <C> <C> Net asset value, beginning of period $ 50.62 $ 47.72 $ 50.68 $ 49.89 $ 47.76 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 1.46 1.63 1.69 1.56 1.60 Net realized and unrealized gain (loss) (5.07) 3.34 (2.26) 1.10 (a) 2.45 ---------- ---------- ---------- ---------- ---------- Total from investment operations (3.61) 4.97 (0.57) 2.66 4.05 ---------- ---------- ---------- ---------- ---------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (1.97) (2.07) (2.10) (1.65) (1.92) Net realized gain -- -- -- (0.22) -- Return of capital (0.06) -- (0.29) -- -- ---------- ---------- ---------- ---------- ---------- Total distributions (2.03) (2.07) (2.39) (1.87) (1.92) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 44.98 $ 50.62 $ 47.72 $ 50.68 $ 49.89 ========== ========== ========== ========== ========== TOTAL RETURN (b) (7.19)% 10.60% (1.21)% 5.40% (a) 8.67% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 60,719 $ 91,120 $ 83,504 $ 96,286 $ 17,460 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets (c) 0.85% 0.85% 0.86% (d) 0.85% 0.85% Ratio of net expenses to average net assets (c) 0.46% 0.50% 0.50% (d) 0.52% 0.55% Ratio of net investment income (loss) to average net assets 3.08% 3.21% 3.40% 3.10% 3.30% Portfolio turnover rate (e) 118% 91% 113% 119% 88% </TABLE> (a) The Fund received a reimbursement from the Advisor in the amount of $3,457 in connection with a trade error, which represents less than $0.01 per share. Since the Advisor reimbursed the Fund, there was no effect on the Fund's total return. (b) 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) 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. (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 <PAGE> --------------------------------------------------------------------------------NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- FIRST TRUST STRATEGIC INCOME ETF (FDIV) OCTOBER 31, 2020 1. ORGANIZATION First Trust Exchange-Traded Fund IV (the "Trust") is an open-end management investment company organized as a Massachusetts business trust on September 15, 2010, and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust currently consists of nine funds that are offering shares. This report covers the First Trust Strategic Income ETF (the "Fund"), which trades under the ticker "FDIV" on The Nasdaq Stock Market LLC ("Nasdaq"). Unlike conventional mutual funds, the Fund issues and redeems shares on a continuous basis, at net asset value ("NAV"), only in large specified blocks consisting of 50,000 shares called a "Creation Unit." Creation Units are issued and redeemed in-kind for securities in which the Fund invests and/or cash, and only to and from broker-dealers and large institutional investors that have entered into participation agreements. Except when aggregated in Creation Units, the Fund's shares are not redeemable securities. The Fund is a multi-manager, multi-strategy actively managed exchange-traded fund. The Fund's primary investment objective is to seek risk-adjusted income. The Fund's secondary investment objective is capital appreciation. First Trust Advisors L.P. ("First Trust" or the "Advisor") is the investment advisor to the Fund. The following serve as investment sub-advisors to the Fund: First Trust Global Portfolios Ltd. ("FTGP"); Energy Income Partners, LLC ("EIP"); Stonebridge Advisors LLC ("Stonebridge"); and Richard Bernstein Advisors LLC ("RBA") (each, a "Sub-Advisor" and together, the "Sub-Advisors"). The Advisor's Investment Committee determines the Fund's strategic allocation among various general investment categories and allocates the Fund's assets to portfolio management teams comprised of personnel of the Advisor and/or a Sub-Advisor (each, a "Management Team"), which employ their respective investment strategies. The Fund seeks to achieve its objectives by having each Management Team focus on those securities within its respective investment category. The Fund may add or remove investment categories or Management Teams at the discretion of the Advisor. The Fund's investment categories are: (i) high-yield corporate bonds, commonly referred to as "junk" bonds, and first lien senior secured floating rate bank loans; (ii) mortgage-related investments; (iii) preferred securities; (iv) international sovereign bonds, including securities issued by emerging market countries; (v) equity securities of Energy Infrastructure Companies(1), certain of which are master limited partnerships ("MLPs"); and (vi) dividend paying U.S. exchange-traded equity securities (including common stock) of companies (that may be domiciled in or outside of the United States) and depositary receipts. The Management Teams may utilize a related option overlay strategy and/or derivative instruments in implementing their respective investment strategies for the Fund. Additionally, the Management Team may seek exposure to these asset classes directly or through investments in exchange-traded funds ("ETFs"). The Advisor expects that the Fund may at times invest significantly in other ETFs, including but not limited to, other ETFs that are advised by the Advisor; accordingly, the Fund may operate principally as a "fund of funds," but will not necessarily operate as such at all times. 2. SIGNIFICANT ACCOUNTING POLICIES The Fund is considered an investment company and follows accounting and reporting guidance under Financial Accounting Standards Board Accounting Standards Codification Topic 946, "Financial Services-Investment Companies." The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of the financial statements. The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. PORTFOLIO VALUATION The Fund's NAV is determined daily as of the close of regular trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV is determined as of that time. Domestic debt securities and foreign securities are priced using data reflecting the earlier closing of the principal markets for those securities. The Fund's NAV is calculated by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding. ----------------------------- (1) Energy Infrastructure Companies are publicly-traded MLPs or limited liability companies that are taxed as partnerships; entities that control MLPs, entities that own general partner interests in an MLP, or MLP affiliates (such as I-shares or I-units); U.S. and Canadian energy yield corporations ("yieldcos"); pipeline companies; utilities; and other companies that are involved in operating or providing services in support of infrastructure assets such as pipeline, power transmission, terminalling and petroleum and natural gas storage in the petroleum, natural gas and power generation industries. Page 18 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST STRATEGIC INCOME ETF (FDIV) OCTOBER 31, 2020 The Fund's investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Advisor's Pricing Committee in accordance with valuation procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act. Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. All securities and other assets of the Fund initially expressed in foreign currencies will be converted to U.S. dollars using exchange rates in effect at the time of valuation. The Fund's investments are valued as follows: Corporate bonds, corporate notes, U.S. government securities, mortgage-backed securities, asset-backed securities and other debt securities are fair valued on the basis of valuations provided by dealers who make markets in such securities or by a third- party pricing service approved by the Trust's Board of Trustees, which may use the following valuation inputs when available: 1) benchmark yields; 2) reported trades; 3) broker/dealer quotes; 4) issuer spreads; 5) benchmark securities; 6) bids and offers; and 7) reference data including market research publications. Common stocks, preferred stocks, MLPs and other equity securities listed on any national or foreign exchange (excluding Nasdaq and the London Stock Exchange Alternative Investment Market ("AIM")) are valued at the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price. Securities traded on more than one securities exchange are valued at the last sale price or official closing price, as applicable, at the close of the securities exchange representing the principal market for such securities. Securities traded in an over-the-counter market are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price. Exchange-traded futures contracts are valued at the closing price in the market where such contracts are principally traded. If no closing price is available, exchange-traded futures contracts are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price. Fixed income and other debt securities having a remaining maturity of sixty days or less when purchased are fair valued at cost adjusted for amortization of premiums and accretion of discounts (amortized cost), provided the Advisor's Pricing Committee has determined that the use of amortized cost is an appropriate reflection of fair value given market and issuer-specific conditions existing at the time of the determination. Factors that may be considered in determining the appropriateness of the use of amortized cost include, but are not limited to, the following: 1) the credit conditions in the relevant market and changes thereto; 2) the liquidity conditions in the relevant market and changes thereto; 3) the interest rate conditions in the relevant market and changes thereto (such as significant changes in interest rates); 4) issuer-specific conditions (such as significant credit deterioration); and 5) any other market-based data the Advisor's Pricing Committee considers relevant. In this regard, the Advisor's Pricing Committee may use last-obtained market-based data to assist it when valuing portfolio securities using amortized cost. Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Trust's Board of Trustees or its delegate, the Advisor's Pricing Committee, at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of the Fund's NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security's fair value. As a general principle, the current fair value of a security would appear to be 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. Page 19 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST STRATEGIC INCOME ETF (FDIV) OCTOBER 31, 2020 Fair valuation of a debt security will be based on the consideration of all available information, including, but not limited to, the following: 1) the fundamental business data relating to the issuer; 2) an evaluation of the forces which influence the market in which these securities are purchased and sold; 3) the type, size and cost of a security; 4) the financial statements of the issuer; 5) the credit quality and cash flow of the issuer, based on the Advisor's or external analysis; 6) the information as to any transactions in or offers for the security; 7) the price and extent of public trading in similar securities of the issuer/borrower, or comparable companies; 8) the coupon payments; 9) the quality, value and salability of collateral, if any, securing the security; 10) the business prospects of the issuer, including any ability to obtain money or resources from a parent or affiliate and an assessment of the issuer's management (for corporate debt only); 11) the economic, political and social prospects/developments of the country of issue and the assessment of the country's government leaders/officials (for sovereign debt only); 12) the prospects for the issuer's industry, and multiples (of earnings and/or cash flows) being paid for similar businesses in that industry (for corporate debt only); and 13) other relevant factors. Fair valuation of an equity security will be based on the consideration of all available information, including, but not limited to, the following: 1) the type of security; 2) the size of the holding; 3) the initial cost of the security; 4) transactions in comparable securities; 5) price quotes from dealers and/or third-party pricing services; 6) relationships among various securities; 7) information obtained by contacting the issuer, analysts, or the appropriate stock exchange; 8) an analysis of the issuer's financial statements; and 9) the existence of merger proposals or tender offers that might affect the value of the security. Because foreign markets may be open on different days than the days during which investors may transact in the shares of the Fund, the value of the Fund's securities may change on the days when investors are not able to transact in the shares of the Fund. The value of the securities denominated in foreign currencies is converted into U.S. dollars using exchange rates determined daily as of the close of regular trading on the NYSE. The Fund is subject to fair value accounting standards that define fair value, establish the framework for measuring fair value and provide a three-level hierarchy for fair valuation based upon the inputs to the valuation as of the measurement date. The three levels of the fair value hierarchy are as follows: o Level 1 - Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis. o Level 2 - Level 2 inputs are observable inputs, either directly or indirectly, and include the following: o Quoted prices for similar investments in active markets. o Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly. o Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). 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. Page 20 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST STRATEGIC INCOME ETF (FDIV) OCTOBER 31, 2020 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 October 31, 2020, is included with the Fund's Portfolio of Investments. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income is recorded daily on the accrual basis. Amortization of premiums and accretion of discounts are recorded using the effective interest method. In July 2017, the Financial Conduct Authority ("FCA") announced that it will no longer persuade or compel banks to submit rates for the calculations of the London Interbank Offered Rates ("LIBOR") after 2021. Further, the FCA has subsequently stated, as recently as March 2020, that the central assumption continues to be that firms should not rely on LIBOR being published after the end of 2021. In the United States, the Alternative Reference Rates Committee (the "ARRC"), a group of market participants convened by the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of New York in cooperation with other federal and state government agencies, has since 2014 undertaken efforts to identify U.S. dollar reference interest rates as alternatives to LIBOR and to facilitate the mitigation of LIBOR-related risks. In June 2017, the ARRC identified the Secured Overnight Financing Rate ("SOFR"), a broad measure of the cost of cash overnight borrowing collateralized by U.S. Treasury securities, as the preferred alternative for U.S. dollar LIBOR. The Federal Reserve Bank of New York began daily publishing of SOFR in April 2018. At this time, it is not possible to predict the full impact of the elimination of LIBOR and the establishment of an alternative reference rate on the Fund or its investments. Distributions received from the Fund's investments in MLPs generally are comprised of return of capital and investment income. The Fund records estimated return of capital and investment income based on historical information available from each MLP. These estimates may subsequently be revised based on information received from the MLPs after their tax reporting periods are concluded. Distributions received from the Fund's investments in real estate investment trusts ("REITs") may be comprised of return of capital, capital gains and income. The actual character of the amounts received during the year is not known until after the REITs' fiscal year end. The Fund records the character of distributions received from the REITs during the year based on estimates available. The characterization of distributions received by the Fund may be subsequently revised based on information received from the REITs after their tax reporting periods conclude. C. FUTURES CONTRACTS The Fund purchases or sells (i.e., is long or short) exchange-listed futures contracts to hedge against changes in interest rates (interest rate risk). Futures contracts are agreements between the Fund and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the contract, futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date. Open futures contracts can also be closed out prior to settlement by entering into an offsetting transaction in a matching futures contract. If the Fund is not able to enter into an offsetting transaction, the Fund will continue to be required to maintain margin deposits on the futures contract. When the contract is closed or expires, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed or expired. This gain or loss is included in "Net realized gain (loss) on futures contracts" on the Statement of Operations. Upon entering into a futures contract, the Fund must deposit funds, called margin, with its custodian in the name of the clearing broker equal to a specified percentage of the current value of the contract. Open futures 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 21 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST STRATEGIC INCOME ETF (FDIV) OCTOBER 31, 2020 D. FOREIGN CURRENCY The books and records of the Fund are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at the exchange rates prevailing at the end of the period. Purchases and sales of investments and items of income and expense are translated on the respective dates of such transactions. Unrealized gains and losses on assets and liabilities, other than investments in securities, which result from changes in foreign currency exchange rates have been included in "Net change in unrealized appreciation (depreciation) on foreign currency translation" on the Statement of Operations. Unrealized gains and losses on investments in securities which result from changes in foreign exchange rates are included with fluctuations arising from changes in market price and are included in "Net change in unrealized appreciation (depreciation) on investments - Unaffiliated" on the Statement of Operations. Net realized foreign currency gains and losses include the effect of changes in exchange rates between trade date and settlement date on investment security transactions, foreign currency transactions and interest and dividends received is included in "Net realized gain (loss) on foreign currency transactions" on the Statement of Operations. The portion of foreign currency gains and losses related to fluctuation in exchange rates between the initial purchase settlement date and subsequent sale trade date is included in "Net realized gain (loss) on investments - Unaffiliated" on the Statement of Operations. E. INTEREST-ONLY SECURITIES An interest-only security ("IO Security") is the interest-only portion of a mortgage-backed security that receives some or all of the interest portion of the underlying mortgage-backed security and little or no principal. A reference principal value called a notional value is used to calculate the amount of interest due to the IO Security. IO Securities are sold at a deep discount to their notional principal amount. Generally speaking, when interest rates are falling and prepayment rates are increasing, the value of an IO Security will fall. Conversely, when interest rates are rising and prepayment rates are decreasing, generally the value of an IO Security will rise. These securities, if any, are identified on the Portfolio of Investments. F. PRINCIPAL-ONLY SECURITIES A principal-only security ("PO Security") is the principal-only portion of a mortgage-backed security that does not receive any interest, is priced at a deep discount to its redemption value and ultimately receives the redemption value. Generally speaking, when interest rates are falling and prepayment rates are increasing, the value of a PO Security will rise. Conversely, when interest rates are rising and prepayment rates are decreasing, generally the value of a PO Security will fall. These securities, if any, are identified on the Portfolio of Investments. G. STRIPPED MORTGAGE-BACKED SECURITIES Stripped mortgage-backed securities are created by segregating the cash flows from underlying mortgage loans or mortgage securities to create two or more new securities, each with a specified percentage of the underlying security's principal or interest payments. Mortgage-backed securities may be partially stripped so that each investor class receives some interest and some principal. When securities are completely stripped, however, all of the interest is distributed to holders of one type of security known as an IO Security and all of the principal is distributed to holders of another type of security known as a PO Security. These securities, if any, are identified on the Portfolio of Investments. H. AFFILIATED TRANSACTIONS The Fund invests in securities of affiliated funds. Dividend income and realized gains and losses, and change in appreciation (depreciation) from affiliated funds are presented on the Statement of Operations. The Fund's investment performance and risks are directly related to the investment performance and risks of the affiliated funds. Page 22 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST STRATEGIC INCOME ETF (FDIV) OCTOBER 31, 2020 Amounts related to these investments at October 31, 2020 and for the fiscal year then ended are as follows: <TABLE> <CAPTION> CHANGES IN UNREALIZED REALIZED SHARES AT VALUE AT APPRECIATION GAIN VALUE AT DIVIDEND SECURITY NAME 10/31/2020 10/31/2019 PURCHASES SALES (DEPRECIATION) (LOSS) 10/31/2020 INCOME ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> <C> <C> <C> First Trust Emerging Markets Local Currency Bond ETF 198,848 $ 8,279,392 $ 4,601,982 $ (4,800,693) $ (663,414) $ (582,861) $ 6,834,406 $ 373,819 First Trust Institutional Preferred Securities and Income ETF 125,406 2,875,710 1,226,819 (1,614,554) (57,245) 2,146 2,432,876 122,265 First Trust Long Duration Opportunities ETF 18,000 322,299 187,383 -- 15,648 -- 525,330 13,083 First Trust Low Duration Opportunities ETF 104,000 3,217,919 5,106,527 (2,974,683) 11,613 (4,336) 5,357,040 91,033 First Trust Preferred Securities and Income ETF 379,838 8,585,277 3,834,283 (4,931,758) (280,307) 74,000 7,281,495 373,947 First Trust Senior Loan Fund -- -- 15,259,853 (13,743,858) -- (1,515,995) -- 154,739 First Trust Tactical High Yield ETF 189,993 15,842,027 9,805,263 (17,276,251) 286,888 296,443 8,954,370 299,391 -------------------------------------------------------------------------------------------------- Total Investments in Affiliates $ 39,122,624 $ 40,022,110 $ (45,341,797) $ (686,817) $ (1,730,603) $ 31,385,517 $ 1,428,277 ================================================================================================== </TABLE> I. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment income, if any, are declared and paid monthly by the Fund, or as the Board of Trustees may determine from time to time. Distributions of net realized capital gains earned by the Fund, if any, are distributed at least annually. Distributions from net investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on significantly modified portfolio securities held by the Fund and have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will reverse at some time in the future. The tax character of distributions paid during the fiscal years ended October 31, 2020 and 2019 was as follows:Distributions paid from: 2020 2019 Ordinary income............................... $ 2,785,206 $ 3,409,004 Capital gains................................. -- -- Return of capital............................. 88,048 -- As of October 31, 2020, the components of distributable earnings on a tax basis for the Fund were as follows:Undistributed ordinary income................. $ -- Accumulated capital and other gain (loss)..... (6,090,400) Net unrealized appreciation (depreciation).... (1,267,899) J. INCOME TAXES The Fund intends to continue to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, which includes distributing substantially all of its net investment income and net realized gains to shareholders. Accordingly, no provision has been made for federal and state income taxes. However, due to the timing and amount of distributions, the Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of the Fund's taxable income exceeds the distributions from such taxable income for the calendar year. Page 23 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST STRATEGIC INCOME ETF (FDIV) OCTOBER 31, 2020 The Fund is subject to accounting standards that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. The taxable years ended 2017, 2018, 2019, and 2020 remain open to federal and state audit. As of October 31, 2020, management has evaluated the application of these standards to the Fund and has determined that no provision for income tax is required in the Fund's financial statements for uncertain tax positions. The Fund intends to utilize provisions of the federal income tax laws, which allow it to carry a realized capital loss forward indefinitely following the year of the loss and offset such loss against any future realized capital gains. The Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. At October 31, 2020, the Fund had non-expiring capital loss carryforwards available for federal income tax purposes of $6,090,400. Certain losses realized during the current fiscal year may be deferred and treated as occurring on the first day of the following fiscal year for federal income tax purposes. For the fiscal year ended October 31, 2020, the Fund had no net late year ordinary or capital losses. In order to present paid-in capital and accumulated distributable earnings (loss) (which consists of accumulated net investment income (loss), accumulated net realized gain (loss) on investments and net unrealized appreciation (depreciation) on investments) on the Statement of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to paid-in capital, accumulated net investment income (loss) and accumulated net realized gain (loss) on investments. These adjustments are primarily due to the difference between book and tax treatments of income and gains on various investment securities held by the Fund and in-kind transactions. The results of operations and net assets were not affected by these adjustments. For the fiscal year ended October 31, 2020, the adjustments for the Fund were as follows:ACCUMULATED ACCUMULATED NET REALIZED NET INVESTMENT GAIN (LOSS) INCOME (LOSS) ON INVESTMENTS PAID-IN CAPITAL -------------- -------------- --------------- $ 692,811 $ 135,918 $ (828,729) K. EXPENSES Expenses, other than the investment advisory fee and other excluded expenses, are paid by the Advisor (see Note 3). 3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS First Trust, the investment advisor to the Fund, is a limited partnership with one limited partner, Grace Partners of DuPage L.P., and one general partner, The Charger Corporation. The Charger Corporation is an Illinois corporation controlled by James A. Bowen, Chief Executive Officer of First Trust. First Trust is responsible for supervising the selection and ongoing monitoring of the securities in the Fund's portfolio, managing the Fund's business affairs and providing certain administrative services necessary for the management of the Fund. The Fund and First Trust have retained the Sub-Advisors to provide recommendations to the Advisor regarding the selection and ongoing monitoring of the securities in the Fund's investment portfolio. First Trust executes all transactions on behalf of the Fund, with the exception of the securities that are selected by FTGP. EIP, an affiliate of First Trust, provides recommendations regarding the selection of MLP securities for the Fund's investment portfolio and provides ongoing monitoring of the MLP securities, MLP affiliate and energy infrastructure securities in the Fund's investment portfolio selected by EIP. EIP exercises discretion only with respect to assets of the Fund allocated to EIP by the Advisor. FTGP, an affiliate of First Trust, selects international sovereign debt securities for the Fund's investment portfolio and provides ongoing monitoring of the international sovereign debt securities in the Fund's investment portfolio selected by FTGP. RBA provides recommendations regarding longer term investment strategies that combine top-down, macroeconomic analysis and quantitatively-driven portfolio construction. RBA exercises discretion only with respect to assets allocated to RBA by the Advisor. Stonebridge, an affiliate of First Trust, provides recommendations regarding the selection and ongoing monitoring of the preferred and hybrid securities in the Fund's investment portfolio. Pursuant to the Investment Management Agreement between the Trust and Advisor, First Trust will supervise the Sub-Advisors and their management of the investment of the Fund's assets and will pay EIP, FTGP, RBA and Stonebridge for their services as the Fund's sub-advisors. EIP and FTGP each receive a sub-advisory fee from First Trust equal to 40% of any remaining monthly investment management fee paid to First Trust for the average daily net assets allocated to the Sub-Advisor after the average Fund expenses accrued during the most recent twelve months are subtracted from the investment management fee in a given month. RBA and Stonebridge each receive annual sub-advisory fees equal to 0.20% of the average daily net assets on the assets of the Fund allocated to the Sub-Advisor by First Trust. First Trust will also be responsible for the Fund's Page 24 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST STRATEGIC INCOME ETF (FDIV) OCTOBER 31, 2020 expenses, including the cost of transfer agency, custody, fund administration, legal, audit and other services, but excluding fee payments under the Investment Management Agreement, interest, taxes, pro rata share of fees and expenses attributable to investments in other investment companies ("acquired fund fees and expenses") with the exception of those attributable to affiliated Funds, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses. The Fund has agreed to pay First Trust an annual unitary management fee equal to 0.85% of its average daily net assets. The total of the unitary management fee, acquired fund fees and expenses, and other excluded expenses represents the Fund's total annual operating expenses. Pursuant to a contractual agreement between the Trust, on behalf of the Fund, and First Trust, the management fees paid to First Trust will be reduced by the proportional amount of the acquired fund fees and expenses of the shares of investment companies held by the Fund so that the Fund would not bear the indirect costs of holding them, provided that the investment companies are advised by First Trust. This contractual agreement shall continue until the earlier of (i) its termination at the direction of the Trust's Board of Trustees or (ii) the termination of the Fund's management agreement with First Trust. First Trust does not have the right to recover the fees waived that are attributable to acquired fund fees and expenses on the shares of investment companies advised by First Trust. During the fiscal year ended October 31, 2020, the Advisor waived fees of $265,076. The Trust has multiple service agreements with The Bank of New York Mellon ("BNYM"). Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services, and transfer agency services for the Fund. As custodian, BNYM is responsible for custody of the Fund's assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of the Fund's securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for the Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company. Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, defined- outcome fund or is an index fund. Additionally, the Lead Independent Trustee and the Chairmen of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and Committee Chairmen will rotate every three years. The officers and "Interested" Trustee receive no compensation from the Trust for acting in such capacities. 4. PURCHASES AND SALES OF SECURITIES The cost of purchases of U.S. Government securities and non-U.S. Government securities, excluding short-term investments and in- kind transactions for the fiscal year ended October 31, 2020, were $466,645 and $79,932,054, respectively. The proceeds from sales and paydowns of U.S. Government securities and non-U.S. Government securities, excluding short-term investments and in-kind transactions for the fiscal year ended October 31, 2020, were $4,902,178 and $74,651,340, respectively. For the fiscal year ended October 31, 2020, the cost of in-kind purchases and proceeds from in-kind sales were $3,803,623 and $25,098,676, respectively. 5. DERIVATIVE TRANSACTIONS As of October 31, 2020, the Fund had no derivative instruments. The following table presents the amount of net realized gain (loss) and change in net unrealized appreciation (depreciation) recognized for the fiscal year ended October 31, 2020, on derivative instruments, as well as the primary underlying risk exposure associated with the instruments.STATEMENT OF OPERATIONS LOCATION -------------------------------- INTEREST RATE RISK EXPOSURE Net realized gain (loss) on futures contracts $ 8,634 Net change in unrealized appreciation (depreciation) on futures contracts -- During the fiscal year ended October 31, 2020, the notional value of futures contracts opened and closed were $128,988 and $128,988, respectively. The Fund does not have the right to offset financial assets and financial liabilities related to futures contracts on the Statement of Assets and Liabilities. Page 25 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST STRATEGIC INCOME ETF (FDIV) OCTOBER 31, 2020 6. CREATIONS, REDEMPTIONS AND TRANSACTION FEES Shares are created and redeemed by the Fund only in Creation Unit size aggregations of 50,000 shares in transactions with broker-dealers or large institutional investors that have entered into a participation agreement (an "Authorized Participant"). In order to purchase Creation Units of the Fund, an Authorized Participant must deposit (i) a designated portfolio of securities determined by First Trust (the "Deposit Securities") and generally make or receive a cash payment referred to as the "Cash Component," which is an amount equal to the difference between the NAV of the Fund Shares (per Creation Unit Aggregation) and the market value of the Deposit Securities, and/or (ii) cash in lieu of all or a portion of the Deposit Securities. The Fund's Creation Units are generally issued and redeemed for cash. If the Cash Component is a positive number (i.e., the NAV per Creation Unit Aggregation exceeds the Deposit Amount), the Authorized Participant will deliver the Cash Component. If the Cash Component is a negative number (i.e., the NAV per Creation Unit Aggregation is less than the Deposit Amount), the Authorized Participant will receive the Cash Component. Authorized Participants purchasing Creation Units must pay to BNYM, as transfer agent, a creation transaction fee (the "Creation Transaction Fee") regardless of the number of Creation Units purchased in the transaction. The Creation Transaction Fee may increase or decrease with changes in the Fund's portfolio. The price for each Creation Unit will equal the daily NAV per share times the number of shares in a Creation Unit plus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees or stamp taxes. When the Fund permits an Authorized Participant to substitute cash or a different security in lieu of depositing one or more of the requisite Deposit Securities, the Authorized Participant may also be assessed an amount to cover the cost of purchasing the Deposit Securities and/or disposing of the substituted securities, including operational processing and brokerage costs, transfer fees, stamp taxes, and part or all of the spread between the expected bid and offer side of the market related to such Deposit Securities and/or substitute securities. Authorized Participants redeeming Creation Units must pay to BNYM, as transfer agent, a redemption transaction fee (the "Redemption Transaction Fee"), regardless of the number of Creation Units redeemed in the transaction. The Redemption Transaction Fee may increase or decrease with changes in the Fund's portfolio. The Fund reserves the right to effect redemptions in cash. An Authorized Participant may request cash redemption in lieu of securities; however, the Fund may, in its discretion, reject any such request. 7. DISTRIBUTION PLAN The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Fund is authorized to pay an amount up to 0.25% of its average daily net assets each year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the Fund, for amounts expended to finance activities primarily intended to result in the sale of Creation Units or the provision of investor services. FTP may also use this amount to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and educational and promotional services. No 12b-1 fees are currently paid by the Fund, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before March 31, 2022. 8. INDEMNIFICATION The Trust, on behalf of the Fund, has a variety of indemnification obligations under contracts with its service providers. The Trust's maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 9. OTHER MATTERS By operation of law, the Fund now operates as a diversified open-end management investment company as defined in Section 5(b) of the 1940 Act. 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 no subsequent events requiring recognition or disclosure in the financial statements that have not already been disclosed. Page 26 <PAGE> --------------------------------------------------------------------------------REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED FUND IV: OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS We have audited the accompanying statement of assets and liabilities of First Trust Strategic Income ETF (the "Fund"), a series of the First Trust Exchange-Traded Fund IV, including the portfolio of investments, as of October 31, 2020, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2020, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended in conformity with accounting principles generally accepted in the United States of America. BASIS FOR OPINION These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund's financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2020, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP Chicago, Illinois December 18, 2020 We have served as the auditor of one or more First Trust investment companies since 2001. Page 27 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION -------------------------------------------------------------------------------- FIRST TRUST STRATEGIC INCOME ETF (FDIV) OCTOBER 31, 2020 (UNAUDITED) PROXY VOTING POLICIES AND PROCEDURES A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how the Fund voted proxies relating to its portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on the Fund's website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov. PORTFOLIO HOLDINGS The Fund files portfolio holdings information for each month in a fiscal quarter within 60 days after the end of the relevant fiscal quarter on Form N-PORT. Portfolio holdings information for the third month of each fiscal quarter will be publicly available on the SEC's website at www.sec.gov. The Fund's complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year is included in the semi-annual and annual reports to shareholders, respectively, and is filed with the SEC on Form N-CSR. The semi-annual and annual report for the Fund is available to investors within 60 days after the period to which it relates. The Fund's Forms N-PORT and Forms N-CSR are available on the SEC's website listed above. FEDERAL TAX INFORMATION For the taxable year ended October 31, 2020, the following percentages of income dividend paid by the Fund qualify for the dividends received deduction available to corporations and are hereby designated as qualified dividend income: Dividends Received Deduction Qualified Dividend Income ---------------------------- ------------------------- 17.16% 21.02% A portion of the Fund's 2020 ordinary dividends (including short-term capital gains) paid to its shareholders during the fiscal year ended October 31, 2020, may be eligible for the Qualified Business Income Deduction (QBI) under Internal Revenue Code Section 199A for the aggregate dividends the Fund received from the underlying Real Estate Investment Trusts (REITs) it invests in. RISK CONSIDERATIONS RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE, RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND. CONCENTRATION RISK. To the extent that a fund is able to invest a large percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund's investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund's corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is not concentrated. CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer's ability to make such payments. CYBER SECURITY RISK. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. In addition, cyber security breaches of a fund's third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or issuers in which the fund invests, can also subject a fund to many of the same risks associated with direct cyber security breaches. DERIVATIVES RISK. To the extent a fund uses derivative instruments such as futures contracts, options contracts and swaps, the fund may experience losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivative. These risks are heightened when a fund's portfolio managers use derivatives to enhance the fund's return or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the fund. Page 28 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST STRATEGIC INCOME ETF (FDIV) OCTOBER 31, 2020 (UNAUDITED) 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 CONSTITUENT RISK. Certain funds may be a constituent of one or more indices. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could significantly increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, a fund's net asset value could be negatively impacted and the fund's market price may be significantly below its net asset value during certain periods. INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject to Index Provider Risk. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, maintained, constructed, reconstituted, rebalanced, composed, calculated or disseminated accurately. To correct any such error, the Index Provider may carry out an unscheduled rebalance or other modification of the Index constituents or weightings, which may increase the fund's costs. The Index Provider does not provide any representation or warranty in relation to the quality, accuracy or completeness of data in the Index, and it does not guarantee that the Index will be calculated in accordance with its stated methodology. Losses or costs associated with any Index Provider errors generally will be borne by the fund and its shareholders. INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of other investment vehicles, the fund will incur additional fees and expenses that would not be present in a direct investment in those investment vehicles. Furthermore, the fund's investment performance and risks are directly related to the investment performance and risks of the investment vehicles in which the fund invests. LIBOR RISK. To the extent a fund invests in floating or variable rate obligations that use the London Interbank Offered Rate ("LIBOR") as a reference interest rate, it is subject to LIBOR Risk. In 2017, the United Kingdom's Financial Conduct Authority announced that LIBOR will cease to be available for use after 2021. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition away from LIBOR on the fund or on certain instruments in which the fund invests can be difficult to ascertain, and they may vary depending on a variety of factors. Any such effects of the transition away from LIBOR, as well as other unforeseen effects, could result in losses to the fund. MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund's investment portfolio, the fund's portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective. Page 29 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST STRATEGIC INCOME ETF (FDIV) OCTOBER 31, 2020 (UNAUDITED) MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than others. The outbreak of the respiratory disease designated as COVID-19 in December 2019 has caused significant volatility and declines in global financial markets, which have caused losses for investors. The COVID-19 pandemic may last for an extended period of time and will continue to impact the economy for the foreseeable future. NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic issuers. Non-U.S. securities are subject to higher volatility than securities of domestic issuers due to: possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries. PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets. NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE ADVISORY AND SUB-ADVISORY AGREEMENTS BOARD CONSIDERATIONS REGARDING CONTINUATION OF 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 continuation of the Investment Management Agreement (the "Advisory Agreement") between the Trust, on behalf of First Trust Strategic Income ETF (the "Fund"), and First Trust Advisors L.P. (the "Advisor"); the Investment Sub-Advisory Agreement (the "Stonebridge Sub-Advisory Agreement") among the Trust, on behalf of the Fund, the Advisor and Stonebridge Advisors LLC ("Stonebridge"); the Investment Sub-Advisory Agreement (the "Richard Bernstein Sub-Advisory Agreement") among the Trust, on behalf of the Fund, the Advisor and Richard Bernstein Advisors LLC ("Richard Bernstein"); the Investment Sub-Advisory Agreement (the "Energy Income Partners Sub-Advisory Agreement") among the Trust, on behalf of the Fund, the Advisor and Energy Income Partners, LLC ("Energy Income Partners"); and the Investment Sub-Advisory Agreement (the "First Trust Global Sub-Advisory Agreement") among the Trust, on behalf of the Fund, the Advisor and First Trust Global Portfolios Ltd. ("First Trust Global"). The Stonebridge Sub-Advisory Agreement, the Richard Bernstein Sub-Advisory Agreement, the Energy Income Partners Sub-Advisory Agreement and the First Trust Global Sub-Advisory Agreement are collectively referred to as the "Sub-Advisory Agreements." Stonebridge, Richard Bernstein, Energy Income Partners and First Trust Global are each referred to as a "Sub-Advisor" and collectively as the "Sub-Advisors." The Sub-Advisory Agreements together with the Advisory Agreement are referred to as the "Agreements." The Board approved the continuation of the Agreements for a one-year period ending June 30, 2021 at a meeting held on June 8, 2020. The Board determined that the continuation of the Agreements is in the best interests of the Fund in light of the nature, extent and quality of the services provided and such other matters as the Board considered to be relevant in the exercise of its reasonable business judgment. To reach this determination, the Board considered its duties under the Investment Company Act of 1940, as amended (the "1940 Act"), as well as under the general principles of state law, in reviewing and approving advisory contracts; the requirements of the 1940 Act in such matters; the fiduciary duty of investment advisors with respect to advisory agreements and compensation; the standards used by courts in determining whether investment company boards have fulfilled their duties; and the factors to be considered by the Board in voting on such agreements. At meetings held on May 11, 2020 and June 8, 2020, the Board, including the Independent Trustees, reviewed materials provided by the Advisor and each Sub-Advisor 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 provided by the Advisor and each Sub-Advisor to the Fund (including the relevant personnel responsible for these services and their experience); the unitary fee rate payable by the Fund as compared to fees charged to a peer group of funds (the "Expense Group") and a broad peer universe of funds (the "Expense Universe"), each assembled by Broadridge Financial Solutions, Inc. ("Broadridge"), an independent source, and as compared to fees charged to other clients of the Advisor, including other exchange-traded funds ("ETFs") managed by the Advisor; the sub-advisory fee rates for the Fund as compared to fees charged to other clients of the Page 30 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST STRATEGIC INCOME ETF (FDIV) OCTOBER 31, 2020 (UNAUDITED) Sub-Advisors; the expense ratio of the Fund as compared to expense ratios of the funds in the Fund's Expense Group and Expense Universe; performance information for the Fund, including comparisons of the Fund's performance to that of one or more relevant benchmark indexes and to that of a performance group of funds and a broad performance universe of funds (the "Performance Universe"), each assembled by Broadridge; the nature of expenses incurred in providing services to the Fund and the potential for the Advisor and each Sub-Advisor to realize economies of scale, if any; profitability and other financial data for the Advisor; financial data for each Sub-Advisor; any fall-out benefits to the Advisor and its affiliates, First Trust Portfolios L.P. ("FTP") and First Trust Global, and the Sub-Advisors; and information on the Advisor's and each Sub-Advisor's compliance programs. The Board reviewed initial materials with the Advisor at the meeting held on May 11, 2020, prior to which the Independent Trustees and their counsel met separately to discuss the information provided by the Advisor and the Sub-Advisors. Following the May meeting, counsel to the Independent Trustees, on behalf of the Independent Trustees, requested certain clarifications and supplements to the materials provided, and the information provided in response to those requests was considered at an executive session of the Independent Trustees and their counsel held prior to the June 8, 2020 meeting, as well as at the meeting held that day. The Board considered supplemental information provided by the Advisor and each Sub-Advisor on the operations of the Advisor and each Sub-Advisor, respectively, and the performance of the Fund since the onset of the COVID-19 pandemic. The Board applied its business judgment to determine whether the arrangements between the Trust and the Advisor and among the Trust, the Advisor and each Sub-Advisor continue to be reasonable business arrangements from the Fund's perspective. The Board determined that, given the totality of the information provided with respect to the Agreements, the Board had received sufficient information to renew the Agreements. The Board considered that shareholders chose to invest or remain invested in the Fund knowing that the Advisor and the Sub-Advisors manage the Fund and knowing the Fund's unitary fee. In reviewing the Agreements, the Board considered the nature, extent and quality of the services provided by the Advisor and the Sub-Advisors under the Agreements. The Board considered that the Fund is an actively-managed ETF and employs a multi-manager/multi-sleeve structure. With respect to the Advisory Agreement, the Board considered that the Advisor is responsible for the overall management and administration of the Trust and the Fund and reviewed all of the services provided by the Advisor to the Fund, including the oversight of the Sub-Advisors and the strategic and tactical asset allocations among internal management teams and the Sub-Advisors performed by members of the Advisor's Investment Committee, as well as the background and experience of the persons responsible for such services. In addition to materials provided by the Advisor, at the May 11, 2020 meeting, the Board received a presentation from members of the Investment Committee discussing the services that the Investment Committee provides to the Fund. The Board considered that Stonebridge and Richard Bernstein act as non-discretionary managers providing model portfolio recommendations to the Advisor, and that although First Trust Global and Energy Income Partners act as discretionary investment advisors, the Advisor executes the Fund's portfolio trades. The Board noted that members of the Advisor's Mortgage Securities Team and Leveraged Finance Investment Team participate in the management of the Fund and considered the experience of each Team and noted the Board's prior meetings with members of each Team. The Board noted that the Advisor oversees management of the Fund's investments, including portfolio risk monitoring and performance review. In reviewing the services 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, each 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 also considered a report from the Advisor with respect to its risk management functions related to the operation of the Fund. Finally, as part of the Board's consideration of the Advisor's services, the Advisor, in its written materials and at the May 11, 2020 meeting, described to the Board the scope of its ongoing investment in additional infrastructure and personnel to maintain and improve the quality of services provided to the Fund and the other funds in the First Trust Fund Complex. With respect to the Sub-Advisory Agreements, the Board noted that the Fund is an actively-managed ETF and the Sub-Advisors actively manage the Fund's investments. The Board reviewed the materials provided by each Sub-Advisor and considered the services that each Sub-Advisor provides to the Fund, including each Sub-Advisor's discretionary or non-discretionary management, as applicable, of the portion of the Fund's assets allocated to it. In considering each Sub-Advisor's services to the Fund, the Board noted the background and experience of each Sub-Advisor's portfolio management team and the Board's prior meetings with members of each portfolio management team. The Board also received a presentation from representatives of Energy Income Partners at the June 8, 2020 meeting. In light of the information presented and the considerations made, the Board concluded that the nature, extent and quality of the services provided to the Trust and the Fund by the Advisor and each Sub-Advisor under the Agreements have been and are expected to remain satisfactory and that the Advisor and the Sub-Advisors have managed the Fund consistent with the Fund's investment objectives, policies and restrictions. The Board considered the unitary fee rate payable by the Fund under the Advisory Agreement for the services provided. The Board noted that the Advisor pays each Sub-Advisor a separate sub-advisory fee from the unitary fee. The Board considered that as part of the unitary fee the Advisor is 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, 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 noted that the Advisor had previously agreed to waive its unitary fee to the extent of acquired fund fees and expenses of shares of investment Page 31 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST STRATEGIC INCOME ETF (FDIV) OCTOBER 31, 2020 (UNAUDITED) companies advised by the Advisor that are held by the Fund. The Board received and reviewed information showing the advisory or unitary fee rates and expense ratios of the peer funds in the Expense Group, as well as advisory and unitary fee rates charged by the Advisor and the Sub-Advisors to other fund (including ETFs) and non-fund clients, as applicable. Because the Fund pays 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, after taking into account fee waivers, was below the median total (net) expense ratio of the peer funds in the Expense Group. With respect to the Expense Group, the Board, at the May 11, 2020 meeting, discussed with Broadridge its methodology for assembling peer groups and discussed with the Advisor limitations in creating peer groups for actively-managed ETFs and that different business models may affect the pricing of services among ETF sponsors. The Board noted that not all peer funds employ an advisor/sub-advisor management structure. The Board took these limitations and differences into account in considering the peer data. With respect to fees charged to other non-ETF clients, the Board considered differences between the Fund and other non-ETF clients that limited their comparability. In considering the unitary fee rate overall, the Board also considered the Advisor's statement that it seeks to meet investor needs through innovative and value-added investment solutions and the Advisor's demonstrated long-term commitment to the Fund and the other funds in the First Trust Fund Complex. The Board considered performance information for the Fund. The Board noted the process it has established for monitoring the Fund's performance and portfolio risk on an ongoing basis, which includes quarterly performance reporting from the Advisor for the Fund. The Board determined that this process continues to be effective for reviewing the Fund's performance. The Board received and reviewed information comparing the Fund's performance for periods ended December 31, 2019 to the performance of the funds in the Performance Universe and to that of a blended benchmark index. Based on the information provided, the Board noted that the Fund outperformed the Performance Universe median and the blended benchmark index for the one-, three- and five-year periods ended December 31, 2019. On the basis of all the information provided on the unitary fee and performance of the Fund and the ongoing oversight by the Board, the Board concluded that the unitary fee for the Fund (out of which the Sub-Advisors are compensated) continues to be reasonable and appropriate in light of the nature, extent and quality of the services provided by the Advisor and the Sub-Advisors to the Fund under the Agreements. The Board considered information and discussed with the Advisor whether there were any economies of scale in connection with providing advisory services to the Fund and noted the Advisor's statement that it believes its expenses will likely increase over the next twelve months as the Advisor continues to hire personnel and build infrastructure, including technology, to improve the services to the Fund. The Board noted that any reduction in fixed costs associated with the management of the Fund would benefit the Advisor, but that the unitary fee structure provides a level of certainty in expenses for the Fund. The Board considered the revenues and allocated costs (including the allocation methodology) of the Advisor in serving as investment advisor to the Fund for the twelve months ended December 31, 2019 and the estimated profitability level for the Fund calculated by the Advisor based on such data, as well as complex-wide and product-line profitability data, for the same period. The Board noted the inherent limitations in the profitability analysis and concluded that, based on the information provided, the Advisor's profitability level for the Fund was not unreasonable. In addition, the Board considered fall-out benefits described by the Advisor that may be realized from its relationship with the Fund. The Board noted that affiliates of the Advisor have ownership interests in Stonebridge, Energy Income Partners and First Trust Global and considered potential fall-out benefits to the Advisor from such ownership interests. The Board also considered that the Advisor had identified as a fall out benefit to the Advisor and FTP their exposure to investors and brokers who, absent their exposure to the Fund, may have had no dealings with the Advisor or FTP, and noted that the Advisor does not utilize soft-dollars in connection with the Fund. The Board concluded that the character and amount of potential fall-out benefits to the Advisor were not unreasonable. With respect to the Stonebridge Sub-Advisory Agreement, the Board considered Stonebridge's expenses in providing investment services to the Fund and noted Stonebridge's hiring of additional personnel and commitment to add additional resources if assets increase. The Board did not review the profitability of Stonebridge with respect to the Fund. The Board noted that the Advisor pays Stonebridge from the unitary fee, and its understanding that the Fund's sub-advisory fee rate was the product of an arm's length negotiation. The Board concluded that the profitability analysis for the Advisor was more relevant. The Board considered fall-out benefits that may be realized by Stonebridge from its relationship with the Fund, including potential fall-out benefits to Stonebridge from the ownership interest of an affiliate of the Advisor in Stonebridge, and noted Stonebridge's statement that its relationship with the Advisor has helped it build relationships with Wall Street firms that have preferred and hybrid securities trading desks, which may lead to access to those firms' research reports and analysts. The Board noted that Stonebridge acts as non-discretionary manager providing model portfolio recommendations to the Advisor and does not provide trade execution services to the Fund. The Board concluded that the character and amount of potential fall-out benefits to Stonebridge were not unreasonable. With respect to the Richard Bernstein Sub-Advisory Agreement, the Board considered Richard Bernstein's statements about economies of scale. The Board did not review the profitability of Richard Bernstein with respect to the Fund. The Board noted that the Advisor pays Richard Bernstein from the unitary fee, and its understanding that the Fund's sub-advisory fee rate was the product of Page 32 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST STRATEGIC INCOME ETF (FDIV) OCTOBER 31, 2020 (UNAUDITED) an arm's length negotiation. The Board concluded that the profitability analysis for the Advisor was more relevant. The Board noted the potential fall-out benefits identified by Richard Bernstein as a result of its relationship with the Fund and the Advisor. The Board noted that Richard Bernstein acts as non-discretionary manager providing model portfolio recommendations to the Advisor and does not provide trade execution services to the Fund. The Board concluded that the character and amount of potential fall-out benefits to Richard Bernstein were not unreasonable. With respect to the Energy Income Partners Sub-Advisory Agreement, the Board considered that Energy Income Partners' investment services expenses are primarily fixed in nature, and that Energy Income Partners has made recent investments in personnel and infrastructure and anticipates that its expenses will continue to rise due to additions to personnel and system upgrades. The Board did not review the profitability of Energy Income Partners with respect to the Fund. The Board noted that the Advisor pays Energy Income Partners from the unitary fee, and its understanding that the Fund's sub-advisory fee rate was the product of an arm's length negotiation. The Board concluded that the profitability analysis for the Advisor was more relevant. The Board considered fall-out benefits that may be realized by Energy Income Partners from its relationship with the Fund, including the potential fall-out benefits to Energy Income Partners from the ownership interest of an affiliate of the Advisor in Energy Income Partners. The Board noted that Energy Income Partners does not provide trade execution services on behalf of the Fund. The Board concluded that the character and amount of potential fall-out benefits to Energy Income Partners were not unreasonable. With respect to the First Trust Global Sub-Advisory Agreement, the Board considered First Trust Global's statements that expenses incurred in providing services to the Fund are of a fixed nature and that no economies of scale have been identified from the provision of services to the Fund. The Board did not review the profitability of First Trust Global with respect to the Fund. The Board concluded that the profitability analysis for the Advisor was more relevant. The Board considered the potential fall-out benefits to First Trust Global from being associated with the Advisor and the Fund. The Board noted that First Trust Global does not provide trade execution services on behalf of the Fund. The Board concluded that the character and amount of potential fall-out benefits to First Trust Global were not unreasonable. Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, unanimously determined that the terms of the Agreements continue to be fair and reasonable and that the continuation 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. 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 May 11, 2020 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 June 1, 2019 (the initial compliance date for certain requirements of Rule 22e-4) through the Liquidity Committee's annual meeting held on March 20, 2020 and assessed the Program's adequacy and effectiveness of implementation during this period, including the operation of the highly liquid investment minimum for each fund that is required under the Program to have one, and any material changes to the Program. Note that because the Fund primarily holds assets that are highly liquid investments, the Fund has not adopted a highly liquid investment minimum. As stated in the written report, during the review period, no fund breached the 15% limitation on illiquid investments, no fund with a highly liquid investment minimum breached that minimum and no fund filed a Form N-LIQUID. The Advisor concluded that each fund's investment strategy is appropriate for an open-end fund; that the Program operated effectively in all material respects during the review period; and that the Program is reasonably designed to assess and manage the liquidity risk of each fund and to maintain compliance with Rule 22e-4. Page 33 <PAGE> --------------------------------------------------------------------------------BOARD OF TRUSTEES AND OFFICERS -------------------------------------------------------------------------------- FIRST TRUST STRATEGIC INCOME ETF (FDIV) OCTOBER 31, 2020 (UNAUDITED) The following tables identify the Trustees and Officers of the Trust. Unless otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite 400, Wheaton, IL 60187. The Trust's statement of additional information includes additional information about the Trustees and is available, without charge, upon request, by calling (800) 988-5891. <TABLE> <CAPTION> NUMBER OF OTHER PORTFOLIOS IN TRUSTEESHIPS OR THE FIRST TRUST DIRECTORSHIPS NAME, TERM OF OFFICE AND FUND COMPLEX HELD BY TRUSTEE YEAR OF BIRTH AND YEAR FIRST ELECTED PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST POSITION WITH THE TRUST OR APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ INDEPENDENT TRUSTEES ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 189 None (1951) Limited Partner, Gundersen Real Estate o Since Inception Limited Partnership (June 1992 to December 2016); Member, Sportsmed LLC (April 2007 to November 2015) Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 189 Director of ADM (1957) (Futures Commission Merchant) Investor Services, o Since Inception Inc., ADM Investor Services International, Futures Industry Association, and National Futures Association Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 189 Director of Trust (1956) and Management Consulting) Company of o Since Inception Illinois Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 189 None (1954) Managing Director and Chief Operating o Since Inception Officer (January 2015 to August 2018), Pelita Harapan Educational Foundation (Educational Product and Services) ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED TRUSTEE ------------------------------------------------------------------------------------------------------------------------------------ James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 189 None Chairman of the Board Advisors L.P. and First Trust Portfolios (1955) o Since Inception L.P., Chairman of the Board of Directors, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) </TABLE> ----------------------------- (1) Mr. Bowen is deemed an "interested person" of the Trust due to his position as Chief Executive Officer of First Trust Advisors L.P., investment advisor of the Trust. Page 34 <PAGE> --------------------------------------------------------------------------------BOARD OF TRUSTEES AND OFFICERS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST STRATEGIC INCOME ETF (FDIV) OCTOBER 31, 2020 (UNAUDITED) <TABLE> <CAPTION> NAME AND POSITION AND OFFICES TERM OF OFFICE AND PRINCIPAL OCCUPATIONS YEAR OF BIRTH WITH TRUST LENGTH OF SERVICE DURING PAST 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS(2) ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> James M. Dykas President and Chief Executive o Indefinite Term Managing Director and Chief Financial Officer (1966) Officer (January 2016 to Present), Controller (January 2011 o Since January 2016 to January 2016), Senior Vice President (April 2007 to January 2016), First Trust Advisors L.P. and First Trust Portfolios L.P.; Chief Financial Officer (January 2016 to Present), BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President (July 2016 to Present), Vice (1972) Officer and Chief President (April 2012 to July 2016), First Trust Accounting Officer o Since January 2016 Advisors L.P. and First Trust Portfolios L.P. W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and First (1960) Legal Officer Trust Portfolios L.P.; Secretary and General o Since Inception Counsel, BondWave LLC; Secretary, Stonebridge Advisors LLC Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and (1970) First Trust Portfolios L.P. o Since Inception Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P. (1966) and Assistant Secretary and First Trust Portfolios L.P. o Since Inception Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. (1966) and First Trust Portfolios L.P. o Since Inception Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. (1970) and First Trust Portfolios L.P. o Since Inception </TABLE> ----------------------------- (2) The term "officer" means the president, vice president, secretary, treasurer, controller or any other officer who performs a policy making function. Page 35 <PAGE> -------------------------------------------------------------------------------- PRIVACY POLICY -------------------------------------------------------------------------------- FIRST TRUST STRATEGIC INCOME ETF (FDIV) OCTOBER 31, 2020 (UNAUDITED) PRIVACY POLICY First Trust values our relationship with you and considers your privacy an important priority in maintaining that relationship. We are committed to protecting the security and confidentiality of your personal information. SOURCES OF INFORMATION We collect nonpublic personal information about you from the following sources: o Information we receive from you and your broker-dealer, investment advisor or financial representative through interviews, applications, agreements or other forms; o Information about your transactions with us, our affiliates or others; o Information we receive from your inquiries by mail, e-mail or telephone; and o Information we collect on our website through the use of "cookies". For example, we may identify the pages on our website that your browser requests or visits. INFORMATION COLLECTED The type of data we collect may include your name, address, social security number, age, financial status, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, investment objectives, marital status, family relationships and other personal information. DISCLOSURE OF INFORMATION We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. In addition to using this information to verify your identity (as required under law), the permitted uses may also include the disclosure of such information to unaffiliated companies for the following reasons: o In order to provide you with products and services and to effect transactions that you request or authorize, we may disclose your personal information as described above to unaffiliated financial service providers and other companies that perform administrative or other services on our behalf, such as transfer agents, custodians and trustees, or that assist us in the distribution of investor materials such as trustees, banks, financial representatives, proxy services, solicitors and printers. o We may release information we have about you if you direct us to do so, if we are compelled by law to do so, or in other legally limited circumstances (for example to protect your account from fraud). In addition, in order to alert you to our other financial products and services, we may share your personal information within First Trust. USE OF WEBSITE ANALYTICS We currently use third party analytics tools, Google Analytics and AddThis, to gather information for purposes of improving First Trust's website and marketing our products and services to you. These tools employ cookies, which are small pieces of text stored in a file by your web browser and sent to websites that you visit, to collect information, track website usage and viewing trends such as the number of hits, pages visited, videos and PDFs viewed and the length of user sessions in order to evaluate website performance and enhance navigation of the website. We may also collect other anonymous information, which is generally limited to technical and web navigation information such as the IP address of your device, internet browser type and operating system for purposes of analyzing the data to make First Trust's website better and more useful to our users. The information collected does not include any personal identifiable information such as your name, address, phone number or email address unless you provide that information through the website for us to contact you in order to answer your questions or respond to your requests. To find out how to opt-out of these services click on: Google Analytics and AddThis. CONFIDENTIALITY AND SECURITY With regard to our internal security procedures, First Trust restricts access to your nonpublic personal information to those First Trust employees who need to know that information to provide products or services to you. We maintain physical, electronic and procedural safeguards to protect your nonpublic personal information. POLICY UPDATES AND INQUIRIES As required by federal law, we will notify you of our privacy policy annually. We reserve the right to modify this policy at any time, however, if we do change it, we will tell you promptly. For questions about our policy, or for additional copies of this notice, please go to www.ftportfolios.com, or contact us at 1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust Advisors). March 2019 Page 36 <PAGE> FIRST TRUST First Trust Exchange-Traded Fund IV INVESTMENT ADVISOR First Trust Advisors L.P. 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 INVESTMENT SUB-ADVISORS Energy Income Partners, LLC 10 Wright Street Westport, CT 06880 First Trust Global Portfolios Limited 8 Angel Court London EC2R 7HJ Richard Bernstein Advisors, LLC 120 West 45th Street, 36th Floor New York, NY 10036 Stonebridge Advisors LLC 10 Westport Road, Suite C101 Wilton, CT 06897 ADMINISTRATOR, CUSTODIAN, FUND ACCOUNTANT & TRANSFER AGENT The Bank of New York Mellon 240 Greenwich Street New York, NY 10286 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deloitte & Touche LLP 111 S. Wacker Drive Chicago, IL 60606 LEGAL COUNSEL Chapman and Cutler LLP 111 W. Monroe Street Chicago, IL 60603 <PAGE> [BLANK BACK COVER] <PAGE>
FIRST TRUST First Trust Exchange-Traded Fund IV -------------------------------------------------------------------------------- First Trust Low Duration Opportunities ETF (LMBS) Annual Report For the Year Ended October 31, 2020 <PAGE> --------------------------------------------------------------------------------TABLE OF CONTENTS -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) ANNUAL REPORT OCTOBER 31, 2020 Shareholder Letter........................................................... 1 Fund Performance Overview.................................................... 2 Portfolio Commentary......................................................... 5 Understanding Your Fund Expenses............................................. 7 Portfolio of Investments..................................................... 8 Statement of Assets and Liabilities.......................................... 46 Statement of Operations...................................................... 47 Statements of Changes in Net Assets.......................................... 48 Financial Highlights......................................................... 49 Notes to Financial Statements................................................ 50 Report of Independent Registered Public Accounting Firm...................... 60 Additional Information....................................................... 61 Board of Trustees and Officers............................................... 67 Privacy Policy............................................................... 69 CAUTION REGARDING FORWARD-LOOKING STATEMENTS This report contains certain forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding the goals, beliefs, plans or current expectations of First Trust Advisors L.P. ("First Trust" or the "Advisor") and its representatives, taking into account the information currently available to them. Forward-looking statements include all statements that do not relate solely to current or historical fact. For example, forward-looking statements include the use of words such as "anticipate," "estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or other words that convey uncertainty of future events or outcomes. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the series of First Trust Exchange-Traded Fund IV (the "Trust") described in this report (First Trust Low Duration Opportunities ETF; hereinafter referred to as the "Fund") to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. When evaluating the information included in this report, you are cautioned not to place undue reliance on these forward-looking statements, which reflect the judgment of the Advisor and its representatives only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events and circumstances that arise after the date hereof. PERFORMANCE AND RISK DISCLOSURE There is no assurance that the Fund will achieve its investment objectives. The Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the Fund's shares may therefore be less than what you paid for them. Accordingly, you can lose money investing in the Fund. See "Risk Considerations" in the Additional Information section of this report for a discussion of other risks of investing in the Fund. Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. For the most recent month-end performance figures, please visit www.ftportfolios.com or speak with your financial advisor. Investment returns, net asset value and share price will fluctuate and Fund shares, when sold, may be worth more or less than their original cost. The Advisor may also periodically provide additional information on Fund performance on the Fund's webpage at www.ftportfolios.com. HOW TO READ THIS REPORT This report contains information that may help you evaluate your investment in the Fund. It includes details about the Fund and presents data and analysis that provide insight into the Fund's performance and investment approach. By reading the portfolio commentary from the portfolio management team of the Fund, you may obtain an understanding of how the market environment affected the Fund's performance. The statistical information that follows may help you understand the Fund's performance compared to that of a relevant market benchmark. It is important to keep in mind that the opinions expressed by personnel of the Advisor are just that: informed opinions. They should not be considered to be promises or advice. The opinions, like the statistics, cover the period through the date on the cover of this report. The material risks of investing in the Fund are spelled out in the prospectus, the statement of additional information, and other Fund regulatory filings. <PAGE> -------------------------------------------------------------------------------- SHAREHOLDER LETTER -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) ANNUAL LETTER FROM THE CHAIRMAN AND CEO OCTOBER 31, 2020 Dear Shareholders: First Trust is pleased to provide you with the annual report for the First Trust Low Duration Opportunities ETF (the "Fund"), which contains detailed information about the Fund for the twelve months ended October 31, 2020. As I was collecting my thoughts for this annual roundup it occurred to me that my message this year should touch on the tone of the markets and the investing climate rather than belabor all the news and events that brought us to this juncture. We all know how tumultuous our lives have become over the past eight or so months. The phrase "shelter-at-home" says it all. I would rather talk about why I believe investors should be optimistic about where we could be headed. Having said that, allow me to at least acknowledge the two elephants in the room: the coronavirus ("COVID-19") and the election. In the first 12 days of November, we learned the following: that we likely have a new president-elect (Joe Biden), though it may not be official for some time because it is being contested by President Donald Trump and some of his loyal backers in the Republican Party citing voter fraud in certain states; that we still do not know which political party will have control of the Senate due to a couple of run-offs in Georgia to be held on January 5, 2021; and, that it looks as though we may be fortunate enough to have an FDA-approved COVID-19 vaccine by either the end of 2020 or the start of 2021, though that too is not yet official. It could be a game-changer in the COVID-19 battle. And, we may gain access to additional vaccines as well. The key to getting the economy back to running on all cylinders is to fully reopen, and a vaccine is "what the doctor ordered." With respect to the tone of the markets and investment climate, to say that I am encouraged about what has transpired in 2020 would be an understatement. Despite the extraordinary challenges so far this year, the S&P 500(R) Index posted a total return of 2.77% over the first 10 months of 2020, this despite plunging 33.8% into bear market territory from February 19, 2020 through March 23, 2020, according to Bloomberg. As impressive as that feat is, the future looks even brighter. While Bloomberg's consensus earnings growth rate estimate for the S&P 500(R) Index for 2020 was -16.51%, as of November 13, 2020, its 2021 and 2022 estimates were 21.74% and 16.95%, respectively. That is a strong take on the prospects for a rebound in Corporate America over the next 24 months. One of the tailwinds that is providing a good deal of support to the economy and markets is the decision by the Federal Reserve (the "Fed") to keep interest rates artificially low for as long as need be to meet both its employment and inflation targets. By keeping rates lower for longer, the Fed is essentially inviting investors to assume more risk to generate higher returns. Brian Wesbury, Chief Economist at First Trust, believes that the Fed could need until 2024 to accomplish its goals. That is a lot of runway for investors to reposition their portfolios, if needed, and a very generous, and perhaps unprecedented, amount of guidance from the Fed, in our opinion. Those investors with cash on the sidelines earning next to nothing have options if they choose to act. We are encouraged about the prospects for the economy and the markets, but investors should be prepared to weather some volatility until the COVID-19 pandemic is better contained. As always, we encourage investors to stay the course! Thank you for giving First Trust the opportunity to play a role in your financial future. We value our relationship with you and will report on the Fund again in six months. Sincerely, /s/ James A. Bowen James A. Bowen Chairman of the Board of Trustees Chief Executive Officer of First Trust Advisors L.P. Page 1 <PAGE> -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) The primary investment objective of the First Trust Low Duration Opportunities ETF (the "Fund") is to generate current income. The Fund's secondary investment objective is to provide capital appreciation. The Fund is an actively managed exchange-traded fund. First Trust Advisors L.P. ("First Trust" or the "Advisor") serves as the advisor. James Snyder and Jeremiah Charles are the Fund's portfolio managers and are jointly and primarily responsible for the day-to-day management of the Fund's investment portfolio. Under normal market conditions, the Fund will seek to achieve its investment objectives by investing at least 60% of its net assets (including investment borrowings) in mortgage-related debt securities and other mortgage-related instruments. The Fund's investment categories are: (i) mortgage-related investments, including mortgage-backed securities that may be, but are not required to be, issued or guaranteed by the U.S. government or its agencies or instrumentalities; (ii) U.S. government securities, including callable agency securities, which give the issuer (the U.S. government agency) the right to redeem the security prior to maturity, and U.S. government inflation-indexed securities; and (iii) high yield debt, commonly referred to as "junk" debt. Although the Fund intends to invest primarily in investment grade securities, the Fund may invest up to 20% of its net assets (including investment borrowings) in securities of any credit quality, including securities that are below investment grade (as described in (iii) above), illiquid securities, and derivative instruments. The Fund is diversified.<TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL CUMULATIVE TOTAL RETURNS TOTAL RETURNS 1 Year Ended 5 Years Ended Inception (11/4/14) 5 Years Ended Inception (11/4/14) 10/31/20 10/31/20 to 10/31/20 10/31/20 to 10/31/20 <S> <C> <C> <C> <C> <C> FUND PERFORMANCE NAV 1.50% 3.15% 3.24% 16.78% 21.01% Market Price 1.71% 3.24% 3.25% 17.30% 21.13% INDEX PERFORMANCE ICE BofA 1-5 Year US Treasury & Agency Index 4.11% 2.21% 2.08% 11.53% 13.14% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> Total returns for the period since inception are calculated from the inception date of the Fund. "Average Annual Total Returns" represent the average annual change in value of an investment over the period indicated. "Cumulative Total Returns" represent the total change in value of an investment over the periods indicated. The Fund's per share net asset value ("NAV") is the value of one share of the Fund and is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of outstanding shares. The price used to calculate market return ("Market Price") is determined by using the midpoint of the national best bid and offer price ("NBBO") as of the time that the Fund's NAV is calculated. Under SEC rules, the NBBO consists of the highest displayed buy and lowest sell prices among the various exchanges trading the Fund at the time the Fund's NAV is calculated. Prior to January 1, 2019, the price used was the midpoint between the highest bid and the lowest offer on the stock exchange on which shares of the Fund were listed for trading as of the time that the Fund's NAV was calculated. Since shares of the Fund did not trade in the secondary market until after its inception, for the period from inception to the first day of secondary market trading in shares of the Fund, the NAV of the Fund is used as a proxy for the secondary market trading price to calculate market returns. NAV and market returns assume that all distributions have been reinvested in the Fund at NAV and Market Price, respectively. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The total returns presented reflect the reinvestment of dividends on securities in the index. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future performance. Page 2 <PAGE> --------------------------------------------------------------------------------FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) ----------------------------------------------------------- % OF FUND ALLOCATION NET ASSETS ----------------------------------------------------------- U.S. Government Agency Mortgage- Backed Securities 87.5% Mortgage-Backed Securities 2.9 Asset-Backed Securities 2.2 Exchange-Traded Funds 0.0* Money Market Funds 20.9 U.S. Government Agency Mortgage- Backed Securities Sold Short (9.0) Net Other Assets and Liabilities(1) (4.5) ------- Total 100.0% ======= ----------------------------------------------------------- % OF TOTAL LONG FIXED-INCOME CREDIT QUALITY(3) INVESTMENTS & CASH ----------------------------------------------------------- Government and Agency 76.98% AAA 0.49 AA+ 0.00** AA 0.01 A+ 0.04 A 0.00** BBB+ 0.03 BBB- 0.00** BB+ 0.03 BB 0.12 B+ 0.00** B- 0.00** CCC 0.02 D 0.05 Not Rated 3.68 Cash and Cash Equivalents 18.55 ------- Total 100.00% ======= * Amount is less than 0.05%. ** Amount is less than 0.01%.----------------------------------------------------------- % OF LONG-TERM TOP TEN HOLDINGS INVESTMENTS(2) ----------------------------------------------------------- Federal National Mortgage Association, Pool TBA, 2.50%, 12/15/50 6.51% Federal National Mortgage Association, Pool TBA, 2.00%, 12/15/50 4.33 Federal National Mortgage Association, Pool TBA, 1.50%, 11/15/35 2.16 Federal National Mortgage Association, Pool FM2500, 2.50%, 3/1/35 2.08 Federal National Mortgage Association, Pool FM1194, 4.50%, 5/1/39 1.81 Federal Home Loan Mortgage Corporation, Series 2017-4673, Class WZ, 3.50%, 4/15/47 1.57 Federal Home Loan Mortgage Corporation, Series 2018-4790, Class Z, 4.00%, 5/15/48 1.55 Federal Home Loan Mortgage Corporation, Pool SD8082, 1.50%, 10/1/50 1.55 Federal National Mortgage Association, Pool FM1725, 2.50%, 11/01/47 1.30 Federal National Mortgage Association, Pool BM5508, 5.00%, 2/1/49 1.22 ------- Total 24.08% ======= ----------------------------------------------------------- WEIGHTED AVERAGE EFFECTIVE NET DURATION ----------------------------------------------------------- October 31, 2020 1.57 Years High - December 31, 2019 2.56 Years Low - July 31, 2020 1.17 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 Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc. A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO), of the creditworthiness of an issuer with respect to debt obligations. Ratings are measured highest to lowest on a scale that generally ranges from AAA to D for long-term ratings and A-1+ to C for short-term ratings. Investment grade is defined as those issuers that have a long-term credit rating of BBB- or higher or a short-term credit rating of A-3 or higher. The credit ratings shown relate to the credit worthiness of the issuers of the underlying securities in the Fund, and not to the Fund or its shares. U.S. Treasury and U.S. Agency mortgage-backed securities appear under "Government and Agency". Credit ratings are subject to change. Page 3 <PAGE> --------------------------------------------------------------------------------FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT NOVEMBER 4, 2014 - OCTOBER 31, 2020 First Trust Low Duration ICE BofA 1-5 Year US Opportunities ETF Treasury & Agency Index <S> <C> <C> 11/4/14 $10,000 $10,000 4/30/15 10,236 10,097 10/31/15 10,362 10,144 4/30/16 10,725 10,256 10/31/16 11,138 10,301 4/30/17 11,186 10,279 10/31/17 11,274 10,307 4/30/18 11,294 10,205 10/31/18 11,368 10,273 4/30/19 11,635 10,578 10/31/19 11,923 10,867 4/30/20 11,990 11,290 10/31/20 12,101 11,314 </TABLE> Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 4 <PAGE> -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) ANNUAL REPORT OCTOBER 31, 2020 (UNAUDITED) ADVISOR First Trust Advisors L.P. ("First Trust" or the "Advisor") is the investment advisor to the First Trust Low Duration Opportunities ETF ("the Fund" or "LMBS"). In this capacity, First Trust is responsible for the selection and ongoing monitoring of the investments in the Fund's portfolio and certain other services necessary for the management of the portfolio. PORTFOLIO MANAGEMENT TEAM JEREMIAH CHARLES - SENIOR VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER, FIRST TRUST SECURITIZED PRODUCTS GROUP JAMES SNYDER - SENIOR VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER, FIRST TRUST SECURITIZED PRODUCTS GROUP COMMENTARY MARKET RECAP The 12-month period ended October 31, 2020 began relatively calmly, being driven primarily by policy decisions related to the trade war between the U.S. and China. The onset of the coronavirus ("COVID-19") pandemic triggered an unprecedented liquidity crisis across global markets, with its effects rippling through the domestic and global economies and causing profound changes in both bond and equity market fundamentals, risk factors and valuations. Due to the nature of this pandemic, the reversal in monetary policy driven by the trade war was put into overdrive. In response, the Federal Reserve (the "Fed") began a new phase of seemingly limitless quantitative easing, and reinstated programs that were last relied upon during the Great Recession of 2008. It also began to roll out new programs, expanding the range of covered asset classes, and providing a backstop to the significant dislocations and severe illiquidity that occurred. The Fed further aided markets with emergency rate cuts totaling 150 basis points ("bps") and setting the lower bound of the Fed Funds rate at 0%. The Fed was not alone in providing aid, as Congress stepped in with a large stimulus package to help Americans weather coronavirus and its effects. Treasury issuance as a result has soared to buoy government spending, however, with the aid of quantitative easing ("QE") programs and a continued demand for safe haven assets, Treasury yields plunged to record lows. For example, over the last year, the 2-Year Treasury yield has declined precipitously by -137 bps to close on October 31, 2020 at 15 bps, while the 10-Year Treasury fell 82 bps to close the year at 87.4 bps, with the curve bull steepening. The COVID-19 panic did not discriminate, affecting nearly every aspect of the broader spread markets, including Agency Mortgage-Backed Securities ("MBS"), which initially saw large spread widening moves as Agency MBS spreads widened dramatically from the low 40s Treasury Option-Adjusted Spread ("OAS"), to a wide of 136 OAS. Agency MBS spreads tightened to close the fiscal year at 64 OAS, as the impact of Fed programs and legislative support helped improve liquidity and greatly improved market participants risk appetite. PERFORMANCE ANALYSIS During the 12-month period ended October 31, 2020, the Fund returned 1.50% on a net asset value ("NAV") basis. Since the Fund's inception on November 4, 2014, the Fund has returned a cumulative 21.01%, net of fees. During the 12-month period ended October 31, 2020, the ICE BofA 1-5 Year U.S. Treasury & Agency Index (the "Index") returned 4.11%. Since the Fund's inception on November 4, 2014, the Index has returned 13.14% on a cumulative basis. During the 12-month period ended October 31, 2020, the Fund underperformed the Index by -261 bps, net of fees. Since the Fund's inception, the Fund has outperformed the Index by 7.87%, net of fees. The Fund is structured to own a significant percentage of the Fund in MBS, with the majority allocated to the Agency MBS sector, whereas the benchmark is a pure treasury and agency index. MBS, both Agency and to a greater extent, Non-Agency Residential Mortgage-Backed Securities ("RMBS"), each experienced substantial widening during the severe illiquidity that gripped the fixed income markets during the early stages of the COVID-19 pandemic unfolding. As American markets digested the rapid pace of lockdowns, uncertainties on future economic health, and the Fed's rapidly evolving market support, treasury yields plunged, in an outright flight to quality. This was detrimental to the Fund in terms of matching the benchmark's performance, due to the negative convexity associated with mortgage securities as well as the Fund's longstanding utilization of treasury future hedges to prudently manage interest rate risk. As the year progressed and the Fed continued to unveil the ever-broadening scope of its market support, coupled with legislative initiatives, risk assets staged a dramatic comeback that has persisted into the close of the fiscal year. As such, valuations on both Non-Agency RMBS and Agency MBS have improved, which helped the Fund to recover from its NAV low which was posted on March 25, 2020. Since the NAV low, the Fund has outperformed its 1-5 Year Treasury benchmark by nearly 200 bps. Page 5 <PAGE> -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) ANNUAL REPORT OCTOBER 31, 2020 (UNAUDITED) MARKET OUTLOOK The Fed has deployed emergency rate cuts, large scale QE, unprecedented lending programs and has signaled it plans to be highly accommodative for some time to come. We believe this will keep the front end of the yield curve anchored in place in the near term, with any rate volatility centralized in the longer maturity segments of the yield curve. We do expect consumer and overall economic data to continue to recover, with the recovery likely to accelerate on the back of any potential additional stimulus package, as well as any positive developments in COVID-19 treatment and vaccines to combat the pandemic. On the other side of that, a rapid acceleration of the pandemic, and corresponding enhanced large-scale restrictions or lockdowns could be quite detrimental to our growth forecast. Over the near term, we expect no rise in inflation, but given the surge in the money supply and dollar weakness, we could see inflationary pressure build over the medium term. We remain positive on MBS spread valuations over the longer term and believe there is additional capacity for spread tightening to occur. Lastly, while we do generally expect interest rate volatility to remain somewhat muted due to ongoing fiscal and monetary programs deployed to assist in fighting the virus, chiefly quantitative easing and the potential for a yield curve control type program by the Fed, we are mindful that volatility could spike around the U.S. elections in November 2020. Given our outlook on the broader bond markets, we plan to continue to actively manage the Fund versus the Index from a duration standpoint, especially after the dramatic declines in Treasury yields to such uneconomic levels. To the extent the curve sees a large bear steepening, likely due to inflation, supply or volatility, we will look to take advantage of higher longer maturity yields. Across the mortgage sector, prepayments remain extremely elevated due to low interest rates and mortgage buybacks. As such, we continue to favor select, call protected MBS interest only securities, loan balance specified pools, Agency Commercial Mortgage-Backed Securities, locked out Collateralized Mortgage Obligation structures and select TBA hedges. Our goal is simple. Lock in longer, more certain mortgage cashflow in government guaranteed sectors, with little to no credit loss risk, protecting for a strategic period the yield, income, dividend and spread for the Fund's shareholders. Over time, we expect others will need those same characteristics and those bonds will become dearer and perform well. Going forward, we are extremely positive on the Fund's future performance as its securities represent attractive value relative to the corporate, generic mortgage and treasury sectors, in our view. We continue to maintain exceptional liquidity within a difficult environment allowing us the ability to take advantage of opportunities should they arise in Non-Agency RMBS and Non-Agency Commercial Mortgage-Backed Securities. Page 6 <PAGE> FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) UNDERSTANDING YOUR FUND EXPENSES OCTOBER 31, 2020 (UNAUDITED) As a shareholder of First Trust Low Duration Opportunities ETF (the "Fund"), you incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, if any, and other Fund expenses. This Example is intended to help you understand your ongoing costs of investing in the Fund and to compare these costs with the ongoing costs of investing in other funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held through the six-month period ended October 31, 2020. ACTUAL EXPENSES The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Six-Month Period" to estimate the expenses you paid on your account during this six-month period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the following table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as brokerage commissions. Therefore, the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.<TABLE> <CAPTION> -------------------------------------------------------------------------------------------------------------------------- ANNUALIZED EXPENSE RATIO EXPENSES PAID BEGINNING ENDING BASED ON THE DURING THE ACCOUNT VALUE ACCOUNT VALUE SIX MONTH SIX MONTH MAY 1, 2020 OCTOBER 31, 2020 PERIOD (a) PERIOD (a) (b) -------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) Actual $1,000.00 $1,009.30 0.65% $3.28 Hypothetical (5% return before expenses) $1,000.00 $1,021.87 0.65% $3.30 </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 (May 1, 2020 through October 31, 2020), multiplied by 184/366 (to reflect the six-month period). Page 7 <PAGE>FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------ ------------ ---------------- <S> <C> <C> <C> <C> U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 87.5% ASSET-BACKED SECURITIES -- 0.0% Fannie Mae Grantor Trust $ 290,149 Series 2002-T7, Class A1, 1 Mo. LIBOR + 0.11% (a)............ 0.26% 07/25/32 $ 283,662 ---------------- COLLATERALIZED MORTGAGE OBLIGATIONS -- 30.5% Federal Home Loan Mortgage Corporation 21,971 Series 1992-133, Class B, IO, STRIPS......................... 8.50% 06/01/22 949 21,708 Series 1992-1206, Class IB, 1 Mo. LIBOR + 0.83% (a).......... 0.98% 03/15/22 21,684 10,112 Series 1993-1498, Class I, 1 Mo. LIBOR + 1.15% (a)........... 1.30% 04/15/23 10,191 8,321 Series 1993-1552, Class I, 10 Yr. Constant Maturity Treasury Rate - 0.65% (a).......................................... 0.04% 08/15/23 8,199 81,237 Series 1993-1579, Class PM................................... 6.70% 09/15/23 86,354 67,306 Series 1993-1630, Class PK................................... 6.00% 11/15/23 71,311 4,552 Series 1993-1643, Class PK................................... 6.50% 12/15/23 4,786 200,194 Series 1994-1710, Class G, 1 Mo. LIBOR + 1.50% (a)........... 1.65% 04/15/24 203,111 1,662 Series 1998-2089, Class PJ, IO............................... 7.00% 10/15/28 169 7,853 Series 1998-2102, Class Z.................................... 6.00% 12/15/28 8,887 727,763 Series 1999-21, Class A, 1 Mo. LIBOR + 0.18% (a)............. 0.33% 10/25/29 724,787 1,564 Series 2001-2365, Class LO, PO............................... (b) 09/15/31 1,561 180,865 Series 2002-48, Class 1A (c)................................. 4.80% 07/25/33 202,127 49,408 Series 2002-2405, Class BF................................... 7.00% 03/25/24 52,366 150,747 Series 2002-2410, Class OG................................... 6.38% 02/15/32 190,586 133,374 Series 2002-2427, Class GE................................... 6.00% 03/15/32 157,502 233,885 Series 2002-2437, Class SA, IO, 1 Mo. LIBOR (x) -1 + 7.90% (d)............................ 7.75% 01/15/29 36,509 14,946 Series 2003-58, Class 2A..................................... 6.50% 09/25/43 17,389 283,922 Series 2003-2557, Class HL................................... 5.30% 01/15/33 328,636 154,824 Series 2003-2564, Class AC................................... 5.50% 02/15/33 177,290 442,203 Series 2003-2574, Class PE................................... 5.50% 02/15/33 515,236 188,915 Series 2003-2577, Class LI, IO............................... 5.50% 02/15/33 29,623 1,484,000 Series 2003-2581, Class LL................................... 5.25% 03/15/33 1,640,314 264,742 Series 2003-2586, Class TG................................... 5.50% 03/15/23 273,620 67,628 Series 2003-2597, Class AE................................... 5.50% 04/15/33 73,371 1,832,000 Series 2003-2613, Class LL................................... 5.00% 05/15/33 2,043,746 237,469 Series 2003-2626, Class ZW................................... 5.00% 06/15/33 273,381 517,682 Series 2003-2626, Class ZX................................... 5.00% 06/15/33 640,062 106,000 Series 2003-2669, Class LL................................... 5.50% 08/15/33 122,414 38,000 Series 2003-2676, Class LL................................... 5.50% 09/15/33 42,407 572,056 Series 2004-2771, Class NL................................... 6.00% 03/15/34 672,546 465,868 Series 2004-2793, Class PE................................... 5.00% 05/15/34 540,598 1,174,603 Series 2004-2801, Class SE, IO, 1 Mo. LIBOR (x) -1 + 7.05% (d)............................ 6.90% 07/15/32 216,747 206,204 Series 2004-2835, Class QY, IO, 1 Mo. LIBOR (x) -1 + 7.90% (d)............................ 7.75% 12/15/32 39,535 162,439 Series 2004-2890, Class ZA................................... 5.00% 11/15/34 187,368 561,218 Series 2004-2891, Class ZA................................... 6.50% 11/15/34 829,126 408,087 Series 2004-2907, Class DZ................................... 4.00% 12/15/34 443,192 1,682,477 Series 2005-233, Class 12, IO, STRIPS........................ 5.00% 09/15/35 312,294 1,282,463 Series 2005-234, Class IO, IO, STRIPS........................ 4.50% 10/01/35 196,971 678,000 Series 2005-2973, Class GE................................... 5.50% 05/15/35 847,828 149,193 Series 2005-3031, Class BI, IO, 1 Mo. LIBOR (x) -1 + 6.69% (d)............................ 6.54% 08/15/35 35,216 3,419,240 Series 2005-3054, Class ZW................................... 6.00% 10/15/35 3,938,072 20,404 Series 2005-3074, Class ZH................................... 5.50% 11/15/35 28,234 396,122 Series 2006-238, Class 8, IO, STRIPS......................... 5.00% 04/15/36 68,417 </TABLE> Page 8 See Notes to Financial Statements <PAGE> FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------ ------------ ---------------- <S> <C> <C> <C> <C> U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED) COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED) Federal Home Loan Mortgage Corporation (Continued) $ 339,498 Series 2006-243, Class 11, IO, STRIPS (e).................... 7.00% 08/15/36 $ 74,902 433,666 Series 2006-3114, Class GI, IO, 1 Mo. LIBOR (x) -1 + 6.60% (d)............................ 6.45% 02/15/36 84,864 62,078 Series 2006-3117, Class ZU................................... 6.00% 02/15/36 92,554 35,726 Series 2006-3150, Class DZ................................... 5.50% 05/15/36 41,624 2,224,328 Series 2006-3174, Class LF, 1 Mo. LIBOR + 0.35% (a)................................... 0.50% 05/15/36 2,231,791 2,505,149 Series 2006-3196, Class ZK................................... 6.50% 04/15/32 3,498,836 1,959,663 Series 2006-3210, Class SA, IO, 1 Mo. LIBOR (x) -1 + 6.60% (d)............................ 6.45% 09/15/36 410,074 573,010 Series 2006-3223, Class FC, 1 Mo. LIBOR + 0.55% (a).......... 0.70% 04/15/32 578,470 201,150 Series 2006-3245, Class PO, PO............................... (b) 11/15/36 194,261 1,216,269 Series 2007-3262, Class KS, IO, 1 Mo. LIBOR (x) -1 + 6.41% (d)............................ 6.26% 01/15/37 161,200 38,690 Series 2007-3274, Class B.................................... 6.00% 02/15/37 43,785 311,990 Series 2007-3322, Class NF, 1 Mo. LIBOR (x) 2,566.67 - 16,683.33%, 0.00% Floor (a).... 0.00% 05/15/37 301,271 48,768 Series 2007-3340, Class PF, 1 Mo. LIBOR + 0.30% (a).......... 0.45% 07/15/37 48,935 70,051 Series 2007-3349, Class MY................................... 5.50% 07/15/37 81,459 180,952 Series 2007-3360, Class CB................................... 5.50% 08/15/37 206,544 1,293,819 Series 2007-3370, Class FM, 1 Mo. LIBOR + 0.62% (a).......... 0.77% 10/15/47 1,315,665 111,636 Series 2007-3380, Class FS, 1 Mo. LIBOR + 0.35% (a).......... 0.50% 11/15/36 112,153 431,039 Series 2008-3406, Class B.................................... 6.00% 01/15/38 491,242 110,981 Series 2008-3413, Class B.................................... 5.50% 04/15/37 125,313 343,255 Series 2008-3420, Class AZ................................... 5.50% 02/15/38 397,129 184,366 Series 2008-3448, Class SA, IO, 1 Mo. LIBOR (x) -1 + 6.05% (d)............................ 5.90% 05/15/38 13,936 3,767,598 Series 2009-3522, Class SE, IO, 1 Mo. LIBOR (x) -1 + 6.10% (d)............................ 5.95% 04/15/39 742,627 36,939 Series 2009-3523, Class SD, 1 Mo. LIBOR (x) -2.75 + 19.66% (d)........................ 9.25% 06/15/36 51,721 1,146,713 Series 2009-3542, Class ZP................................... 5.00% 06/15/39 1,415,362 177,000 Series 2009-3550, Class LL................................... 4.50% 07/15/39 207,568 698,292 Series 2009-3563, Class ZP................................... 5.00% 08/15/39 893,045 2,498,407 Series 2009-3572, Class JS, IO, 1 Mo. LIBOR (x) -1 + 6.80% (d)............................ 6.65% 09/15/39 414,007 31,159 Series 2009-3585, Class QZ................................... 5.00% 08/15/39 41,978 168,736 Series 2009-3587, Class FX, 1 Mo. LIBOR (a).................. 0.15% 12/15/37 156,337 796,493 Series 2009-3593, Class F, 1 Mo. LIBOR + 0.50% (a)........... 0.66% 03/15/36 799,374 2,090,367 Series 2009-3605, Class NC................................... 5.50% 06/15/37 2,415,893 500,000 Series 2010-3622, Class PB................................... 5.00% 01/15/40 582,177 621,640 Series 2010-3632, Class BS, 1 Mo. LIBOR (x) -3.33 + 17.50% (d)........................ 17.01% 02/15/40 912,324 214 Series 2010-3637, Class LJ................................... 3.50% 02/15/25 214 107,000 Series 2010-3645, Class WD................................... 4.50% 02/15/40 119,990 661,000 Series 2010-3667, Class PL................................... 5.00% 05/15/40 748,429 22,149 Series 2010-3688, Class HI, IO............................... 5.00% 11/15/21 246 96,576 Series 2010-3699, Class FD, 1 Mo. LIBOR + 0.60% (a).......... 0.75% 07/15/40 97,658 1,578,258 Series 2010-3704, Class ED................................... 4.00% 12/15/36 1,647,195 400,000 Series 2010-3714, Class PB................................... 4.75% 08/15/40 491,669 5,586 Series 2010-3716, Class PC................................... 2.50% 04/15/38 5,609 132,866 Series 2010-3726, Class BI, IO............................... 6.00% 07/15/30 49 804,963 Series 2010-3735, Class IK, IO............................... 3.50% 10/15/25 38,480 </TABLE> See Notes to Financial Statements Page 9 <PAGE>FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <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) $ 128,893 Series 2010-3735, Class JI, IO............................... 4.50% 10/15/30 $ 14,877 9,662 Series 2010-3739, Class MB................................... 4.00% 06/15/37 9,692 453,438 Series 2010-3740, Class SC, IO, 1 Mo. LIBOR (x) -1 + 6.00% (d)............................ 5.85% 10/15/40 83,833 15,075 Series 2010-3755, Class AI, IO (f)........................... 3.50% 11/15/20 1 215,435 Series 2010-3764, Class QA................................... 4.00% 10/15/29 216,347 77,765 Series 2010-3770, Class GZ................................... 4.50% 10/15/40 109,791 2,463 Series 2010-3775, Class LD................................... 3.00% 12/15/20 2,462 7,157 Series 2010-3775, Class LI, IO (f)........................... 3.50% 12/15/20 0 312,000 Series 2010-3780, Class AV................................... 4.00% 04/15/31 344,860 134,659 Series 2011-3795, Class ED................................... 3.00% 10/15/39 138,444 600,000 Series 2011-3796, Class PB................................... 5.00% 01/15/41 730,361 318,793 Series 2011-3819, Class ZQ................................... 6.00% 04/15/36 379,121 3,411,907 Series 2011-3820, Class GZ................................... 5.00% 03/15/41 4,170,822 300,000 Series 2011-3820, Class NC................................... 4.50% 03/15/41 352,887 67,845 Series 2011-3827, Class BM................................... 5.50% 08/15/39 68,258 153,801 Series 2011-3828, Class SY, 1 Mo. LIBOR (x) -3 + 13.20% (d)........................... 12.75% 02/15/41 261,392 1,404,736 Series 2011-3841, Class JZ................................... 5.00% 04/15/41 1,631,353 103,547 Series 2011-3842, Class BS, 1 Mo. LIBOR (x) -5 + 22.75% (d)........................... 22.00% 04/15/41 238,701 300,000 Series 2011-3844, Class PC................................... 5.00% 04/15/41 368,885 1,055,647 Series 2011-3852, Class SW, IO, 1 Mo. LIBOR (x) -1 + 6.00% (d)............................ 5.85% 05/15/41 161,469 3,071,544 Series 2011-3860, Class PZ................................... 5.00% 05/15/41 3,698,758 525,000 Series 2011-3890, Class ME................................... 5.00% 07/15/41 645,486 1,387,000 Series 2011-3895, Class PW................................... 4.50% 07/15/41 1,608,493 1,717,010 Series 2011-3925, Class ZD................................... 4.50% 09/15/41 2,179,775 841,433 Series 2011-3926, Class SH, IO, 1 Mo. LIBOR (x) -1 + 6.55% (d)............................ 6.40% 05/15/40 60,796 2,359,613 Series 2011-3935, Class HZ................................... 4.50% 10/15/41 3,007,525 181,775 Series 2011-3935, Class LI, IO............................... 3.00% 10/15/21 1,406 15,136,174 Series 2011-3954, Class GS, IO, 1 Mo. LIBOR (x) -1 + 6.00% (d)............................ 5.85% 11/15/41 3,184,279 623,067 Series 2011-3956, Class KI, IO............................... 3.00% 11/15/21 6,728 170,953 Series 2011-3960, Class BU................................... 3.50% 02/15/30 172,096 213,327 Series 2011-3968, Class AI, IO (f)........................... 3.00% 12/15/21 2,298 720,893 Series 2012-267, Class S5, IO, STRIPS, 1 Mo. LIBOR (x) -1 + 6.00% (d)............................ 5.85% 08/15/42 151,255 21,597,116 Series 2012-272, Class PO, PO, STRIPS........................ (b) 08/15/42 20,338,576 16,670,580 Series 2012-276, Class S5, IO, STRIPS, 1 Mo. LIBOR (x) -1 + 6.00% (d)............................ 5.85% 09/15/42 3,129,747 84,495 Series 2012-278, Class F1, STRIPS, 1 Mo. LIBOR + 0.45% (a)................................... 0.60% 09/15/42 85,427 531,352 Series 2012-3994, Class AI, IO............................... 3.00% 02/15/22 6,477 823,799 Series 2012-3999, Class WA (e)............................... 5.39% 08/15/40 945,877 1,878,000 Series 2012-4000, Class PY................................... 4.50% 02/15/42 2,210,787 182,482 Series 2012-4002, Class DE................................... 2.50% 03/15/30 182,681 59,000 Series 2012-4012, Class GC................................... 3.50% 06/15/40 62,416 33,547 Series 2012-4015, Class KB................................... 1.75% 05/15/41 34,338 663,226 Series 2012-4021, Class IP, IO............................... 3.00% 03/15/27 34,759 1,051,974 Series 2012-4026, Class GZ................................... 4.50% 04/15/42 1,356,132 </TABLE> Page 10 See Notes to Financial Statements <PAGE> FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------ ------------ ---------------- <S> <C> <C> <C> <C> U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED) COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED) Federal Home Loan Mortgage Corporation (Continued) $ 1,297,624 Series 2012-4030, Class IL, IO............................... 3.50% 04/15/27 $ 80,217 138,248 Series 2012-4038, Class CS, 1 Mo. LIBOR (x) -3 + 12.00% (d)........................... 11.55% 04/15/42 165,022 1,048,644 Series 2012-4048, Class FJ, 1 Mo. LIBOR + 0.40% (a).......... 0.56% 07/15/37 1,049,122 2,304,220 Series 2012-4054, Class AI, IO............................... 3.00% 04/15/27 133,624 32,081,297 Series 2012-4057, Class ZA................................... 4.00% 06/15/42 36,346,609 4,014,266 Series 2012-4057, Class ZC................................... 3.50% 06/15/42 4,340,618 2,306,416 Series 2012-4077, Class TS, IO, 1 Mo. LIBOR (x) -1 + 6.00% (d)............................ 5.85% 05/15/41 414,996 613,924 Series 2012-4090, Class YZ................................... 4.50% 08/15/42 821,107 49,702 Series 2012-4097, Class ES, IO, 1 Mo. LIBOR (x) -1 + 6.10% (d)............................ 5.95% 08/15/42 10,065 4,769,265 Series 2012-4097, Class SA, IO, 1 Mo. LIBOR (x) -1 + 6.05% (d)............................ 5.90% 08/15/42 1,035,887 2,447,000 Series 2012-4098, Class PE................................... 4.00% 08/15/42 2,841,685 489,552 Series 2012-4103, Class HI, IO............................... 3.00% 09/15/27 32,129 59,326 Series 2012-4116, Class AS, IO, 1 Mo. LIBOR (x) -1 + 6.15% (d)............................ 6.00% 10/15/42 11,492 2,534,135 Series 2012-4121, Class HI, IO............................... 3.50% 10/15/27 183,624 2,395,373 Series 2012-4132, Class AI, IO............................... 4.00% 10/15/42 373,816 633,906 Series 2012-4136, Class TU, IO, 1 Mo. LIBOR (x) -22.50 + 139.50%, 4.50% Cap (d)........... 4.50% 08/15/42 115,535 573,486 Series 2012-4145, Class YI, IO............................... 3.00% 12/15/27 36,178 526,432 Series 2013-299, Class S1, IO, STRIPS, 1 Mo. LIBOR (x) -1 + 6.00% (d)............................ 5.85% 01/15/43 85,694 627,559 Series 2013-303, Class C2, IO, STRIPS........................ 3.50% 01/15/28 47,062 9,723,499 Series 2013-303, Class C12, IO, STRIPS....................... 4.00% 12/15/32 1,047,548 22,150,202 Series 2013-303, Class C33, IO, STRIPS....................... 4.50% 01/15/43 3,529,154 5,632,730 Series 2013-304, Class C19, IO, STRIPS....................... 5.00% 06/15/42 1,170,359 524,027 Series 2013-304, Class C37, IO, STRIPS....................... 3.50% 12/15/27 28,580 2,528,371 Series 2013-304, Class C40, IO, STRIPS....................... 3.50% 09/15/26 128,190 20,752,946 Series 2013-311, Class PO, PO, STRIPS........................ (b) 08/15/43 19,212,245 3,016,885 Series 2013-4151, Class DI, IO............................... 3.50% 11/15/31 174,174 5,566,629 Series 2013-4154, Class IB, IO............................... 3.50% 01/15/28 412,458 14,309,871 Series 2013-4170, Class CO, PO............................... (b) 11/15/32 13,907,333 905,000 Series 2013-4176, Class HE................................... 4.00% 03/15/43 1,075,469 732,650 Series 2013-4177, Class GL................................... 3.00% 03/15/33 817,674 2,216,262 Series 2013-4184, Class GZ................................... 3.00% 03/15/43 2,204,933 6,425,784 Series 2013-4193, Class AI, IO............................... 3.00% 04/15/28 452,861 826,035 Series 2013-4193, Class PB................................... 4.00% 04/15/43 1,022,027 17,010,948 Series 2013-4194, Class GI, IO............................... 4.00% 04/15/43 2,483,573 4,733,446 Series 2013-4203, Class US, 1 Mo. LIBOR (x) -1.50 + 6.00% (d)......................... 5.78% 05/15/33 5,267,039 500,000 Series 2013-4211, Class PB................................... 3.00% 05/15/43 560,349 1,742,306 Series 2013-4213, Class MZ................................... 4.00% 06/15/43 1,977,193 355,282 Series 2013-4226, Class NS, 1 Mo. LIBOR (x) -3 + 10.50% (d)........................... 10.05% 01/15/43 441,571 505,058 Series 2013-4239, Class IO, IO............................... 3.50% 06/15/27 31,821 1,450,000 Series 2013-4247, Class AY................................... 4.50% 09/15/43 1,821,901 877,343 Series 2013-4261, Class GS, 1 Mo. LIBOR (x) -2.75 + 10.98% (d)........................ 10.57% 01/15/41 1,194,729 940,105 Series 2013-4265, Class IB, IO............................... 4.50% 12/15/24 51,859 </TABLE> See Notes to Financial Statements Page 11 <PAGE>FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <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) $ 200,295 Series 2014-4300, Class IM, IO............................... 3.00% 03/15/37 $ 9,302 1,188,447 Series 2014-4314, Class CI, IO............................... 6.00% 03/15/44 278,429 1,256,697 Series 2014-4316, Class XZ................................... 4.50% 03/15/44 1,485,963 115,917 Series 2014-4318, Class CI, IO............................... 4.00% 03/15/22 1,035 14,252,638 Series 2014-4329, Class VZ................................... 4.00% 04/15/44 15,848,934 501,673 Series 2014-4332, Class PO, PO............................... (b) 01/15/33 500,835 5,491,945 Series 2014-4347, Class YT................................... 3.50% 06/15/44 5,987,966 15,279,103 Series 2014-4375, Class MZ................................... 3.50% 08/15/44 17,318,268 5,655,058 Series 2014-4387, Class IE, IO............................... 2.50% 11/15/28 321,866 30,053,273 Series 2015-4483, Class ZX................................... 4.15% 06/15/44 34,790,390 1,003,761 Series 2015-4503, Class MI, IO............................... 5.00% 08/15/45 197,350 874,082 Series 2015-4512, Class W (c) (e)............................ 5.40% 05/15/38 998,610 152,094 Series 2015-4520, Class AI, IO............................... 3.50% 10/15/35 14,998 546,513 Series 2015-4522, Class JZ................................... 2.00% 01/15/45 575,184 17,339,886 Series 2015-4532, Class ZX................................... 4.00% 09/15/45 20,033,900 257,983 Series 2016-4546, Class PZ................................... 4.00% 12/15/45 326,876 436,701 Series 2016-4546, Class ZT................................... 4.00% 01/15/46 552,431 134,048 Series 2016-4568, Class MZ................................... 4.00% 04/15/46 169,412 17,559,933 Series 2016-4570, Class ST, IO, 1 Mo. LIBOR (x) -1 + 6.00% (d)............................ 5.85% 04/15/46 4,101,419 6,808,236 Series 2016-4572, Class LI, IO............................... 4.00% 08/15/45 959,380 13,717,649 Series 2016-4582, Class GZ................................... 3.75% 03/15/52 15,740,377 31,691,384 Series 2016-4585, Class DS, IO, 1 Mo. LIBOR (x) -1 +6.00% (d)............................. 5.85% 05/15/46 7,642,010 6,580,892 Series 2016-4587, Class ZH, steps up 07/15/21 to 4.00% (g)... 3.75% 03/15/44 7,776,977 2,579,780 Series 2016-4591, Class GI, IO............................... 4.00% 12/15/44 344,365 1,393,932 Series 2016-4596, Class FL, 1 Mo. LIBOR + 0.50% (a).......... 0.66% 11/15/41 1,408,465 771,702 Series 2016-4600, Class WT................................... 3.50% 07/15/36 924,053 324,867 Series 2016-4605, Class KS, 1 Mo. LIBOR (x) -1.57 + 4.71% (d)......................... 4.48% 08/15/43 355,642 856,834 Series 2016-4609, Class YI, IO............................... 4.00% 04/15/54 32,382 457,549 Series 2016-4613, Class AF, 1 Mo. LIBOR + 1.10% (a).......... 1.25% 11/15/37 464,740 1,223,979 Series 2016-4615, Class GT, 1 Mo. LIBOR (x) -4 + 16.00%, 4.00% Cap (d)................ 4.00% 10/15/42 1,240,261 22,301,055 Series 2016-4619, Class IB, IO............................... 4.00% 12/15/47 815,273 3,350,647 Series 2016-4641, Class DI, IO............................... 5.00% 05/15/41 506,230 8,478,445 Series 2017-4649, Class AZ................................... 3.50% 05/15/46 9,459,711 1,173,000 Series 2017-4650, Class JH................................... 3.00% 01/15/47 1,313,337 10,509,527 Series 2017-4660, Class PO, PO............................... (b) 01/15/33 9,197,637 84,344,133 Series 2017-4673, Class WZ................................... 3.50% 04/15/47 92,660,136 600,000 Series 2017-4681, Class JY................................... 2.50% 05/15/47 640,601 11,268,310 Series 2017-4682, Class KZ................................... 3.50% 09/15/46 12,521,235 6,465,163 Series 2018-4774, Class SL, IO, 1 Mo. LIBOR (x) -1 + 6.20% (d)............................ 6.05% 04/15/48 1,046,928 22,173,409 Series 2018-4778, Class DZ................................... 4.00% 04/15/48 25,195,538 2,556,214 Series 2018-4780, Class VA................................... 4.00% 05/15/29 2,728,932 6,261,926 Series 2018-4780, Class Z.................................... 4.00% 01/15/48 7,191,744 5,397,855 Series 2018-4790, Class IO, IO............................... 4.50% 05/15/48 896,107 84,471,696 Series 2018-4790, Class Z.................................... 4.00% 05/15/48 91,731,337 9,924,000 Series 2018-4826, Class ME................................... 3.50% 09/15/48 10,712,313 3,517,000 Series 2018-4833, Class PY................................... 4.00% 10/15/48 3,890,049 11,344,771 Series 2018-4851, Class PO, PO............................... (b) 08/15/57 9,799,441 </TABLE> Page 12 See Notes to Financial Statements <PAGE> FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <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) $ 6,674,285 Series 2018-4855, Class AZ................................... 4.00% 08/15/48 $ 7,366,050 10,367,570 Series 2018-4857, Class ZB................................... 4.50% 01/15/49 11,609,661 26,126,000 Series 2018-4858, Class EK................................... 4.00% 01/15/49 28,047,567 3,013,099 Series 2019-4872, Class BZ................................... 4.00% 04/15/49 3,671,026 15,820,314 Series 2019-4894, Class PZ................................... 4.00% 07/15/49 17,098,376 11,956,731 Series 2019-4910, Class SA, IO, 1 Mo. LIBOR (x) -1 + 6.05% (d)............................ 5.90% 06/15/49 2,083,490 21,462,881 Series 2019-4938, Class BS, IO, 1 Mo. LIBOR (x) -1 + 6.00% (d)............................ 5.85% 12/25/49 2,899,532 19,357,178 Series 2019-4943, Class NS, IO, 1 Mo. LIBOR (x) -1 + 6.00% (d)............................ 5.85% 01/25/50 3,138,753 71,091,689 Series 2020-4973, Class IK, IO............................... 5.00% 05/25/50 12,282,696 2,515,155 Series 2020-4974, Class IA, IO............................... 3.50% 12/25/49 798,810 9,608,042 Series 2020-4988, Class IJ, IO............................... 4.50% 12/15/47 1,630,337 11,075,801 Series 2020-5000, Class ZE................................... 1.00% 07/25/50 10,979,970 13,558,241 Series 2020-5013, Class HI, IO............................... 5.00% 03/25/40 2,350,531 6,750,562 Series 2020-5013, Class IQ, IO............................... 3.50% 09/25/50 1,244,537 33,291,468 Series 2020-5013, Class QI, IO............................... 3.50% 09/25/50 6,330,066 29,186,598 Series 2020-5034, Class IO, IO (e)........................... 2.79% 10/15/45 1,623,504 19,015,782 Series 2020-BM8449, Class WA................................. 4.00% 05/01/50 20,395,169 Federal National Mortgage Association 94,330 Series 1992-38, Class GZ..................................... 7.50% 07/25/22 98,470 15 Series 1992-44, Class ZQ..................................... 8.00% 07/25/22 15 3,078 Series 1992-185, Class ZB.................................... 7.00% 10/25/22 3,212 540 Series 1993-3, Class K....................................... 7.00% 02/25/23 560 7,469 Series 1993-39, Class Z...................................... 7.50% 04/25/23 7,859 920 Series 1993-46, Class FH, 7 Yr. Constant Maturity Treasury Rate - 0.20% (a).......................................... 0.26% 04/25/23 912 105,184 Series 1993-169, Class L..................................... 6.50% 09/25/23 111,820 32,102 Series 1993-171, Class SB, 10 Yr. Constant Maturity Treasury Rate (x) -2.17 + 21.99% (d)............................... 20.54% 09/25/23 38,080 25,317 Series 1993-214, Class 2, IO, STRIPS......................... 7.50% 03/25/23 1,623 284,532 Series 1993-222, Class 2, IO, STRIPS......................... 7.00% 06/25/23 19,236 14,740 Series 1993-230, Class FA, 1 Mo. LIBOR + 0.60% (a)........... 0.75% 12/25/23 14,670 140,552 Series 1994-61, Class FG, 1 Mo. LIBOR + 1.50% (a)............ 1.65% 04/25/24 142,515 41,532 Series 1996-51, Class AY, IO................................. 7.00% 12/18/26 5,346 89,317 Series 1998-37, Class VZ..................................... 6.00% 06/17/28 94,670 534,697 Series 2000-45, Class SD, IO, 1 Mo. LIBOR (x) -1 + 7.95% (d)............................ 7.80% 12/18/30 67,509 159 Series 2001-8, Class SE, IO, 1 Mo. LIBOR (x) -1 + 1 Mo. LIBOR (x) -1 + 8.60% (d)............................ 8.45% 02/17/31 2 93,589 Series 2001-34, Class SR, IO, 1 Mo. LIBOR (x) -1 + 8.10% (d)............................ 7.95% 08/18/31 8,995 2,946 Series 2001-42, Class SB, 1 Mo. LIBOR (x) -16 + 128.00%, 8.50% Cap (d).............. 8.50% 09/25/31 3,350 165,218 Series 2001-46, Class F, 1 Mo. LIBOR + 0.40% (a)............. 0.55% 09/18/31 165,608 8,804 Series 2002-22, Class G...................................... 6.50% 04/25/32 10,453 98,923 Series 2002-30, Class Z...................................... 6.00% 05/25/32 116,077 67,335 Series 2002-80, Class CZ..................................... 4.50% 09/25/32 81,537 109,805 Series 2002-320, Class 2, IO, STRIPS......................... 7.00% 04/25/32 23,351 110,294 Series 2002-323, Class 6, IO, STRIPS......................... 6.00% 01/25/32 20,549 278,924 Series 2002-324, Class 2, IO, STRIPS......................... 6.50% 07/25/32 50,798 </TABLE> See Notes to Financial Statements Page 13 <PAGE>FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <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) $ 33,229 Series 2003-14, Class AT..................................... 4.00% 03/25/33 $ 34,987 84,750 Series 2003-21, Class OA..................................... 4.00% 03/25/33 91,280 106,052 Series 2003-32, Class UI, IO................................. 6.00% 05/25/33 20,156 487,508 Series 2003-45, Class JB..................................... 5.50% 06/25/33 565,050 40,908 Series 2003-52, Class NA..................................... 4.00% 06/25/23 41,524 3,891,675 Series 2003-61, Class MZ..................................... 5.00% 08/25/33 4,318,180 19,853 Series 2003-63, Class F1, 1 Mo. LIBOR + 0.30% (a)............ 0.45% 11/25/27 19,828 1,800,929 Series 2003-63, Class IP, IO................................. 6.00% 07/25/33 337,155 355,000 Series 2003-71, Class NH..................................... 4.29% 08/25/33 423,846 485,014 Series 2003-75, Class GI, IO................................. 5.00% 08/25/23 13,097 172,506 Series 2003-109, Class YB.................................... 6.00% 11/25/33 204,495 173,735 Series 2003-339, Class 12, IO, STRIPS........................ 6.00% 06/25/33 30,221 359,298 Series 2003-343, Class 2, IO, STRIPS......................... 4.50% 10/25/33 48,229 310,036 Series 2003-345, Class 14, IO, STRIPS........................ 6.00% 03/25/34 58,819 57,012 Series 2003-348, Class 17, IO, STRIPS........................ 7.50% 12/25/33 11,790 83,709 Series 2003-348, Class 18, IO, STRIPS (e).................... 7.50% 12/25/33 18,099 91,977 Series 2003-W3, Class 2A5.................................... 5.36% 06/25/42 106,356 882,018 Series 2003-W6, Class 1A41................................... 5.40% 10/25/42 1,013,863 33,284 Series 2003-W10, Class 1A4................................... 4.51% 06/25/43 37,391 573,100 Series 2003-W12, Class 1A8................................... 4.55% 06/25/43 638,891 272,288 Series 2004-10, Class ZB..................................... 6.00% 02/25/34 316,753 881,556 Series 2004-18, Class EZ..................................... 6.00% 04/25/34 1,042,162 321,243 Series 2004-25, Class LC..................................... 5.50% 04/25/34 377,317 346,471 Series 2004-25, Class UC..................................... 5.50% 04/25/34 411,082 39,568 Series 2004-28, Class ZH..................................... 5.50% 05/25/34 54,213 610,039 Series 2004-60, Class AC..................................... 5.50% 04/25/34 699,312 12,109 Series 2004-W9, Class 1A3.................................... 6.05% 02/25/44 14,032 1,385,899 Series 2004-W10, Class A6.................................... 5.75% 08/25/34 1,589,224 2,516,422 Series 2005-2, Class S, IO, 1 Mo. LIBOR (x) -1 + 6.60% (d)... 6.45% 02/25/35 492,857 494,657 Series 2005-2, Class TB, IO, 1 Mo. LIBOR (x) -1 + 5.90%, 0.40% Cap (d)................. 0.40% 07/25/33 5,477 54,403 Series 2005-29, Class ZT..................................... 5.00% 04/25/35 69,884 111,351 Series 2005-40, Class SA, IO, 1 Mo. LIBOR (x) -1 + 6.70% (d)............................ 6.55% 05/25/35 21,141 271,659 Series 2005-52, Class TZ..................................... 6.50% 06/25/35 404,329 990,903 Series 2005-57, Class KZ..................................... 6.00% 07/25/35 1,320,285 12,278 Series 2005-67, Class SC, 1 Mo. LIBOR (x) -2.15 + 14.41% (d)........................ 14.08% 08/25/35 16,631 58,550 Series 2005-79, Class NS, IO, 1 Mo. LIBOR (x) -1 + 6.09% (d)............................ 5.94% 09/25/35 11,409 6,032,851 Series 2005-86, Class WZ..................................... 5.50% 10/25/35 6,884,339 18,306 Series 2005-87, Class SC, 1 Mo. LIBOR (x) -1.67 + 13.83% (d)........................ 13.58% 10/25/35 26,247 32,093 Series 2005-90, Class ES, 1 Mo. LIBOR (x) -2.50 + 16.88% (d)........................ 16.50% 10/25/35 45,750 51,536 Series 2005-95, Class WZ..................................... 6.00% 11/25/35 78,057 42,828 Series 2005-102, Class DS, 1 Mo. LIBOR (x) -2.75 + 19.80% (d)........................ 19.39% 11/25/35 56,197 636,025 Series 2005-104, Class UE.................................... 5.50% 12/25/35 741,247 177,114 Series 2005-359, Class 6, IO, STRIPS......................... 5.00% 11/25/35 25,739 506,297 Series 2005-359, Class 12, IO, STRIPS........................ 5.50% 10/25/35 97,012 142,299 Series 2005-362, Class 13, IO, STRIPS........................ 6.00% 08/25/35 29,729 </TABLE> Page 14 See Notes to Financial Statements <PAGE> FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <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) $ 81,428 Series 2005-W1, Class 1A2.................................... 6.50% 10/25/44 $ 97,736 39,823 Series 2006-5, Class 2A2 (c)................................. 3.24% 02/25/35 42,431 32,009,337 Series 2006-5, Class N2, IO (c).............................. 0.00% 02/25/35 320 75,969 Series 2006-15, Class IS, IO, 1 Mo. LIBOR (x) -1 + 6.58% (d)............................ 6.43% 03/25/36 16,074 1,668,033 Series 2006-20, Class PI, IO, 1 Mo. LIBOR (x) -1 + 6.68% (d)............................ 6.53% 11/25/30 205,887 23,817 Series 2006-31, Class PZ..................................... 6.00% 05/25/36 36,189 63,811 Series 2006-42, Class CF, 1 Mo. LIBOR + 0.45% (a)............ 0.60% 06/25/36 64,336 1,985,388 Series 2006-42, Class EI, IO, 1 Mo. LIBOR (x) -1 + 6.55% (d)............................ 6.40% 06/25/36 353,534 525,931 Series 2006-59, Class SL, IO, 1 Mo. LIBOR (x) -1 + 6.57% (d)............................ 6.42% 07/25/36 93,507 706,234 Series 2006-80, Class PH..................................... 6.00% 08/25/36 834,617 94,779 Series 2006-85, Class MZ..................................... 6.50% 09/25/36 110,723 2,606,792 Series 2006-110, Class PI, IO................................ 5.50% 11/25/36 514,245 2,757,777 Series 2006-116, Class ES, IO, 1 Mo. LIBOR (x) -1 + 6.65% (d)............................ 6.50% 12/25/36 564,591 236,085 Series 2006-117, Class GF, 1 Mo. LIBOR + 0.35% (a)........... 0.50% 12/25/36 237,220 2,688,185 Series 2006-118, Class A1, 1 Mo. LIBOR + 0.06% (a)........... 0.21% 12/25/36 2,673,151 1,368 Series 2006-126, Class DZ.................................... 5.50% 01/25/37 1,461 1,455 Series 2006-378, Class 31, IO, STRIPS (f).................... 4.50% 06/25/21 2 313,274 Series 2007-7, Class KA...................................... 5.75% 08/25/36 392,727 35,017 Series 2007-25, Class FB, 1 Mo. LIBOR + 0.33% (a)............ 0.48% 04/25/37 35,179 895,258 Series 2007-28, Class ZA..................................... 6.00% 04/25/37 1,012,979 60,586 Series 2007-32, Class KT..................................... 5.50% 04/25/37 70,425 787,073 Series 2007-57, Class ZG..................................... 4.75% 06/25/37 960,469 511,737 Series 2007-60, Class ZS..................................... 4.75% 07/25/37 670,763 505,051 Series 2007-68, Class AE..................................... 6.50% 07/25/37 644,939 473,391 Series 2007-116, Class PB.................................... 5.50% 08/25/35 554,521 167,838 Series 2007-117, Class MD.................................... 5.50% 07/25/37 182,255 4,778,041 Series 2007-W10, Class 3A (c)................................ 3.36% 06/25/47 5,083,814 119,942 Series 2008-3, Class FZ, 1 Mo. LIBOR + 0.55% (a)............. 0.70% 02/25/38 115,684 18,892 Series 2008-8, Class ZA...................................... 5.00% 02/25/38 22,722 4,959 Series 2008-16, Class AB..................................... 5.50% 12/25/37 4,982 17,606 Series 2008-17, Class IP, IO (f)............................. 6.50% 02/25/38 2,244 296,686 Series 2008-65, Class PE..................................... 5.75% 08/25/38 346,300 1,014,018 Series 2008-389, Class 4, IO, STRIPS......................... 6.00% 03/25/38 182,203 16,586 Series 2009-10, Class AB..................................... 5.00% 03/25/24 17,236 1,108,235 Series 2009-11, Class PI, IO................................. 5.50% 03/25/36 215,583 15,046 Series 2009-14, Class BS, IO, 1 Mo. LIBOR (x) -1 + 6.25% (d)............................ 6.10% 03/25/24 418 1,054,433 Series 2009-37, Class NZ..................................... 5.71% 02/25/37 1,398,065 56,998 Series 2009-47, Class PE..................................... 4.00% 07/25/39 58,095 4,400,000 Series 2009-50, Class GX..................................... 5.00% 07/25/39 5,445,480 736,853 Series 2009-64, Class ZD..................................... 8.00% 08/25/39 923,400 126,863 Series 2009-69, Class PO, PO................................. (b) 09/25/39 118,710 3,842,845 Series 2009-85, Class J...................................... 4.50% 10/25/39 4,327,389 306,359 Series 2009-91, Class HL..................................... 5.00% 11/25/39 333,662 97,000 Series 2009-92, Class DB..................................... 5.00% 11/25/39 119,555 732,283 Series 2009-103, Class PZ.................................... 6.00% 12/25/39 1,063,355 </TABLE> See Notes to Financial Statements Page 15 <PAGE>FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <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) $ 286,073 Series 2009-106, Class SN, IO, 1 Mo. LIBOR (x) -1 + 6.25% (d)............................ 6.10% 01/25/40 $ 53,183 254,483 Series 2009-109, Class PZ.................................... 4.50% 01/25/40 311,346 88,525 Series 2009-115, Class HZ.................................... 5.00% 01/25/40 94,612 1,631,704 Series 2009-397, Class 2, IO, STRIPS......................... 5.00% 09/25/39 275,644 405,207 Series 2009-398, Class C13, IO, STRIPS....................... 4.00% 06/25/24 19,051 1,350,000 Series 2010-2, Class LC...................................... 5.00% 02/25/40 1,620,651 183,136 Series 2010-3, Class DZ...................................... 4.50% 02/25/40 227,189 233,387 Series 2010-21, Class KO, PO................................. (b) 03/25/40 221,757 500,000 Series 2010-35, Class EP..................................... 5.50% 04/25/40 633,273 520,322 Series 2010-35, Class SJ, 1 Mo. LIBOR (x) -3.33 + 17.67% (d)........................ 17.17% 04/25/40 727,824 400,000 Series 2010-38, Class KC..................................... 4.50% 04/25/40 458,456 496,000 Series 2010-45, Class WB..................................... 5.00% 05/25/40 570,260 49,577 Series 2010-49, Class SC, 1 Mo. LIBOR (x) -2 + 12.66% (d).... 12.36% 03/25/40 67,249 515,281 Series 2010-68, Class BI, IO................................. 5.50% 07/25/50 106,677 52,724 Series 2010-75, Class MT (c)................................. 2.21% 12/25/39 55,172 531,463 Series 2010-110, Class KI, IO................................ 5.50% 10/25/25 25,170 253,800 Series 2010-115, Class PO, PO................................ (b) 04/25/40 242,969 361,961 Series 2010-129, Class SM, IO, 1 Mo. LIBOR (x) -1 + 6.00% (d)............................ 5.85% 11/25/40 46,591 2,821,000 Series 2010-142, Class DL.................................... 4.00% 12/25/40 3,375,882 86 Series 2010-145, Class PE.................................... 3.25% 10/25/24 86 2,502,048 Series 2010-147, Class KS, IO, 1 Mo. LIBOR (x) -1 + 5.95% (d)............................ 5.80% 01/25/41 317,657 345,809 Series 2011-9, Class AZ...................................... 5.00% 05/25/40 384,564 1,507,000 Series 2011-10, Class AY..................................... 6.00% 02/25/41 2,088,166 2,043 Series 2011-17, Class CD..................................... 2.00% 03/25/21 2,044 16,346 Series 2011-17, Class CJ..................................... 2.75% 03/25/21 16,353 209,363 Series 2011-30, Class LS, IO (e)............................. 2.93% 04/25/41 14,324 120,984 Series 2011-30, Class ZB..................................... 5.00% 04/25/41 147,701 515,545 Series 2011-47, Class AI, IO................................. 5.50% 01/25/40 4,603 312,139 Series 2011-52, Class GB..................................... 5.00% 06/25/41 359,760 101,638 Series 2011-60, Class OA, PO................................. (b) 08/25/39 94,123 4,504 Series 2011-72, Class TI, IO (f)............................. 4.00% 09/25/40 9 2,566,649 Series 2011-73, Class PI, IO................................. 4.50% 05/25/41 186,624 348,681 Series 2011-74, Class TQ, IO, 1 Mo. LIBOR (x) -6.43 + 55.93%, 4.50% Cap (d)............. 4.50% 12/25/33 41,745 39,853 Series 2011-75, Class BL..................................... 3.50% 08/25/21 40,088 75,274 Series 2011-86, Class DI, IO................................. 3.50% 09/25/21 816 2,342,183 Series 2011-87, Class YI, IO................................. 5.00% 09/25/41 435,192 4,241,556 Series 2011-101, Class EI, IO................................ 3.50% 10/25/26 202,162 750,000 Series 2011-105, Class MB.................................... 4.00% 10/25/41 890,748 1,641,991 Series 2011-111, Class PZ.................................... 4.50% 11/25/41 2,091,310 10,276 Series 2011-113, Class GA.................................... 2.00% 11/25/21 10,315 789,665 Series 2011-118, Class IC, IO................................ 3.50% 11/25/21 7,661 7,242,718 Series 2011-123, Class JS, IO, 1 Mo. LIBOR (x) -1 + 6.65% (d)............................ 6.50% 03/25/41 1,222,236 12,230,119 Series 2011-123, Class ZP.................................... 4.50% 12/25/41 14,551,080 520,688 Series 2011-137, Class AI, IO (f)............................ 3.00% 01/25/22 5,856 802,199 Series 2011-145, Class IO, IO................................ 3.00% 01/25/22 8,911 252,597 Series 2012-8, Class TI, IO.................................. 3.00% 10/25/21 2,371 </TABLE> Page 16 See Notes to Financial Statements <PAGE> FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <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) $ 12,721,771 Series 2012-15, Class PZ..................................... 4.00% 03/25/42 $ 14,803,127 1,634,081 Series 2012-28, Class PT..................................... 4.00% 03/25/42 1,816,580 776,952 Series 2012-39, Class PB..................................... 4.25% 04/25/42 950,124 188,156 Series 2012-52, Class BZ..................................... 4.00% 05/25/42 198,160 1,287,473 Series 2012-53, Class CI, IO................................. 3.00% 05/25/22 18,229 1,087,658 Series 2012-65, Class IO, IO................................. 5.50% 07/25/40 206,569 273,379 Series 2012-66, Class DI, IO................................. 3.50% 06/25/27 18,124 72,100 Series 2012-79, Class QA..................................... 2.00% 03/25/42 72,250 936,567 Series 2012-101, Class AI, IO................................ 3.00% 06/25/27 44,598 6,582,127 Series 2012-103, Class HI, IO................................ 3.00% 09/25/27 370,576 338,048 Series 2012-111, Class B..................................... 7.00% 10/25/42 407,543 3,926,604 Series 2012-118, Class DI, IO................................ 3.50% 01/25/40 175,250 292,879 Series 2012-118, Class IB, IO................................ 3.50% 11/25/42 42,031 16,002,539 Series 2012-122, Class SD, IO, 1 Mo. LIBOR (x) -1 + 6.10% (d)............................ 5.95% 11/25/42 3,107,362 435,138 Series 2012-133, Class KO, PO................................ (b) 12/25/42 317,813 1,669,561 Series 2012-134, Class GI, IO................................ 4.50% 03/25/29 51,206 730,717 Series 2012-138, Class MA.................................... 1.00% 12/25/42 726,111 2,668,342 Series 2012-146, Class QA.................................... 1.00% 01/25/43 2,601,130 482,815 Series 2012-409, Class 49, IO, STRIPS (e).................... 3.50% 11/25/41 59,724 674,921 Series 2012-409, Class 53, IO, STRIPS (e).................... 3.50% 04/25/42 84,605 1,832,427 Series 2012-409, Class C17, IO, STRIPS....................... 4.00% 11/25/41 250,837 690,000 Series 2013-10, Class HQ..................................... 2.50% 02/25/43 687,029 716,416 Series 2013-13, Class IK, IO................................. 2.50% 03/25/28 35,879 138,181 Series 2013-22, Class TS, 1 Mo. LIBOR (x) -1.50 + 6.08% (d)......................... 5.85% 03/25/43 149,313 47,813 Series 2013-23, Class ZB..................................... 3.00% 03/25/43 46,389 13,529,743 Series 2013-33, Class UZ..................................... 3.50% 04/25/43 15,316,087 750,000 Series 2013-41, Class DB..................................... 3.00% 05/25/43 826,179 1,748,616 Series 2013-43, Class IX, IO................................. 4.00% 05/25/43 337,043 572,583 Series 2013-51, Class PI, IO................................. 3.00% 11/25/32 49,910 834,638 Series 2013-52, Class MD..................................... 1.25% 06/25/43 828,206 7,970,895 Series 2013-54, Class LI, IO................................. 7.00% 11/25/34 1,720,529 1,014,312 Series 2013-55, Class AI, IO................................. 3.00% 06/25/33 99,815 5,611,785 Series 2013-67, Class IL, IO................................. 6.50% 07/25/43 1,120,101 124,573 Series 2013-70, Class JZ..................................... 3.00% 07/25/43 137,666 220,593 Series 2013-75, Class FC, 1 Mo. LIBOR + 0.25% (a)............ 0.40% 07/25/42 221,075 256,068 Series 2013-94, Class CA..................................... 3.50% 08/25/38 258,519 98,612 Series 2013-103, Class IO, IO................................ 3.50% 03/25/38 3,013 379,979 Series 2013-105, Class BN.................................... 4.00% 05/25/43 441,612 286,339 Series 2013-105, Class KO, PO................................ (b) 10/25/43 275,643 195,852 Series 2013-106, Class KN.................................... 3.00% 10/25/43 214,930 414,972 Series 2013-128, Class PO, PO................................ (b) 12/25/43 385,428 1,003,000 Series 2013-130, Class QY.................................... 4.50% 06/25/41 1,229,293 3,645,369 Series 2013-417, Class C21, IO, STRIPS....................... 4.00% 12/25/42 602,084 6,590,321 Series 2013-418, Class C1, IO, STRIPS........................ 3.50% 08/25/43 893,631 197,261 Series 2014-29, Class GI, IO................................. 3.00% 05/25/29 12,140 6,235,555 Series 2014-44, Class NI, IO................................. 4.50% 08/25/29 349,273 1,126,293 Series 2014-46, Class KA (e)................................. 5.36% 08/25/44 1,293,743 260,675 Series 2014-68, Class GI, IO................................. 4.50% 10/25/43 27,325 555,798 Series 2014-82, Class GZ..................................... 4.00% 12/25/44 687,667 1,470,461 Series 2014-84, Class LI, IO................................. 3.50% 12/25/26 71,219 </TABLE> See Notes to Financial Statements Page 17 <PAGE>FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <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) $ 152,830 Series 2014-91, Class PB..................................... 3.00% 02/25/38 $ 153,102 875,000 Series 2015-16, Class MY..................................... 3.50% 04/25/45 1,045,260 8,000,000 Series 2015-19, Class JB..................................... 3.50% 04/25/45 9,124,864 328,745 Series 2015-38, Class GI, IO................................. 3.00% 09/25/43 14,953 16,116,897 Series 2015-40, Class AI, IO................................. 6.00% 05/25/37 3,381,304 1,806,644 Series 2015-76, Class BI, IO................................. 4.00% 10/25/39 119,045 10,598,200 Series 2015-80, Class HZ..................................... 3.50% 11/25/45 11,576,175 338,239 Series 2015-93, Class KI, IO................................. 3.00% 09/25/44 20,718 5,526,288 Series 2015-97, Class AI, IO................................. 4.00% 09/25/41 295,703 5,367,554 Series 2016-2, Class EZ...................................... 2.50% 02/25/46 5,631,601 27,289,644 Series 2016-40, Class MS, IO, 1 Mo. LIBOR (x) -1 + 6.00% (d)............................ 5.85% 07/25/46 6,481,318 11,635,439 Series 2016-44, Class Z...................................... 3.50% 07/25/46 12,811,796 12,029,183 Series 2016-62, Class SB, IO, 1 Mo. LIBOR (x) -1 + 6.10% (d)............................ 5.95% 09/25/46 2,183,848 1,203,471 Series 2016-71, Class NI, IO................................. 3.50% 04/25/46 161,482 9,409,751 Series 2016-73, Class PI, IO................................. 3.00% 08/25/46 990,150 527,324 Series 2016-74, Class HI, IO................................. 3.50% 10/25/46 80,402 529,302 Series 2016-84, Class DF, 1 Mo. LIBOR + 0.42% (a)............ 0.58% 11/25/46 529,414 1,352,126 Series 2016-87, Class AF, 1 Mo. LIBOR + 0.40% (a)............ 0.56% 11/25/46 1,348,914 14,110,063 Series 2017-18, Class AS, IO, 1 Mo. LIBOR (x) -1 + 6.05% (d)............................ 5.90% 03/25/47 3,204,425 597,364 Series 2017-46, Class BY..................................... 3.00% 06/25/47 657,393 8,567,831 Series 2017-49, Class ZJ..................................... 4.00% 07/25/57 10,459,111 11,549,170 Series 2017-50, Class BZ..................................... 3.00% 07/25/47 12,796,408 30,048,364 Series 2017-54, Class IG, IO................................. 4.00% 07/25/47 3,961,682 12,515,600 Series 2017-65, Class SA, IO, 1 Mo. LIBOR (x) -1 + 5.90%, 5.00% Cap (d)................. 5.00% 09/25/47 1,844,162 3,786,852 Series 2017-84, Class ZK..................................... 3.50% 10/25/57 4,391,729 6,027,649 Series 2017-87, Class GI, IO................................. 4.00% 06/25/44 952,990 1,997,973 Series 2017-87, Class ZA..................................... 4.00% 11/25/57 2,442,088 2,422,736 Series 2018-17, Class Z...................................... 3.50% 03/25/48 2,880,306 28,731,694 Series 2018-76, Class ZL..................................... 4.00% 10/25/58 34,440,995 12,557,063 Series 2018-86, Class DL..................................... 3.50% 12/25/48 13,678,472 8,484,224 Series 2018-92, Class DA..................................... 3.50% 11/25/46 8,773,724 3,957,386 Series 2018-92, Class DB..................................... 3.50% 01/25/49 4,335,926 5,689,513 Series 2018-94, Class AZ..................................... 4.00% 01/25/49 6,383,291 18,008,665 Series 2019-8, Class DY...................................... 3.50% 03/25/49 19,069,581 18,690,413 Series 2019-12, Class HY..................................... 3.50% 04/25/59 21,954,353 7,662,224 Series 2019-17, Class GZ..................................... 4.00% 11/25/56 9,321,709 13,844,501 Series 2019-21, Class BL..................................... 4.00% 05/25/59 17,052,419 24,725,397 Series 2019-26, Class GA..................................... 3.50% 06/25/49 26,322,069 11,852,118 Series 2019-27, Class HA..................................... 3.00% 06/25/49 12,381,661 15,141,793 Series 2019-29, Class HT..................................... 3.00% 06/25/49 15,844,974 16,310,245 Series 2019-34, Class JA..................................... 3.00% 07/25/49 17,186,954 28,365,773 Series 2019-34, Class LA..................................... 3.00% 07/25/49 30,143,376 12,009,138 Series 2019-37, Class A...................................... 3.00% 07/25/49 12,635,321 23,479,939 Series 2019-41, Class SN, IO, 1 Mo. LIBOR (x) -1 + 6.05% (d)............................ 5.90% 08/25/49 4,360,525 7,805,000 Series 2019-45, Class BU..................................... 3.00% 08/25/49 8,688,723 28,726,580 Series 2019-57, Class JA..................................... 2.50% 10/25/49 29,627,460 16,616,467 Series 2019-59, Class PT..................................... 2.50% 10/25/49 17,231,666 </TABLE> Page 18 See Notes to Financial Statements <PAGE> FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <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) $ 25,241,185 Series 2019-66, Class C...................................... 3.00% 11/25/49 $ 26,579,872 47,678,843 Series 2019-68, Class KP..................................... 2.50% 11/25/49 50,635,313 37,208,104 Series 2019-70, Class WA, PO................................. (b) 11/25/42 34,338,429 23,839,665 Series 2020-1, Class LA...................................... 4.00% 02/25/60 29,847,280 37,277,462 Series 2020-9, Class SJ, IO, 1 Mo. LIBOR (x) -1 + 6.00% (d).. 5.85% 02/25/50 4,957,094 11,969,763 Series 2020-20, Class KI, IO................................. 4.00% 03/25/50 4,190,127 55,723,040 Series 2020-34, Class AI, IO................................. 3.50% 06/25/35 5,546,816 20,937,306 Series 2020-37, Class QI, IO................................. 4.50% 06/25/50 3,674,453 6,703,057 Series 2020-44, Class QZ..................................... 1.00% 07/25/50 6,627,449 6,881,074 Series 2020-44, Class ZQ..................................... 0.75% 07/25/50 6,780,751 7,820,410 Series 2020-66, Class IC, IO................................. 6.00% 10/25/47 1,675,926 64,261,551 Series 2020-74, Class IQ, IO................................. 6.00% 10/25/50 14,445,155 Government National Mortgage Association 30,276 Series 2001-60, Class PZ..................................... 6.00% 12/20/31 30,273 174,444 Series 2002-72, Class ZB..................................... 6.00% 10/20/32 176,421 305,467 Series 2002-75, Class PJ..................................... 5.50% 11/20/32 316,125 260,800 Series 2003-4, Class MZ...................................... 5.50% 01/20/33 282,786 373,035 Series 2003-11, Class SM, IO, 1 Mo. LIBOR (x) -1 + 7.70% (d)............................ 7.55% 02/16/33 1,195 466,736 Series 2003-18, Class PG..................................... 5.50% 03/20/33 512,627 1,364,377 Series 2003-35, Class TZ..................................... 5.75% 04/16/33 1,460,722 223,966 Series 2003-42, Class SA, IO, 1 Mo. LIBOR (x) -1 + 6.60% (d)............................ 6.45% 07/16/31 3,709 1,001,120 Series 2003-42, Class SH, IO, 1 Mo. LIBOR (x) -1 + 6.55% (d)............................ 6.40% 05/20/33 15,787 115,960 Series 2003-62, Class MZ..................................... 5.50% 07/20/33 135,508 273,596 Series 2003-84, Class Z...................................... 5.50% 10/20/33 311,428 148,433 Series 2004-37, Class B...................................... 6.00% 04/17/34 170,703 489,508 Series 2004-49, Class MZ..................................... 6.00% 06/20/34 586,292 62,060 Series 2004-68, Class ZC..................................... 6.00% 08/20/34 71,184 76,105 Series 2004-71, Class ST, 1 Mo. LIBOR (x) -6.25 + 44.50%, 7.00% Cap (d)............. 7.00% 09/20/34 83,666 126,933 Series 2004-83, Class AK, 1 Mo. LIBOR (x) -3 + 16.49% (d).... 16.05% 10/16/34 167,324 586,615 Series 2004-88, Class SM, IO, 1 Mo. LIBOR (x) -1 + 6.10% (d)............................ 5.95% 10/16/34 79,442 54,113 Series 2004-92, Class AK, 1 Mo. LIBOR (x) -3 + 16.50% (d).... 16.06% 11/16/34 76,359 1,545,535 Series 2004-92, Class BZ..................................... 5.50% 11/16/34 1,780,094 220,344 Series 2004-105, Class JZ.................................... 5.00% 12/20/34 254,695 243,323 Series 2004-105, Class KA.................................... 5.00% 12/16/34 271,709 5,440 Series 2004-109, Class BC.................................... 5.00% 11/20/33 5,437 219,430 Series 2005-3, Class JZ...................................... 5.00% 01/16/35 242,412 219,430 Series 2005-3, Class KZ...................................... 5.00% 01/16/35 252,253 24,589 Series 2005-7, Class AJ, 1 Mo. LIBOR (x) -4 + 22.00% (d)..... 21.42% 02/16/35 39,591 112,948 Series 2005-7, Class KA, 1 Mo. LIBOR (x) -2.81 + 18.95% (d)........................ 18.54% 12/17/34 126,669 311,343 Series 2005-7, Class MA, 1 Mo. LIBOR (x) -2.81 + 18.95% (d)........................ 18.54% 12/17/34 380,724 209,111 Series 2005-33, Class AY..................................... 5.50% 04/16/35 236,658 169,417 Series 2005-41, Class PA..................................... 4.00% 05/20/35 185,871 407,204 Series 2005-44, Class IO, IO................................. 5.50% 07/20/35 49,149 3,606,948 Series 2005-78, Class ZA..................................... 5.00% 10/16/35 4,067,382 317,409 Series 2005-93, Class PO, PO................................. (b) 06/20/35 312,520 </TABLE> See Notes to Financial Statements Page 19 <PAGE>FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <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) $ 589,771 Series 2006-17, Class TW..................................... 6.00% 04/20/36 $ 684,059 500,000 Series 2006-38, Class OH..................................... 6.50% 08/20/36 620,514 176,219 Series 2006-61, Class ZA..................................... 5.00% 11/20/36 199,648 408,653 Series 2007-16, Class OZ........ 1 Mo. LIBOR (x) -1 + 6.20% (d)............................ 6.05% 05/20/37 29,981 152,332 Series 2007-41, Class OL, PO................................. (b) 07/20/37 147,944 276,098 Series 2007-42, Class SB, IO, 1 Mo. LIBOR (x) -1 + 6.75% (d)............................ 6.60% 07/20/37 47,342 142,488 Series 2007-68, Class NA..................................... 5.00% 11/20/37 159,614 874,132 Series 2007-71, Class ZD..................................... 6.00% 11/20/37 987,981 149,295 Series 2007-81, Class FZ, 1 Mo. LIBOR + 0.35% (a)............ 0.50% 12/20/37 149,645 127,412 Series 2008-16, Class PO, PO................................. (b) 02/20/38 121,072 9,345 Series 2008-20, Class PO, PO................................. (b) 09/20/37 9,309 14,562 Series 2008-29, Class PO, PO................................. (b) 02/17/33 14,394 127,960 Series 2008-33, Class XS, IO, 1 Mo. LIBOR (x) -1 + 7.70% (d)............................ 7.55% 04/16/38 23,833 734,802 Series 2008-47, Class ML..................................... 5.25% 06/16/38 841,598 187,500 Series 2008-54, Class PE..................................... 5.00% 06/20/38 217,637 601,038 Series 2008-71, Class JI, IO................................. 6.00% 04/20/38 66,715 105,913 Series 2009-10, Class PA..................................... 4.50% 12/20/38 111,482 167,383 Series 2009-14, Class KI, IO................................. 6.50% 03/20/39 29,438 54,923 Series 2009-14, Class KS, IO, 1 Mo. LIBOR (x) -1 + 6.30% (d)............................ 6.15% 03/20/39 8,066 130,114 Series 2009-25, Class SE, IO, 1 Mo. LIBOR (x) -1 + 7.60% (d)............................ 7.45% 09/20/38 21,807 2,474,663 Series 2009-29, Class PC..................................... 7.00% 05/20/39 3,243,906 374,525 Series 2009-32, Class SZ..................................... 5.50% 05/16/39 461,014 490,717 Series 2009-42, Class BI, IO................................. 6.00% 06/20/39 62,747 3,732,542 Series 2009-57, Class VB..................................... 5.00% 06/16/39 4,387,057 896,670 Series 2009-61, Class OW, PO................................. (b) 11/16/35 859,533 244,014 Series 2009-61, Class PZ..................................... 7.50% 08/20/39 348,252 13,310,422 Series 2009-61, Class WQ, IO, 1 Mo. LIBOR (x) -1 + 6.25% (d)............................ 6.10% 11/16/35 2,659,534 975,489 Series 2009-69, Class ZB..................................... 6.00% 08/20/39 1,131,470 1,107,440 Series 2009-72, Class SM, IO, 1 Mo. LIBOR (x) -1 + 6.25% (d)............................ 6.10% 08/16/39 196,513 455,000 Series 2009-75, Class JN..................................... 5.50% 09/16/39 563,078 22,458 Series 2009-76, Class PC..................................... 4.00% 03/16/39 22,521 562,154 Series 2009-78, Class KZ..................................... 5.50% 09/16/39 720,232 155,079 Series 2009-79, Class OK, PO................................. (b) 11/16/37 148,607 132,271 Series 2009-81, Class TZ..................................... 5.50% 09/20/39 167,541 1,176,772 Series 2009-87, Class EI, IO................................. 5.50% 08/20/39 123,564 69,000 Series 2009-94, Class AL..................................... 5.00% 10/20/39 82,198 267,595 Series 2009-106, Class DZ.................................... 5.50% 11/20/39 339,843 5,919,453 Series 2009-106, Class SL, IO, 1 Mo. LIBOR (x) -1 + 6.10% (d)............................ 5.95% 04/20/36 1,058,279 45,509 Series 2009-106, Class WZ.................................... 5.50% 11/16/39 58,719 137,322 Series 2009-116, Class MS, IO, 1 Mo. LIBOR (x) -1 + 6.50% (d)............................ 6.35% 11/16/38 1,926 732,000 Series 2009-126, Class LB.................................... 5.00% 12/20/39 895,832 46,198 Series 2010-4, Class WA...................................... 3.00% 01/16/40 48,563 </TABLE> Page 20 See Notes to Financial Statements <PAGE> FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <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) $ 56,532 Series 2010-7, Class BC...................................... 4.00% 09/16/24 $ 56,978 60,369 Series 2010-11, Class HE..................................... 4.00% 04/20/39 61,189 804 Series 2010-14, Class AO, PO................................. (b) 12/20/32 804 1,544,155 Series 2010-14, Class BV, IO, 1 Mo. LIBOR (x) -1 + 6.25% (d)............................ 6.10% 02/16/40 248,217 602,306 Series 2010-42, Class CO, PO................................. (b) 06/16/39 601,190 2,505,036 Series 2010-46, Class FC, 1 Mo. LIBOR + 0.80% (a)............ 0.95% 03/20/35 2,542,347 825,105 Series 2010-59, Class ZD..................................... 6.50% 05/20/40 1,172,093 1,741,058 Series 2010-85, Class SL, IO, 1 Mo. LIBOR (x) -1 + 6.60% (d)............................ 6.45% 07/20/37 209,500 87,000 Series 2010-116, Class BM.................................... 4.50% 09/16/40 107,307 2,421,368 Series 2010-116, Class JB.................................... 5.00% 06/16/40 2,771,158 27,313 Series 2010-129, Class PQ.................................... 3.00% 04/20/39 27,316 1,119,948 Series 2010-157, Class OP, PO................................ (b) 12/20/40 1,064,127 283,955 Series 2010-166, Class DI, IO................................ 4.50% 02/20/39 17,909 141,513 Series 2011-4, Class PZ...................................... 5.00% 01/20/41 167,565 1,012,291 Series 2011-19, Class MI, IO................................. 5.00% 06/16/40 27,723 771,202 Series 2011-35, Class BP..................................... 4.50% 03/16/41 913,025 390,931 Series 2011-48, Class LI, IO................................. 5.50% 01/16/41 65,275 9,068,588 Series 2011-61, Class WS, IO, 1 Mo. LIBOR (x) -1 + 6.47% (d)............................ 6.32% 02/20/38 1,817,987 95,503 Series 2011-63, Class BI, IO (f)............................. 6.00% 02/20/38 8,410 890,433 Series 2011-71, Class ZC..................................... 5.50% 07/16/34 1,006,439 2,372,736 Series 2011-81, Class IC, IO, 1 Mo. LIBOR (x) -1 + 6.72%, 0.62% Cap (d)................. 0.62% 07/20/35 35,371 797,718 Series 2011-112, Class IP, IO (f)............................ 0.50% 08/16/26 13 239,265 Series 2011-129, Class CL.................................... 5.00% 03/20/41 272,801 14,103 Series 2011-136, Class GB.................................... 2.50% 05/20/40 14,493 236,520 Series 2011-137, Class WA (e)................................ 5.57% 07/20/40 277,798 331,181 Series 2011-146, Class EI, IO................................ 5.00% 11/16/41 66,564 67,773 Series 2011-151, Class TB, IO, 1 Mo. LIBOR (x) -70 + 465.50%, 3.50% Cap (d).............. 3.50% 04/20/41 4,310 1,672,120 Series 2012-10, Class LI, IO................................. 3.50% 07/20/40 33,674 3,427,921 Series 2012-18, Class IA, IO, 1 Mo. LIBOR (x) -1 + 6.68%, 0.58% Cap (d)................. 0.58% 07/20/39 35,536 1,466,813 Series 2012-48, Class MI, IO................................. 5.00% 04/16/42 281,805 12,208,493 Series 2012-84, Class QS, IO, 1 Mo. LIBOR (x) -1 + 6.10% (d)............................ 5.95% 07/16/42 2,111,697 6,711,842 Series 2012-84, Class SJ, 1 Mo. LIBOR (x) -0.57 + 2.51% (d)......................... 2.43% 07/16/42 6,675,654 251,623 Series 2012-108, Class KB.................................... 2.75% 09/16/42 279,773 2,070,679 Series 2012-143, Class IB, IO................................ 3.50% 12/20/39 18,104 7,424,303 Series 2012-143, Class TI, IO................................ 3.00% 12/16/27 509,142 2,616,509 Series 2012-149, Class PC (e)................................ 6.31% 12/20/42 3,092,651 20,730,302 Series 2013-4, Class IC, IO.................................. 4.00% 09/20/42 3,897,125 116,444 Series 2013-5, Class IA, IO.................................. 3.50% 10/16/42 14,316 1,263,712 Series 2013-10, Class DI, IO................................. 3.50% 09/20/42 135,784 286,308 Series 2013-20, Class KI, IO................................. 5.00% 01/20/43 33,179 2,223,000 Series 2013-20, Class QM..................................... 2.63% 02/16/43 2,367,953 2,141,300 Series 2013-22, Class IO, IO................................. 3.00% 02/20/43 261,104 5,953,634 Series 2013-23, Class IP, IO................................. 3.50% 08/20/42 748,025 3,272,370 Series 2013-53, Class OI, IO................................. 3.50% 04/20/43 325,386 </TABLE> See Notes to Financial Statements Page 21 <PAGE>FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------ ------------ ---------------- <S> <C> <C> <C> <C> U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED) COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED) Government National Mortgage Association (Continued) $ 2,809,788 Series 2013-69, Class AI, IO................................. 3.50% 05/20/43 $ 398,248 346,624 Series 2013-69, Class PI, IO................................. 5.00% 05/20/43 41,668 953,680 Series 2013-70, Class PM..................................... 2.50% 05/20/43 981,723 4,629,000 Series 2013-91, Class PB..................................... 3.50% 09/20/42 4,921,665 1,456,028 Series 2013-130, Class WS, IO, 1 Mo. LIBOR (x) -1 + 6.10% (d)............................ 5.95% 09/20/43 290,505 5,984,748 Series 2013-170, Class IG, IO................................ 5.50% 11/16/43 775,540 688,000 Series 2013-183, Class PB.................................... 4.50% 12/20/43 811,358 44,500 Series 2013-188, Class CF, 1 Mo. LIBOR + 0.45% (a)........... 0.60% 03/20/43 44,542 5,107,765 Series 2014-6, Class IJ, IO.................................. 4.50% 06/16/43 344,469 20,072,267 Series 2014-30, Class EA (e)................................. 1.92% 02/16/44 20,603,736 5,072,694 Series 2014-43, Class Z...................................... 4.00% 03/20/44 6,236,163 4,609,127 Series 2014-44, Class IC, IO................................. 3.00% 04/20/28 311,393 10,747,335 Series 2014-44, Class ID, IO (c) (e)......................... 0.33% 03/16/44 102,334 46,656 Series 2014-91, Class JI, IO................................. 4.50% 01/20/40 2,744 541,215 Series 2014-94, Class Z...................................... 4.50% 01/20/44 714,407 4,902,540 Series 2014-99, Class HI, IO................................. 4.50% 06/20/44 659,432 6,754,703 Series 2014-115, Class QI, IO................................ 3.00% 03/20/29 349,082 4,224,693 Series 2014-116, Class SB, IO, 1 Mo. LIBOR (x) -1 + 5.60% (d)............................ 5.45% 08/20/44 800,059 2,831,332 Series 2014-118, Class TV, IO, 1 Mo. LIBOR (x) -1 + 6.25% (d)............................ 6.10% 05/20/44 502,132 844,174 Series 2014-178, Class LT.................................... 2.00% 11/20/43 850,421 6,768,678 Series 2015-3, Class ZD...................................... 4.00% 01/20/45 8,010,936 16,158,408 Series 2015-40, Class IO, IO................................. 4.00% 03/20/45 2,412,460 8,107,917 Series 2015-66, Class LI, IO................................. 5.00% 05/16/45 976,581 54,526 Series 2015-95, Class IK, IO (e) (f)......................... 1.33% 05/16/37 1,130 15,963,857 Series 2015-99, Class EI, IO................................. 5.50% 07/16/45 3,283,729 16,866,196 Series 2015-119, Class TI, IO................................ 3.50% 05/20/41 419,783 15,609,210 Series 2015-124, Class DI, IO................................ 3.50% 01/20/38 868,827 393,149 Series 2015-137, Class WA (c) (e)............................ 5.50% 01/20/38 462,772 842,061 Series 2015-138, Class MI, IO................................ 4.50% 08/20/44 96,048 196,540 Series 2015-151, Class KW (e)................................ 5.68% 04/20/34 217,038 3,476,663 Series 2015-162, Class ZG.................................... 4.00% 11/20/45 4,256,373 6,190,641 Series 2015-168, Class GI, IO................................ 5.50% 02/16/33 1,050,339 184,012 Series 2016-16, Class KZ..................................... 3.00% 02/16/46 197,512 344,298 Series 2016-55, Class PB (e)................................. 5.96% 03/20/31 375,849 1,693,801 Series 2016-69, Class WI, IO................................. 4.50% 05/20/46 372,844 5,062,214 Series 2016-75, Class SA, IO, 1 Mo. LIBOR (x) -1 + 6.00% (d)............................ 5.85% 05/20/40 753,331 1,066,579 Series 2016-78, Class UI, IO................................. 4.00% 06/20/46 116,518 4,712,973 Series 2016-89, Class HI, IO................................. 3.50% 07/20/46 710,414 516,517 Series 2016-99, Class JA (e)................................. 5.53% 11/20/45 605,624 961,266 Series 2016-109, Class ZM.................................... 3.50% 08/20/36 1,088,283 10,165,405 Series 2016-111, Class PI, IO................................ 3.50% 06/20/45 1,051,466 1,180,075 Series 2016-118, Class GI, IO................................ 4.50% 02/16/40 171,629 12,532,543 Series 2016-120, Class AS, IO, 1 Mo. LIBOR (x) -1 + 6.10% (d)............................ 5.95% 09/20/46 3,175,671 464,000 Series 2016-141, Class PC.................................... 5.00% 10/20/46 599,747 310,014 Series 2016-145, Class LZ.................................... 3.00% 10/20/46 310,063 1,121,773 Series 2016-154, Class WF, 1 Mo. LIBOR + 0.40% (a)........... 0.55% 11/20/45 1,121,005 12,705,291 Series 2016-156, Class ZM.................................... 3.50% 11/20/46 13,590,478 </TABLE> Page 22 See Notes to Financial Statements <PAGE> FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <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) $ 303,000 Series 2016-160, Class LE.................................... 2.50% 11/20/46 $ 308,652 301,989 Series 2016-167, Class KI, IO................................ 6.00% 12/16/46 54,420 3,626,953 Series 2017-12, Class SD, IO, 1 Mo. LIBOR (x) -1 + 6.10% (d)............................ 5.95% 01/20/47 724,053 877,673 Series 2017-17, Class KZ..................................... 4.50% 02/20/47 1,126,628 6,499,622 Series 2017-32, Class DI, IO................................. 5.50% 05/20/35 1,335,518 3,972,837 Series 2017-32, Class IB, IO................................. 5.00% 02/16/47 528,694 5,779,863 Series 2017-33, Class PZ..................................... 3.00% 02/20/47 6,092,353 7,208,049 Series 2017-56, Class BI, IO................................. 6.00% 04/16/47 1,422,172 15,473,931 Series 2017-57, Class IO, IO................................. 5.00% 04/20/47 2,785,662 22,175,784 Series 2017-104, Class LT.................................... 3.00% 07/20/47 24,390,883 5,017,006 Series 2017-113, Class IE, IO................................ 5.50% 07/20/47 900,491 7,779,595 Series 2017-117, Class ZN.................................... 3.00% 08/20/47 8,660,563 11,823,223 Series 2017-122, Class CZ.................................... 3.00% 08/20/47 13,261,827 7,877,053 Series 2017-130, Class LS, IO, 1 Mo. LIBOR (x) -1 + 6.20% (d)............................ 6.05% 08/16/47 1,415,804 7,874,242 Series 2017-133, Class JI, IO................................ 7.00% 06/20/41 1,510,962 11,034,612 Series 2017-134, Class AZ.................................... 3.00% 09/20/47 12,384,596 8,547,124 Series 2017-177, Class DI, IO................................ 4.50% 11/16/47 1,387,466 15,812,843 Series 2017-179, Class IN, IO................................ 5.00% 07/20/44 4,311,421 6,268,994 Series 2017-186, Class TI, IO, 1 Mo. LIBOR (x) -1 + 6.50%, 0.50% Cap (d)................. 0.50% 05/20/40 66,102 870,545 Series 2018-44, Class Z...................................... 2.50% 09/20/47 889,367 3,385,088 Series 2018-53, Class VA..................................... 3.50% 07/20/29 3,664,994 5,098,258 Series 2018-78, Class EZ..................................... 3.00% 04/20/48 5,409,658 8,274,968 Series 2018-79, Class IO, IO................................. 5.00% 06/20/48 1,380,058 2,179,611 Series 2018-89, Class A...................................... 3.50% 06/20/39 2,191,106 12,391,052 Series 2018-97, Class DZ..................................... 3.50% 07/20/48 14,373,944 9,742,638 Series 2018-131, Class IA, IO................................ 5.00% 04/20/44 1,302,253 10,000,000 Series 2018-134, Class KB.................................... 3.50% 10/20/48 10,793,536 10,556,000 Series 2018-155, Class KD.................................... 4.00% 11/20/48 11,542,323 10,908,217 Series 2018-160, Class GY.................................... 4.50% 11/20/48 11,938,673 5,677,452 Series 2019-6, Class EI, IO.................................. 5.00% 09/20/39 755,934 11,890,020 Series 2019-15, Class MZ..................................... 4.50% 02/20/49 13,187,223 12,488,006 Series 2019-18, Class TP..................................... 3.50% 02/20/49 13,619,562 1,751,181 Series 2019-27, Class DI, IO................................. 5.50% 01/20/40 282,179 3,291,919 Series 2019-35, Class BZ..................................... 3.50% 03/20/49 4,066,015 5,190,883 Series 2019-45, Class ZB..................................... 3.50% 04/20/49 6,091,262 1,731,974 Series 2019-98, Class UZ..................................... 2.50% 08/20/49 1,729,074 29,002,211 Series 2020-31, Class IO, IO................................. 6.50% 03/20/50 5,352,080 21,825,479 Series 2020-62, Class IA, IO................................. 5.50% 05/20/50 4,468,588 3,000,000 Series 2020-62, Class IC, IO................................. 2.50% 01/20/50 807,071 14,014,801 Series 2020-62, Class WI, IO................................. 2.50% 08/20/49 3,800,448 7,097,422 Series 2020-84, Class IM, IO................................. 2.50% 05/20/50 2,149,550 19,759,118 Series 2020-84, Class IO, IO................................. 2.50% 04/20/50 5,969,832 38,981,465 Series 2020-104, Class AI, IO................................ 3.00% 07/20/50 5,335,280 1,265,279 Series 2020-122, Class BN.................................... 1.00% 08/16/50 1,231,983 4,469,042 Series 2020-127, Class ZL.................................... 1.50% 08/20/50 4,401,068 32,968,836 Series 2020-129, Class IO, IO................................ 2.50% 09/20/50 3,510,169 105,888,975 Series 2020-129, Class IU, IO................................ 2.50% 09/20/50 11,913,738 22,094,370 Series 2020-144, Class IK, IO................................ 2.50% 09/20/50 2,648,607 67,710,118 Series 2020-146, Class CI, IO................................ 2.50% 10/20/50 8,178,113 </TABLE> See Notes to Financial Statements Page 23 <PAGE>FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <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) $ 51,000,000 Series 2020-162, Class NI, IO................................ 2.50% 10/20/50 $ 5,853,047 Vendee Mortgage Trust 2,767,810 Series 2003-2, Class Z....................................... 5.00% 05/15/33 3,187,384 15,742 Series 2010-1, Class DA...................................... 4.25% 02/15/35 16,004 8,055,847 Series 2010-1, Class DZ...................................... 4.25% 04/15/40 9,013,221 13,226,737 Series 2011-1, Class DZ...................................... 3.75% 09/15/46 14,434,809 24,621,265 Series 2011-2, Class DZ...................................... 3.75% 10/15/41 27,502,004 ---------------- 1,952,992,960 ---------------- COMMERCIAL MORTGAGE-BACKED SECURITIES -- 10.1% Federal National Mortgage Association 99,948,271 Series 2019-M24, Class XA, IO (e)............................ 1.28% 03/25/29 8,989,458 Federal Home Loan Mortgage Corporation Multiclass Certificates 50,000,000 Series 2020-RR06, Class BX, IO (e)........................... 1.84% 05/27/33 7,951,101 47,500,000 Series 2020-RR09, Class BX, IO (e)........................... 2.20% 02/27/29 7,548,047 96,907,000 Series 2020-RR10, Class X, IO (e)............................ 2.01% 12/27/27 11,088,821 Federal Home Loan Mortgage Corporation Multifamily Structured Pass Through Certificates 86,834,320 Series 2011-K016, Class X1, IO (c)........................... 1.48% 10/25/21 659,802 58,338,922 Series 2012-K019, Class X1, IO (c)........................... 1.59% 03/25/22 1,029,163 64,512,468 Series 2012-K020, Class X1, IO (c)........................... 1.36% 05/25/22 1,086,835 122,116,634 Series 2013-K030, Class X1, IO (c)........................... 0.17% 04/25/23 458,939 78,085,983 Series 2014-K036, Class X1, IO (c)........................... 0.72% 10/25/23 1,479,917 4,938,979 Series 2014-K714, Class X3, IO (c)........................... 1.98% 01/25/42 604 94,380,859 Series 2015-K721, Class X1, IO (c)........................... 0.32% 08/25/22 481,871 242,163,569 Series 2016-KIR1, Class X, IO (c)............................ 1.06% 03/25/26 11,721,056 4,310,000 Series 2017-K153, Class A3................................... 3.12% 10/25/31 4,952,574 282,498,065 Series 2018-K086, Class X1, IO (c)........................... 0.24% 11/25/28 5,510,181 8,000,000 Series 2018-K156, Class A3................................... 3.70% 06/25/33 9,661,198 189,425,845 Series 2018-K156, Class X1, IO (c)........................... 0.07% 06/25/33 2,010,263 352,736,875 Series 2018-K158, Class X1, IO (c)........................... 0.07% 10/25/33 4,219,156 113,704,599 Series 2018-K159, Class X1, IO (c)........................... 0.11% 11/25/33 1,660,167 28,658,093 Series 2019-K1510, Class X1, IO (c).......................... 0.48% 01/25/34 1,418,899 123,158,383 Series 2019-K1511, Class X1, IO (c).......................... 0.78% 03/25/34 9,440,139 15,000,000 Series 2019-K1512, Class A3.................................. 3.06% 04/25/34 17,367,387 158,845,832 Series 2019-K1512, Class X1, IO (c).......................... 0.91% 04/25/34 14,021,782 57,700,653 Series 2019-K1513, Class X1, IO (c).......................... 0.86% 08/25/34 4,896,956 20,035,000 Series 2019-K1514, Class A2.................................. 2.86% 10/25/34 22,797,450 152,852,802 Series 2019-K1514, Class X1, IO (c).......................... 0.58% 10/25/34 9,580,386 40,594,043 Series 2019-K094, Class X1, IO (c)........................... 0.88% 06/25/29 2,691,040 56,904,823 Series 2019-K099, Class X1, IO (c)........................... 0.89% 09/25/29 3,866,381 57,790,000 Series 2019-K099, Class XAM, IO (c).......................... 1.14% 09/25/29 5,347,835 69,896,837 Series 2019-K101, Class X1, IO (e)........................... 0.84% 10/25/29 4,547,726 72,454,864 Series 2019-K102, Class X1, IO (e)........................... 0.83% 10/25/29 4,682,338 64,993,000 Series 2019-K102, Class XAM, IO (e).......................... 1.08% 10/25/29 5,771,947 92,446,421 Series 2019-K103, Class X1, IO (c)........................... 0.64% 11/25/29 4,714,832 59,029,000 Series 2019-K103, Class XAM, IO (c).......................... 0.89% 11/25/29 4,417,536 104,308,983 Series 2019-K734, Class X1, IO (c)........................... 0.65% 02/25/26 3,077,636 68,018,000 Series 2019-K734, Class XAM, IO (c).......................... 0.42% 02/25/26 1,525,929 42,660,513 Series 2019-K735, Class X1, IO (c)........................... 0.96% 05/25/26 2,011,140 117,034,893 Series 2019-K736, Class X1, IO (c)........................... 1.31% 07/25/26 7,281,057 76,981,384 Series 2020-K1515, Class X1, IO (c).......................... 1.51% 02/25/35 12,259,124 52,317,980 Series 2020-K1516, Class X1, IO (c).......................... 1.51% 05/25/35 8,802,249 64,494,701 Series 2020-K1517, Class X1, IO (c).......................... 1.33% 07/25/35 9,396,710 </TABLE> Page 24 See Notes to Financial Statements <PAGE> FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <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) $ 85,190,073 Series 2020-K104, Class X1, IO (c)........................... 1.13% 01/25/30 $ 7,499,044 107,053,018 Series 2020-K110, Class X1, IO (c)........................... 1.70% 04/25/30 14,290,133 75,287,375 Series 2020-K112, Class X1, IO (c)........................... 1.43% 05/25/30 8,803,458 29,090,000 Series 2020-K112, Class XAM, IO (c).......................... 1.66% 05/25/30 4,135,635 60,000,000 Series 2020-K113, Class XAM, IO (c).......................... 1.69% 06/25/30 8,212,296 34,000,000 Series 2020-K114, Class XAM, IO (c).......................... 1.34% 06/25/30 3,936,938 45,168,850 Series 2020-K115, Class X1, IO (c)........................... 1.33% 06/25/30 4,930,912 55,537,412 Series 2020-K115, Class XAM, IO (c).......................... 1.55% 07/25/30 7,374,924 16,498,023 Series 2020-K116, Class X1, IO (c)........................... 1.43% 07/25/30 1,905,223 41,000,000 Series 2020-K116, Class XAM, IO (c).......................... 1.60% 08/25/30 5,696,237 34,990,815 Series 2020-K118, Class X1, IO (c)........................... 1.06% 09/25/30 2,817,516 24,322,615 Series 2020-K118, Class XAM, IO (c).......................... 1.26% 09/25/30 2,515,430 75,959,663 Series 2020-K737, Class X1, IO (e)........................... 0.64% 10/25/26 2,519,833 136,093,306 Series 2020-K739, Class X1, IO (c)........................... 1.29% 09/25/27 10,000,000 40,072,531 Series 2020-K739, Class XAM, IO (c).......................... 1.61% 09/25/27 4,000,000 FREMF Mortgage Trust 7,590,000 Series 2011-K14, Class B (c) (h)............................. 5.18% 02/25/47 7,720,064 3,000,000 Series 2011-K15, Class B (c) (h)............................. 4.96% 08/25/44 3,077,313 11,771,000 Series 2014-K715, Class B (c) (h)............................ 4.00% 02/25/46 11,811,267 2,260,829 Series 2015-K721, Class B (c) (h)............................ 3.57% 11/25/47 2,357,687 Government National Mortgage Association 3,336,917 Series 2011-31, Class Z (e).................................. 3.79% 09/16/52 3,664,874 17,972,659 Series 2012-120, Class Z (e)................................. 2.52% 01/16/55 17,685,510 12,649,638 Series 2012-125, Class Z (e)................................. 2.34% 05/16/53 11,862,771 324,618 Series 2013-32, Class A...................................... 1.90% 06/16/36 325,502 532,000 Series 2013-57, Class D (e).................................. 2.35% 06/16/46 547,400 100,000 Series 2013-74, Class AG (c)................................. 2.83% 12/16/53 104,583 18,132 Series 2013-194, Class AE (e)................................ 2.75% 11/16/44 18,924 23,000,000 Series 2014-153, Class D (e)................................. 3.00% 04/16/56 24,628,644 15,362,214 Series 2015-30, Class DZ..................................... 2.95% 05/16/55 16,028,286 53,536,938 Series 2015-30, Class IO, IO (e)............................. 0.90% 07/16/56 2,639,398 14,435,123 Series 2015-70, Class IO, IO (e)............................. 0.79% 12/16/49 524,497 43,447,657 Series 2015-107, Class IO, IO (e)............................ 0.75% 03/16/57 1,542,535 5,352,978 Series 2015-125, Class VA (e)................................ 2.70% 05/16/35 5,633,453 37,055,461 Series 2016-2, Class IO, IO (e).............................. 0.81% 04/16/57 1,893,808 2,500,000 Series 2016-7, Class B....................................... 2.80% 07/16/57 2,708,117 25,576,677 Series 2016-11, Class IO, IO (e)............................. 0.87% 01/16/56 1,335,312 20,989,652 Series 2016-26, Class IO, IO (e)............................. 0.88% 02/16/58 1,064,677 79,103,539 Series 2016-28, Class IO, IO (e)............................. 0.87% 12/16/57 4,167,238 70,780,525 Series 2016-34, Class IO, IO (e)............................. 1.01% 01/16/58 4,631,325 55,694,805 Series 2016-35, Class IO, IO (e)............................. 0.83% 03/16/58 3,087,414 27,160,180 Series 2016-36, Class IO, IO (e)............................. 0.80% 08/16/57 1,428,256 43,866,257 Series 2016-50, Class IO, IO (e)............................. 0.94% 08/16/57 2,365,747 30,447,643 Series 2016-52, Class IO, IO (e)............................. 0.86% 03/16/58 1,543,714 99,330,940 Series 2016-64, Class IO, IO (e)............................. 0.95% 12/16/57 5,542,666 4,404,309 Series 2016-110, Class VA.................................... 2.10% 01/16/38 4,486,910 31,712,475 Series 2016-113, Class IO, IO (e)............................ 1.16% 02/16/58 2,303,918 19,476,439 Series 2016-127, Class IO, IO (e)............................ 0.92% 05/16/58 1,148,964 186,421,128 Series 2016-131, Class IO, IO (e)............................ 0.92% 08/16/58 11,983,057 132,084,735 Series 2016-133, Class IO, IO (e)............................ 0.98% 12/16/57 7,934,594 86,834,591 Series 2016-143, Class IO, IO................................ 0.89% 10/16/56 5,614,403 </TABLE> See Notes to Financial Statements Page 25 <PAGE>FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <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) $ 35,873,818 Series 2016-152, Class IO, IO (c)............................ 0.83% 08/15/58 $ 2,091,264 65,160,238 Series 2016-158, Class IO, IO (e)............................ 0.85% 06/16/58 3,563,744 133,355,316 Series 2016-166, Class IO, IO (e)............................ 1.00% 04/16/58 8,576,507 76,280,305 Series 2017-7, Class IO, IO (e).............................. 0.83% 12/16/58 4,426,699 3,942,870 Series 2017-35, Class Z (e).................................. 2.50% 05/16/59 3,787,218 4,405,906 Series 2017-44, Class B...................................... 2.60% 04/17/50 4,456,988 7,020,000 Series 2017-76, Class B...................................... 2.60% 12/16/56 7,259,244 7,390,000 Series 2017-90, Class B...................................... 2.75% 12/16/57 7,778,296 4,780,000 Series 2017-106, Class AE.................................... 2.60% 12/16/56 4,950,414 104,694,807 Series 2017-126, Class IO, IO (c) (e)........................ 0.78% 08/16/59 6,552,262 22,426,641 Series 2018-2, Class IO, IO (e).............................. 0.73% 12/16/59 1,268,516 16,488,047 Series 2018-123, Class Z..................................... 2.50% 06/16/60 16,143,530 9,036,915 Series 2018-150, Class Z..................................... 3.20% 02/16/60 9,456,192 12,589,780 Series 2018-170, Class Z..................................... 2.50% 11/16/60 12,808,591 17,422,501 Series 2019-7, Class Z....................................... 2.50% 01/16/61 16,831,561 1,780,409 Series 2019-104, Class Z..................................... 2.80% 05/16/61 1,805,596 2,312,918 Series 2019-113, Class Z..................................... 3.00% 06/16/61 2,395,165 1,526,680 Series 2019-122, Class Z..................................... 3.00% 07/16/61 1,632,408 4,622,855 Series 2019-139, Class Z (e)................................. 2.90% 11/16/61 4,853,157 5,113,632 Series 2020-12, Class Z (e).................................. 3.00% 11/16/61 5,366,338 10,200,000 Series 2020-143, Class B..................................... 2.00% 03/16/62 10,224,988 6,700,000 Series 2020-161, Class B..................................... 2.00% 08/16/62 6,193,353 ---------------- 644,898,070 ---------------- PASS-THROUGH SECURITIES -- 46.9% Federal Home Loan Mortgage Corporation 2,793,166 Pool 760043, 5 Yr. Constant Maturity Treasury Rate + 1.39% (a)................................................. 2.95% 12/01/48 2,907,316 7,376,579 Pool 840359, 12 Mo. LIBOR + 1.63% (a)........................ 3.08% 06/01/46 7,690,925 140,565 Pool A19763.................................................. 5.00% 04/01/34 161,451 56,553 Pool A47333.................................................. 5.00% 10/01/35 65,224 537,290 Pool A47828.................................................. 3.50% 08/01/35 571,130 321,570 Pool A47829.................................................. 4.00% 08/01/35 349,812 274,921 Pool A47937.................................................. 5.50% 08/01/35 323,468 114,523 Pool A48972.................................................. 5.50% 05/01/36 133,244 85,742 Pool A54675.................................................. 5.50% 01/01/36 100,132 190,888 Pool A65324.................................................. 5.50% 09/01/37 216,156 60,062 Pool A86143.................................................. 5.00% 05/01/39 69,161 23,955 Pool A90319.................................................. 5.00% 12/01/39 27,684 348,031 Pool A92197.................................................. 5.00% 05/01/40 402,187 9,597 Pool A93093.................................................. 4.50% 07/01/40 10,799 13,535 Pool A93891.................................................. 4.00% 09/01/40 15,292 19,989 Pool A94729.................................................. 4.00% 11/01/40 22,588 68,111 Pool A94843.................................................. 4.00% 11/01/40 76,876 289,188 Pool A95441.................................................. 4.00% 12/01/40 323,554 28,965 Pool A95653.................................................. 4.00% 12/01/40 32,724 47,071 Pool A95728.................................................. 4.00% 12/01/40 53,167 64,578 Pool A96380.................................................. 4.00% 01/01/41 71,200 173,850 Pool A97294.................................................. 4.00% 02/01/41 191,493 751,740 Pool B70791.................................................. 4.00% 06/01/39 812,008 4,940 Pool C01310.................................................. 6.50% 03/01/32 5,627 15,188 Pool C01574.................................................. 5.00% 06/01/33 17,525 17,514 Pool C03458.................................................. 5.00% 02/01/40 20,239 60,452 Pool C03949.................................................. 3.50% 05/01/42 66,845 </TABLE> Page 26 See Notes to Financial Statements <PAGE> FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <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) $ 143,328 Pool C04269.................................................. 3.00% 10/01/42 $ 155,378 262,210 Pool C91167.................................................. 5.00% 04/01/28 290,120 194,568 Pool C91353.................................................. 3.50% 01/01/31 206,279 410,832 Pool C91366.................................................. 4.50% 04/01/31 453,103 31,460 Pool C91482.................................................. 3.50% 07/01/32 33,971 26,380 Pool E02883.................................................. 4.00% 04/01/26 28,031 23,342 Pool G01443.................................................. 6.50% 08/01/32 26,355 58,379 Pool G01737.................................................. 5.00% 12/01/34 67,380 31,842 Pool G01840.................................................. 5.00% 07/01/35 36,739 365,436 Pool G02017.................................................. 5.00% 12/01/35 422,805 70,273 Pool G03072.................................................. 5.00% 11/01/36 81,038 361,150 Pool G04593.................................................. 5.50% 01/01/37 421,293 34,756 Pool G04632.................................................. 5.00% 11/01/36 40,102 164,333 Pool G04814.................................................. 5.50% 10/01/38 190,794 62,515 Pool G04913.................................................. 5.00% 03/01/38 72,181 37,435 Pool G05173.................................................. 4.50% 11/01/31 40,880 504,056 Pool G05275.................................................. 5.50% 02/01/39 582,693 103,635 Pool G05449.................................................. 4.50% 05/01/39 116,547 397,617 Pool G05792.................................................. 4.50% 02/01/40 447,048 327,547 Pool G05927.................................................. 4.50% 07/01/40 370,838 25,942 Pool G06252.................................................. 4.00% 02/01/41 28,606 494,804 Pool G06359.................................................. 4.00% 02/01/41 545,569 77,402 Pool G06501.................................................. 4.00% 04/01/41 85,324 288,560 Pool G06583.................................................. 5.00% 06/01/41 338,933 140,343 Pool G06687.................................................. 5.00% 07/01/41 162,173 79,873 Pool G06739.................................................. 4.50% 09/01/41 89,710 425,063 Pool G07025.................................................. 5.00% 02/01/42 490,263 641,228 Pool G07100.................................................. 5.50% 07/01/40 742,885 13,321 Pool G07219.................................................. 5.00% 10/01/41 15,182 78,008 Pool G07266.................................................. 4.00% 12/01/42 86,091 518,971 Pool G07329.................................................. 4.00% 01/01/43 572,750 567,101 Pool G07683.................................................. 4.00% 03/01/44 625,750 525,946 Pool G07806.................................................. 5.00% 06/01/41 606,581 3,005 Pool G08113.................................................. 6.50% 02/01/36 3,446 2,705,771 Pool G08854.................................................. 5.00% 12/01/48 2,971,190 25 Pool G11833.................................................. 5.00% 11/01/20 26 20 Pool G11880.................................................. 5.00% 12/01/20 20 23,425 Pool G12312.................................................. 6.00% 09/01/21 23,749 15,169 Pool G12797.................................................. 6.50% 02/01/22 15,332 49,029 Pool G12959.................................................. 6.50% 10/01/22 50,662 2,150 Pool G12978.................................................. 5.50% 12/01/22 2,222 2 Pool G13044.................................................. 4.50% 06/01/21 2 129 Pool G13581.................................................. 5.50% 11/01/21 130 34,063 Pool G13623.................................................. 4.50% 08/01/24 36,136 36,947 Pool G13625.................................................. 5.50% 01/01/24 38,517 68,298 Pool G13733.................................................. 5.00% 11/01/24 72,921 65,867 Pool G14088.................................................. 4.00% 02/01/26 69,899 96,577 Pool G14106.................................................. 6.00% 10/01/24 100,743 24,692 Pool G14167.................................................. 5.50% 07/01/23 25,626 46,027 Pool G14233.................................................. 6.00% 01/01/24 46,976 670,284 Pool G14348.................................................. 4.00% 10/01/26 710,887 27,809 Pool G14376.................................................. 4.00% 09/01/25 29,488 </TABLE> See Notes to Financial Statements Page 27 <PAGE>FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <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) $ 35,942 Pool G14676.................................................. 4.50% 09/01/26 $ 38,062 164,599 Pool G14995.................................................. 5.50% 12/01/24 169,699 39,892 Pool G15019.................................................. 4.50% 07/01/26 41,834 34,756 Pool G15039.................................................. 4.50% 09/01/26 36,914 35,429 Pool G15725.................................................. 4.50% 09/01/26 37,538 4,648 Pool G15821.................................................. 5.00% 07/01/25 4,906 158,099 Pool G15949.................................................. 4.00% 01/01/29 167,679 89,360 Pool G15957.................................................. 5.50% 12/01/24 91,716 2,696 Pool G18100.................................................. 5.00% 02/01/21 2,845 218,971 Pool G18264.................................................. 5.00% 07/01/23 231,122 191,552 Pool G18287.................................................. 5.50% 12/01/23 202,100 66,398 Pool G18306.................................................. 4.50% 04/01/24 69,831 13,816 Pool G60020.................................................. 4.50% 12/01/43 15,496 646,236 Pool G60114.................................................. 5.50% 06/01/41 758,293 1,040,714 Pool G60168.................................................. 4.50% 07/01/45 1,145,773 359,016 Pool G60194.................................................. 3.50% 08/01/45 395,586 340,697 Pool G60737.................................................. 4.50% 08/01/42 383,100 958,919 Pool G60762.................................................. 5.00% 07/01/41 1,105,780 378,082 Pool G60808.................................................. 3.00% 10/01/46 405,303 4,401,098 Pool G60921.................................................. 4.50% 02/01/47 4,797,171 14,914,825 Pool G60940.................................................. 4.00% 09/01/46 16,405,914 5,656,667 Pool G61160.................................................. 4.50% 11/01/45 6,311,090 11,199 Pool H09034.................................................. 5.50% 05/01/37 12,377 1,623 Pool J03523.................................................. 5.00% 09/01/21 1,713 24,966 Pool J05364.................................................. 6.00% 08/01/22 25,704 160,220 Pool J09465.................................................. 4.00% 04/01/24 169,892 65,412 Pool J09504.................................................. 4.00% 04/01/24 69,361 21,419 Pool J09798.................................................. 4.00% 05/01/24 22,712 50,311 Pool J10623.................................................. 4.00% 09/01/24 53,348 589,322 Pool J10827.................................................. 4.50% 10/01/24 625,898 228,192 Pool N70075.................................................. 5.00% 01/01/35 251,634 388,628 Pool N70081.................................................. 5.50% 07/01/38 441,045 53,675 Pool O20138.................................................. 5.00% 11/01/30 58,877 867,997 Pool Q00841.................................................. 4.50% 05/01/41 976,119 102,021 Pool Q03139.................................................. 4.00% 09/01/41 113,291 36,904 Pool Q04031.................................................. 4.00% 10/01/41 42,120 29,699 Pool Q04905.................................................. 4.00% 12/01/41 33,896 48,648 Pool Q05035.................................................. 4.00% 12/01/41 53,704 51,996 Pool Q05173.................................................. 4.00% 12/01/41 59,345 41,663 Pool Q05181.................................................. 4.00% 12/01/41 47,551 28,988 Pool Q05445.................................................. 4.00% 01/01/42 33,085 110,882 Pool Q07189.................................................. 4.00% 04/01/42 122,397 35,849 Pool Q07479.................................................. 3.50% 04/01/42 39,235 135,912 Pool Q11791.................................................. 3.50% 10/01/42 148,753 81,261 Pool Q11836.................................................. 3.50% 10/01/42 90,553 584,882 Pool Q14034.................................................. 3.50% 12/01/42 660,660 2,405,126 Pool Q43309.................................................. 4.00% 09/01/46 2,750,413 5,194,748 Pool Q45763.................................................. 4.00% 01/01/47 5,745,501 3,311,548 Pool Q50564.................................................. 4.50% 09/01/47 3,581,757 10,583,574 Pool Q53219.................................................. 4.50% 12/01/47 11,875,891 6,622,309 Pool Q53875.................................................. 4.00% 01/01/48 7,285,866 738,477 Pool Q54651.................................................. 4.50% 03/01/48 830,194 </TABLE> Page 28 See Notes to Financial Statements <PAGE> FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <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) $ 1,434,733 Pool Q55037.................................................. 4.50% 04/01/48 $ 1,668,690 11,134,655 Pool Q55152.................................................. 4.50% 04/01/48 12,150,471 5,447,668 Pool Q55606.................................................. 4.00% 04/01/48 6,054,292 4,058,379 Pool Q56260.................................................. 5.00% 05/01/48 4,607,619 5,698,451 Pool Q58363.................................................. 5.00% 09/01/48 6,262,857 4,407,197 Pool Q58483.................................................. 4.50% 09/01/48 4,762,429 4,106,732 Pool Q61217.................................................. 4.00% 01/01/49 4,536,419 14,938,715 Pool Q63173.................................................. 4.00% 04/01/49 16,183,327 14,187,976 Pool QA2693.................................................. 4.00% 09/01/49 16,212,030 6,477,487 Pool QA3965.................................................. 4.00% 10/01/49 7,161,417 8,187,777 Pool QA4774.................................................. 4.00% 11/01/49 9,041,454 14,002,814 Pool QA5778.................................................. 3.50% 01/01/50 14,977,672 17,416,297 Pool QA7078.................................................. 3.50% 01/01/50 18,740,728 3,744,442 Pool QB4340.................................................. 3.00% 10/01/50 3,965,327 4,427,625 Pool QN2804.................................................. 1.50% 07/01/35 4,523,902 421,615 Pool QN3055.................................................. 1.50% 08/01/35 430,784 26,038,419 Pool RA1624.................................................. 4.00% 08/01/49 28,575,995 33,413,383 Pool RA2415.................................................. 3.00% 04/01/50 34,960,738 7,505,635 Pool SB8044.................................................. 2.00% 05/01/35 7,790,263 46,048,492 Pool SB8068.................................................. 1.50% 10/01/35 47,049,867 89,999,999 Pool SD8082.................................................. 1.50% 10/01/50 91,620,753 60,000,000 Pool SD8104.................................................. 1.50% 11/01/50 60,456,781 479,834 Pool U50165.................................................. 4.00% 05/01/32 518,036 2,411,773 Pool U59020.................................................. 4.00% 06/01/35 2,599,160 2,276,099 Pool U64762.................................................. 4.50% 10/01/45 2,523,875 9,428,734 Pool U69020.................................................. 5.00% 07/01/44 10,604,685 10,700,055 Pool U69040.................................................. 4.00% 05/01/45 11,761,361 5,487,508 Pool U69041.................................................. 5.00% 11/01/43 6,153,413 25,470,359 Pool U69055.................................................. 4.50% 10/01/47 28,241,510 14,083,664 Pool U69060.................................................. 4.50% 06/01/47 15,613,617 3,619,574 Pool U79023.................................................. 3.50% 10/01/28 3,837,677 175,273 Pool U80068.................................................. 3.50% 10/01/32 188,835 100,017 Pool U80212.................................................. 3.50% 02/01/33 107,762 136,591 Pool U90245.................................................. 3.50% 10/01/42 148,862 38,794 Pool U90291.................................................. 4.00% 10/01/42 42,255 625,631 Pool U90316.................................................. 4.00% 10/01/42 687,985 553,009 Pool U90490.................................................. 4.00% 06/01/42 607,876 1,560,282 Pool U90690.................................................. 3.50% 06/01/42 1,698,787 19,468 Pool U90932.................................................. 3.00% 02/01/43 21,083 157,123 Pool U90975.................................................. 4.00% 06/01/42 171,654 473,765 Pool U91254.................................................. 4.00% 04/01/43 521,231 1,539,763 Pool U91619.................................................. 4.00% 06/01/43 1,692,992 51,384 Pool U92272.................................................. 4.50% 12/01/43 57,431 708,359 Pool U92432.................................................. 4.00% 02/01/44 779,585 44,423 Pool U95137.................................................. 4.00% 08/01/43 48,888 158,540 Pool U99045.................................................. 3.50% 03/01/43 172,569 202,502 Pool U99084.................................................. 4.50% 02/01/44 226,455 94,184 Pool U99091.................................................. 4.50% 03/01/44 105,240 251,291 Pool U99096.................................................. 4.50% 05/01/44 280,785 3,057,861 Pool U99134.................................................. 4.00% 01/01/46 3,362,047 6,832,751 Pool U99184.................................................. 4.00% 08/01/43 7,500,420 589,774 Pool V80910.................................................. 4.00% 12/01/43 648,419 </TABLE> See Notes to Financial Statements Page 29 <PAGE>FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <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) $ 14,067,419 Pool ZM4944.................................................. 4.00% 11/01/47 $ 15,554,952 3,810,329 Pool ZM6088.................................................. 4.50% 04/01/48 4,131,857 2,023,348 Pool ZS2492.................................................. 6.50% 04/01/35 2,412,054 Federal National Mortgage Association 63,793 Pool 190371.................................................. 6.50% 07/01/36 74,485 23,886 Pool 254636.................................................. 5.00% 02/01/33 27,357 37,517 Pool 255190.................................................. 5.50% 05/01/34 44,250 24,444 Pool 255984.................................................. 4.50% 11/01/25 26,377 151,622 Pool 256181.................................................. 5.50% 03/01/36 165,054 448,667 Pool 256576.................................................. 5.50% 01/01/37 492,938 24,592 Pool 256808.................................................. 5.50% 07/01/37 28,213 89,646 Pool 256936.................................................. 6.00% 10/01/37 101,236 74,326 Pool 545759.................................................. 6.50% 07/01/32 87,151 16,986 Pool 555851.................................................. 6.50% 01/01/33 19,375 299,506 Pool 683246.................................................. 5.50% 02/01/33 351,227 230,470 Pool 725014.................................................. 5.50% 12/01/33 271,862 365,168 Pool 734922.................................................. 4.50% 09/01/33 407,896 502,645 Pool 735415.................................................. 6.50% 12/01/32 589,175 4,702 Pool 745875.................................................. 6.50% 09/01/36 5,681 47,374 Pool 747097.................................................. 6.00% 10/01/29 51,927 454,638 Pool 788149.................................................. 5.50% 05/01/33 516,663 250,579 Pool 812741.................................................. 5.50% 02/01/35 283,664 375,739 Pool 827948.................................................. 5.50% 05/01/35 424,888 347,139 Pool 850000.................................................. 5.50% 01/01/36 403,793 68,177 Pool 871039.................................................. 5.50% 02/01/37 77,669 1,488,136 Pool 879015.................................................. 4.00% 10/01/35 1,624,314 175,500 Pool 888001.................................................. 5.50% 10/01/36 206,056 137,895 Pool 888163.................................................. 7.00% 12/01/33 165,894 15,524 Pool 888435.................................................. 5.50% 06/01/22 15,865 454,706 Pool 889610.................................................. 5.50% 06/01/38 527,723 353,813 Pool 889834.................................................. 5.00% 12/01/35 408,284 15,913 Pool 890149.................................................. 6.50% 10/01/38 18,498 37,802 Pool 890231.................................................. 5.00% 07/01/25 39,930 38,300 Pool 890314.................................................. 5.50% 12/01/22 39,390 11,792 Pool 890378.................................................. 6.00% 05/01/24 12,344 1,100,772 Pool 890556.................................................. 4.50% 10/01/43 1,281,870 303,169 Pool 890561.................................................. 4.50% 01/01/27 318,072 979,760 Pool 890736.................................................. 5.00% 07/01/30 1,102,441 206,601 Pool 905917.................................................. 5.50% 01/01/37 242,017 73,300 Pool 922386.................................................. 5.50% 01/01/37 76,933 14,831 Pool 930562.................................................. 5.00% 02/01/39 17,195 159,685 Pool 931808.................................................. 5.50% 08/01/39 184,835 192,519 Pool 953115.................................................. 5.50% 11/01/38 214,325 78,523 Pool 962556.................................................. 5.00% 04/01/23 82,868 36,495 Pool 973561.................................................. 5.00% 03/01/23 38,515 60,440 Pool 976871.................................................. 6.50% 08/01/36 68,956 58,905 Pool 995002.................................................. 5.00% 07/01/37 67,865 19,340 Pool 995097.................................................. 6.50% 10/01/37 22,727 117,840 Pool 995149.................................................. 6.50% 10/01/38 139,394 47,233 Pool 995228.................................................. 6.50% 11/01/38 55,936 110,746 Pool 995252.................................................. 5.00% 12/01/23 116,874 45,647 Pool 995259.................................................. 6.50% 11/01/23 47,908 </TABLE> Page 30 See Notes to Financial Statements <PAGE> FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <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) $ 155,915 Pool AA0916.................................................. 5.00% 08/01/37 $ 179,576 121,930 Pool AA3303.................................................. 5.50% 06/01/38 140,698 621,600 Pool AB0460.................................................. 5.50% 02/01/37 718,826 250,166 Pool AB0731.................................................. 4.00% 06/01/39 275,364 68,029 Pool AB1953.................................................. 4.00% 12/01/40 76,050 54,976 Pool AB2092.................................................. 4.00% 01/01/41 61,262 36,696 Pool AB2133.................................................. 4.00% 01/01/26 38,926 167,605 Pool AB2265.................................................. 4.00% 02/01/41 189,339 25,905 Pool AB2467.................................................. 4.50% 03/01/41 29,388 1,151,325 Pool AB2506.................................................. 5.00% 03/01/41 1,321,619 1,524,176 Pool AB2959.................................................. 4.50% 07/01/40 1,673,924 115,366 Pool AB5174.................................................. 3.50% 05/01/42 127,446 127,658 Pool AB5919.................................................. 3.00% 08/01/42 140,701 76,814 Pool AB6632.................................................. 3.50% 10/01/42 83,018 263,503 Pool AB6671.................................................. 3.00% 10/01/42 289,359 321,968 Pool AB7765.................................................. 3.00% 02/01/43 353,559 224,799 Pool AB7859.................................................. 3.50% 02/01/43 248,494 1,604,092 Pool AB8289.................................................. 4.50% 04/01/42 1,794,490 555,682 Pool AB8676.................................................. 3.50% 05/01/42 597,983 99,058 Pool AB9382.................................................. 4.00% 05/01/43 111,110 865,301 Pool AB9551.................................................. 3.00% 06/01/43 950,215 266,278 Pool AB9615.................................................. 4.00% 06/01/33 287,788 61,423 Pool AB9959.................................................. 4.00% 07/01/43 68,297 40,619 Pool AC1232.................................................. 5.00% 07/01/24 43,107 92,739 Pool AC3236.................................................. 5.00% 09/01/39 107,066 270,614 Pool AC3267.................................................. 5.50% 09/01/39 314,567 194,415 Pool AD0889.................................................. 6.00% 09/01/24 202,439 580,622 Pool AD4317.................................................. 4.00% 04/01/40 639,992 17,631 Pool AD5222.................................................. 4.50% 05/01/30 19,192 103,890 Pool AD5583.................................................. 5.00% 04/01/40 115,683 137,401 Pool AD6369.................................................. 4.50% 05/01/40 154,614 74,476 Pool AD6938.................................................. 4.50% 06/01/40 84,029 130,710 Pool AD7110.................................................. 5.00% 07/01/40 143,816 81,964 Pool AD7137.................................................. 5.50% 07/01/40 97,450 30,543 Pool AD8526.................................................. 4.50% 08/01/40 34,353 292,283 Pool AE0137.................................................. 4.50% 03/01/36 321,745 25,085 Pool AE0383.................................................. 4.50% 09/01/25 26,641 104,523 Pool AE4476.................................................. 4.00% 03/01/41 115,002 142,997 Pool AE7005.................................................. 4.00% 10/01/40 157,359 4,557,831 Pool AE7733.................................................. 5.00% 11/01/40 5,340,121 32,552 Pool AE9284.................................................. 4.00% 11/01/40 35,785 520,540 Pool AE9959.................................................. 5.00% 03/01/41 592,535 22,621 Pool AH0057.................................................. 4.50% 02/01/41 25,460 406,857 Pool AH0943.................................................. 4.00% 12/01/40 451,153 522,056 Pool AH0979.................................................. 3.50% 01/01/41 549,847 281,455 Pool AH1089.................................................. 4.00% 11/01/40 309,363 136,145 Pool AH1141.................................................. 4.50% 12/01/40 153,191 138,725 Pool AH4404.................................................. 4.00% 01/01/41 152,922 91,132 Pool AH7204.................................................. 4.00% 03/01/41 100,156 46,236 Pool AI1190.................................................. 4.50% 04/01/41 52,017 64,526 Pool AI1969.................................................. 4.50% 05/01/41 72,633 349,983 Pool AI4268.................................................. 5.00% 06/01/41 402,343 </TABLE> See Notes to Financial Statements Page 31 <PAGE>FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <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) $ 9,622,661 Pool AI5614.................................................. 5.00% 07/01/41 $ 11,116,575 239,739 Pool AI6093.................................................. 4.50% 06/01/31 264,332 64,237 Pool AI6503.................................................. 5.00% 11/01/39 70,687 34,660 Pool AI6581.................................................. 4.50% 07/01/41 39,016 26,159 Pool AI7800.................................................. 4.50% 07/01/41 29,447 152,542 Pool AI8779.................................................. 4.00% 11/01/41 168,218 382,953 Pool AI9114.................................................. 4.00% 06/01/42 424,035 2,003,334 Pool AI9124.................................................. 4.00% 08/01/42 2,218,244 1,164,288 Pool AI9158.................................................. 6.50% 01/01/41 1,464,569 1,796,900 Pool AJ2311.................................................. 5.00% 10/01/41 2,024,516 24,997 Pool AJ4756.................................................. 4.00% 10/01/41 28,523 36,067 Pool AJ5424.................................................. 4.00% 11/01/41 41,153 19,973 Pool AJ5736.................................................. 4.00% 12/01/41 22,789 26,029 Pool AJ6061.................................................. 4.00% 12/01/41 29,700 28,557 Pool AJ7538.................................................. 4.00% 01/01/42 32,612 34,888 Pool AJ8104.................................................. 4.00% 12/01/41 39,808 14,283 Pool AJ8203.................................................. 4.50% 01/01/42 16,078 26,943 Pool AJ8341.................................................. 4.00% 12/01/41 30,743 23,242 Pool AJ8369.................................................. 4.00% 01/01/42 26,520 40,426 Pool AJ8436.................................................. 4.00% 12/01/41 46,128 21,543 Pool AJ9162.................................................. 4.00% 01/01/42 24,574 882,670 Pool AJ9332.................................................. 4.00% 01/01/42 979,681 42,723 Pool AK0543.................................................. 4.00% 01/01/42 48,748 1,191,233 Pool AK0765.................................................. 4.00% 03/01/42 1,309,215 30,617 Pool AK1827.................................................. 4.00% 01/01/42 34,924 198,588 Pool AK4520.................................................. 4.00% 03/01/42 219,060 167,914 Pool AK5555.................................................. 4.00% 04/01/42 185,310 17,160 Pool AL0147.................................................. 4.00% 04/01/41 19,381 112,990 Pool AL0212.................................................. 5.50% 02/01/38 133,194 279,778 Pool AL0241.................................................. 4.00% 04/01/41 308,707 26,032 Pool AL0399.................................................. 6.00% 08/01/24 26,939 12,628 Pool AL0446.................................................. 6.00% 05/01/24 13,063 43,727 Pool AL0815.................................................. 4.00% 09/01/41 49,894 14,615 Pool AL1195.................................................. 6.00% 09/01/23 15,222 531,641 Pool AL1850.................................................. 5.50% 07/01/40 621,305 37,732 Pool AL1948.................................................. 4.00% 01/01/42 41,871 34,069 Pool AL1953.................................................. 4.50% 01/01/27 35,761 100,949 Pool AL2142.................................................. 6.50% 09/01/38 118,502 508,988 Pool AL2551.................................................. 3.50% 10/01/42 562,637 83,998 Pool AL2589.................................................. 5.50% 05/01/25 86,249 89,087 Pool AL2892.................................................. 3.50% 12/01/42 98,202 677,862 Pool AL3093.................................................. 3.50% 02/01/43 754,488 24,563 Pool AL3154.................................................. 3.00% 02/01/43 27,078 1,923,575 Pool AL4703.................................................. 3.50% 12/01/28 2,012,678 7,655,168 Pool AL4741.................................................. 4.50% 01/01/44 8,550,322 20,903 Pool AL4962.................................................. 6.00% 05/01/24 21,901 148,217 Pool AL5616.................................................. 5.50% 09/01/41 172,384 817,064 Pool AL5760.................................................. 4.00% 09/01/43 907,693 657,391 Pool AL5890.................................................. 4.50% 03/01/43 742,754 503,729 Pool AL6031.................................................. 4.00% 10/01/44 564,882 18,291 Pool AL6057.................................................. 6.00% 08/01/24 18,458 64,214 Pool AL6449.................................................. 4.50% 01/01/27 68,188 </TABLE> Page 32 See Notes to Financial Statements <PAGE> FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------ ------------ ---------------- <S> <C> <C> <C> <C> U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED) PASS-THROUGH SECURITIES (CONTINUED) Federal National Mortgage Association (Continued) $ 3,128,053 Pool AL6513.................................................. 5.00% 07/01/44 $ 3,513,164 190,606 Pool AL6948.................................................. 5.00% 09/01/25 201,154 117,712 Pool AL7046.................................................. 3.50% 06/01/45 130,066 4,982,844 Pool AL7162, 12 Mo. LIBOR + 1.72% (a)........................ 2.89% 09/01/42 5,209,514 322,703 Pool AL7231.................................................. 3.50% 08/01/45 356,572 585,411 Pool AL7449.................................................. 8.50% 12/01/37 724,416 740,225 Pool AL7637.................................................. 5.00% 01/01/42 815,849 2,389,458 Pool AL7905.................................................. 4.50% 03/01/34 2,632,568 127,922 Pool AL8139.................................................. 4.00% 02/01/32 136,337 10,084,559 Pool AL8263.................................................. 4.50% 02/01/44 11,265,336 84,594 Pool AL8353.................................................. 3.50% 08/01/44 93,451 8,181,919 Pool AL8640, 12 Mo. LIBOR + 1.80% (a)........................ 3.37% 12/01/41 8,584,175 4,672,246 Pool AL8652.................................................. 5.00% 07/01/44 5,383,860 529,519 Pool AL9143.................................................. 3.50% 09/01/36 577,491 170,656 Pool AL9226.................................................. 5.50% 12/01/41 201,852 1,605,665 Pool AL9777.................................................. 4.50% 01/01/47 1,769,375 5,085,571 Pool AO3529.................................................. 4.00% 06/01/42 5,590,033 1,599,615 Pool AO5527.................................................. 4.00% 07/01/42 1,744,270 1,573,368 Pool AO8106.................................................. 4.00% 08/01/42 1,730,620 516,310 Pool AO8167.................................................. 4.00% 09/01/42 564,518 200,108 Pool AP1197.................................................. 3.50% 09/01/42 218,645 888,198 Pool AP2109.................................................. 4.00% 08/01/32 959,211 101,588 Pool AP5113.................................................. 4.00% 09/01/42 112,867 291,500 Pool AP7963.................................................. 4.00% 09/01/42 330,159 2,480,193 Pool AQ0411.................................................. 3.50% 10/01/42 2,734,149 1,004,373 Pool AQ0535.................................................. 3.00% 11/01/42 1,098,304 743,588 Pool AQ1534.................................................. 3.50% 10/01/32 801,134 835,872 Pool AQ1584.................................................. 4.00% 11/01/42 956,680 582,107 Pool AQ1607.................................................. 3.50% 11/01/32 627,146 473,895 Pool AQ3310.................................................. 4.00% 11/01/42 521,135 1,589,683 Pool AQ4086.................................................. 4.00% 06/01/43 1,747,455 66,741 Pool AQ9715.................................................. 3.00% 01/01/43 72,289 454,027 Pool AQ9999.................................................. 3.00% 02/01/43 491,772 1,824,043 Pool AR7582.................................................. 3.50% 03/01/33 1,956,511 320,079 Pool AR7961.................................................. 3.50% 03/01/33 344,932 3,778,034 Pool AS1719.................................................. 5.00% 02/01/44 4,429,415 549,045 Pool AS5236.................................................. 4.00% 05/01/45 594,926 982,371 Pool AS5515.................................................. 3.50% 06/01/30 1,041,266 299,200 Pool AS5635.................................................. 3.00% 08/01/45 331,670 883,175 Pool AS7211.................................................. 3.00% 04/01/46 949,019 1,640,059 Pool AS7537.................................................. 3.00% 07/01/46 1,818,133 6,647,884 Pool AS8548.................................................. 3.50% 12/01/46 7,211,624 1,011,563 Pool AS9244.................................................. 4.50% 08/01/39 1,130,401 500,819 Pool AS9990.................................................. 4.50% 07/01/47 543,299 189,608 Pool AS9994.................................................. 4.50% 04/01/47 207,007 107,631 Pool AT0332.................................................. 3.00% 04/01/43 111,860 682,577 Pool AT1747.................................................. 3.00% 04/01/43 752,481 683,871 Pool AT3892.................................................. 3.00% 06/01/43 744,545 295,927 Pool AT4180.................................................. 3.50% 05/01/33 317,426 121,375 Pool AT5915.................................................. 4.00% 06/01/43 133,423 725,817 Pool AT6303.................................................. 4.00% 06/01/43 830,475 44,145 Pool AT6306.................................................. 4.00% 06/01/43 49,965 </TABLE> See Notes to Financial Statements Page 33 <PAGE>FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <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) $ 142,631 Pool AU5787.................................................. 4.50% 09/01/43 $ 163,625 737,168 Pool AU6278.................................................. 5.00% 11/01/43 824,243 194,721 Pool AY0013.................................................. 4.50% 01/01/45 217,999 796,563 Pool BA4113.................................................. 3.00% 04/01/46 863,291 1,430,286 Pool BD4509, 12 Mo. LIBOR + 1.67% (a)........................ 2.73% 01/01/44 1,494,095 1,630,804 Pool BD4533, 12 Mo. LIBOR + 1.66% (a)........................ 2.70% 09/01/44 1,695,077 213,446 Pool BD8660, 1 Yr. Constant Maturity Treasury Rate + 1.67% (a)................................................. 2.47% 12/01/45 215,490 15,554,962 Pool BE2973.................................................. 4.00% 01/01/47 17,199,616 588,619 Pool BE3631.................................................. 4.50% 05/01/47 640,748 2,418,525 Pool BH2633.................................................. 5.00% 08/01/47 2,696,275 30,024 Pool BH9428.................................................. 4.50% 09/01/47 32,559 15,999,006 Pool BJ1637.................................................. 3.50% 11/01/47 17,618,154 73,844 Pool BJ5781.................................................. 4.50% 04/01/48 81,745 243,656 Pool BJ6232.................................................. 5.00% 04/01/48 268,643 17,075 Pool BJ6234.................................................. 5.00% 05/01/48 18,777 1,027,984 Pool BJ9100.................................................. 4.50% 02/01/48 1,186,778 881,210 Pool BJ9111.................................................. 4.50% 03/01/48 1,024,620 1,674,082 Pool BJ9124.................................................. 4.50% 04/01/48 1,946,484 937,466 Pool BK0922.................................................. 4.50% 07/01/48 1,014,243 22,750,054 Pool BK4769.................................................. 5.00% 08/01/48 25,119,028 542,072 Pool BK4851.................................................. 5.00% 05/01/48 599,190 28,732 Pool BK7173.................................................. 5.00% 06/01/48 31,623 895,244 Pool BK7797.................................................. 5.00% 07/01/48 985,771 6,266,158 Pool BK8883.................................................. 5.00% 09/01/48 7,088,834 3,065,441 Pool BK9563.................................................. 4.50% 12/01/48 3,330,125 6,670,930 Pool BK9599.................................................. 5.00% 08/01/48 7,345,349 435,109 Pool BM1880.................................................. 4.00% 02/01/45 483,260 969,349 Pool BM3013, 12 Mo. LIBOR + 1.53% (a)........................ 2.50% 07/01/44 1,004,133 15,860,317 Pool BM3076.................................................. 4.50% 07/01/47 17,578,203 8,077,445 Pool BM3625.................................................. 3.00% 03/01/48 8,825,945 17,057,293 Pool BM3980, 12 Mo. LIBOR + 1.78% (a)........................ 3.16% 02/01/43 17,871,967 17,592,459 Pool BM4122.................................................. 7.47% 01/01/40 21,449,923 7,826,303 Pool BM4561.................................................. 5.00% 09/01/48 8,902,232 8,891,723 Pool BM4785.................................................. 4.50% 10/01/38 9,905,024 21,190,116 Pool BM5039.................................................. 4.50% 12/01/48 23,303,335 18,457,439 Pool BM5130.................................................. 4.50% 08/01/47 20,500,130 63,399,476 Pool BM5508.................................................. 5.00% 02/01/49 72,115,282 21,454,170 Pool BM5667.................................................. 4.00% 12/01/48 23,555,849 7,630,241 Pool BM5671.................................................. 4.50% 01/01/49 8,620,612 14,779,943 Pool BM6018.................................................. 5.00% 05/01/49 15,683,490 881,849 Pool BN1027.................................................. 5.50% 03/01/49 1,027,370 12,364,306 Pool BN1345.................................................. 4.00% 09/01/48 13,272,518 30,320,803 Pool BN3925.................................................. 4.50% 01/01/49 34,532,528 2,759,314 Pool BN4059.................................................. 4.00% 12/01/48 2,941,648 6,780,651 Pool BN4328.................................................. 5.00% 01/01/49 7,539,198 3,346,431 Pool BN5323.................................................. 3.50% 03/01/49 3,534,672 12,899,330 Pool BN6078.................................................. 4.00% 06/01/49 13,769,423 10,204,999 Pool BN8210.................................................. 4.50% 07/01/49 11,326,895 7,226,779 Pool BO1420.................................................. 3.50% 09/01/49 7,629,545 19,046,458 Pool BO2179.................................................. 4.00% 09/01/49 21,763,425 15,398,168 Pool BO2653.................................................. 3.50% 07/01/49 16,356,124 </TABLE> Page 34 See Notes to Financial Statements <PAGE> FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------ ------------ ---------------- <S> <C> <C> <C> <C> U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED) PASS-THROUGH SECURITIES (CONTINUED) Federal National Mortgage Association (Continued) $ 7,357,340 Pool BO3030.................................................. 4.00% 10/01/49 $ 8,147,806 5,099,264 Pool BO5425.................................................. 4.00% 10/01/49 5,634,585 11,159,987 Pool BO5426.................................................. 4.00% 10/01/49 12,124,054 9,808,249 Pool BO5430.................................................. 4.00% 10/01/49 10,615,076 13,425,238 Pool BP1950.................................................. 3.00% 04/01/50 14,887,794 4,743,122 Pool BP4238.................................................. 3.00% 04/01/50 4,962,772 874,224 Pool BP6504.................................................. 1.50% 07/01/35 893,233 2,688,716 Pool BP8797.................................................. 3.00% 07/01/50 2,871,881 7,894,466 Pool BQ3099.................................................. 3.00% 10/01/50 8,432,298 5,850,603 Pool CA0843.................................................. 3.00% 12/01/47 6,445,980 13,541,163 Pool CA1576.................................................. 5.00% 01/01/48 15,041,134 12,612,639 Pool CA1902.................................................. 4.50% 06/01/48 13,774,780 7,656,535 Pool CA1917.................................................. 5.00% 06/01/48 8,761,785 2,745,168 Pool CA2520.................................................. 4.00% 10/01/33 2,944,008 6,203,675 Pool CA2947.................................................. 4.00% 12/01/48 6,863,049 665,298 Pool CA3684.................................................. 4.50% 06/01/49 719,181 31,087,764 Pool CA4175.................................................. 4.00% 09/01/49 35,522,725 21,937,628 Pool FM0050.................................................. 5.50% 11/01/49 24,660,636 62,631,517 Pool FM0085.................................................. 4.00% 03/01/50 71,564,925 96,290,482 Pool FM1194.................................................. 4.50% 05/01/39 107,263,304 3,091,410 Pool FM1284.................................................. 3.50% 02/01/46 3,380,267 3,003,198 Pool FM1285.................................................. 4.00% 10/01/43 3,310,744 6,765,522 Pool FM1286.................................................. 4.50% 06/01/46 7,505,434 2,899,816 Pool FM1287.................................................. 5.00% 11/01/44 3,194,997 72,502,233 Pool FM1725.................................................. 2.50% 11/01/47 76,664,247 15,252,788 Pool FM2001.................................................. 5.00% 09/01/49 16,908,938 27,510,166 Pool FM2329.................................................. 5.00% 12/01/49 31,067,713 24,309,357 Pool FM2397.................................................. 4.50% 01/01/50 26,904,532 7,895,769 Pool FM2450.................................................. 3.50% 12/01/39 8,774,934 115,498,475 Pool FM2500.................................................. 2.50% 03/01/35 123,180,446 6,012,759 Pool FM2853.................................................. 5.00% 03/01/41 6,624,816 148,668 Pool MA0096.................................................. 4.50% 06/01/29 161,996 3,220 Pool MA0293.................................................. 4.50% 01/01/30 3,510 50,231 Pool MA0295.................................................. 5.00% 01/01/30 55,639 47,445 Pool MA0353.................................................. 4.50% 03/01/30 52,298 1,258,296 Pool MA0443.................................................. 5.00% 05/01/30 1,417,130 40,074 Pool MA0444.................................................. 5.00% 06/01/40 44,901 334,461 Pool MA0575.................................................. 4.50% 11/01/30 368,704 221,435 Pool MA0633.................................................. 5.00% 01/01/41 248,108 5,640 Pool MA0777.................................................. 5.00% 06/01/31 6,345 832,422 Pool MA1125.................................................. 4.00% 07/01/42 907,230 1,509,674 Pool MA1217.................................................. 4.00% 10/01/42 1,658,381 46,696 Pool MA1222.................................................. 4.00% 10/01/32 51,007 81,033 Pool MA1228.................................................. 3.00% 09/01/42 87,753 540,795 Pool MA1510.................................................. 4.00% 07/01/43 594,474 170,677 Pool MA1591.................................................. 4.50% 09/01/43 190,661 16,980,662 Pool MA1629.................................................. 4.50% 10/01/43 18,972,695 456,811 Pool MA1664.................................................. 4.50% 11/01/43 510,299 441,566 Pool MA1711.................................................. 4.50% 12/01/43 493,267 716,647 Pool MA1866.................................................. 4.50% 04/01/44 800,561 613,553 Pool MA1900.................................................. 4.50% 04/01/44 685,395 676,192 Pool MA2024.................................................. 4.00% 07/01/29 721,617 </TABLE> See Notes to Financial Statements Page 35 <PAGE>FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------ ------------ ---------------- <S> <C> <C> <C> <C> U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED) PASS-THROUGH SECURITIES (CONTINUED) Federal National Mortgage Association (Continued) $ 1,037,070 Pool MA2099.................................................. 3.50% 11/01/29 $ 1,099,080 450,385 Pool MA2454.................................................. 3.50% 09/01/30 477,454 6,973 Pool MA2509.................................................. 3.00% 01/01/46 7,195 1,969,984 Pool MA2695.................................................. 4.00% 07/01/46 2,167,025 2,318,496 Pool MA2916.................................................. 4.00% 02/01/47 2,550,627 452,453 Pool MA3101.................................................. 4.50% 08/01/47 492,468 180,314 Pool MA3123.................................................. 5.00% 08/01/47 200,520 675,557 Pool MA3205.................................................. 5.00% 10/01/47 751,264 12,179,463 Pool MA3385.................................................. 4.50% 06/01/48 13,205,200 14,388,933 Pool MA4018.................................................. 2.00% 05/01/50 14,862,596 1,537,365 Pool MA4122.................................................. 1.50% 09/01/35 1,570,797 1,064,959 Pool MA4154.................................................. 1.50% 10/01/35 1,088,117 125,000,000 Pool TBA (i)................................................. 1.50% 11/15/35 127,634,276 45,000,000 Pool TBA (i)................................................. 1.50% 12/15/50 45,214,453 249,000,000 Pool TBA (i)................................................. 2.00% 12/15/50 256,294,923 370,500,000 Pool TBA (i)................................................. 2.50% 12/15/50 385,522,619 40,000,000 Pool TBA..................................................... 4.00% 12/15/50 42,760,937 Government National Mortgage Association 85,183 Pool 3149.................................................... 6.00% 10/20/31 96,068 54,166 Pool 3172.................................................... 6.00% 12/20/31 62,540 57,900 Pool 3227.................................................... 6.00% 04/20/32 65,155 401,405 Pool 3345.................................................... 5.00% 02/20/33 454,717 134,943 Pool 3389.................................................... 5.00% 05/20/33 152,575 23,537 Pool 3390.................................................... 5.50% 05/20/33 27,936 652,526 Pool 3428.................................................... 5.00% 08/20/33 740,610 56,309 Pool 3442.................................................... 5.00% 09/20/33 64,109 23,025 Pool 3459.................................................... 5.50% 10/20/33 27,332 11,745 Pool 3474.................................................... 6.00% 11/20/33 13,502 78,425 Pool 3487.................................................... 5.00% 12/20/33 89,148 406,539 Pool 3529.................................................... 5.00% 03/20/34 462,928 62,159 Pool 3555.................................................... 5.00% 05/20/34 70,818 89,978 Pool 3596.................................................... 5.50% 08/20/34 106,749 78,823 Pool 3786.................................................... 5.50% 11/20/35 93,566 55,691 Pool 3807.................................................... 5.50% 01/20/36 66,104 402,144 Pool 4029.................................................... 6.50% 09/20/37 482,106 254,552 Pool 4251.................................................... 5.50% 10/20/23 267,758 141,297 Pool 455986.................................................. 5.25% 07/15/25 157,384 156,127 Pool 487108.................................................. 6.00% 04/15/29 186,266 55,006 Pool 553144.................................................. 5.50% 04/15/33 63,397 9,699 Pool 589331.................................................. 6.00% 10/15/22 10,292 153,488 Pool 604338.................................................. 5.00% 05/15/33 176,818 151,654 Pool 604897.................................................. 5.00% 12/15/33 174,816 146,838 Pool 605389.................................................. 5.00% 04/15/34 169,224 351,590 Pool 615403.................................................. 4.50% 08/15/33 396,626 14,454 Pool 627123.................................................. 5.50% 03/15/34 16,943 88,716 Pool 638704.................................................. 5.50% 11/15/36 100,936 200,355 Pool 653143.................................................. 4.90% 04/15/36 223,630 260,675 Pool 658324.................................................. 5.50% 03/15/37 292,570 187,894 Pool 677190.................................................. 5.00% 06/15/38 212,851 25,186 Pool 687833.................................................. 6.00% 08/15/38 30,166 50,369 Pool 706840.................................................. 4.50% 05/15/40 58,543 200,556 Pool 706855.................................................. 4.50% 09/15/40 232,553 </TABLE> Page 36 See Notes to Financial Statements <PAGE> FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <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) $ 316,049 Pool 711483.................................................. 4.00% 01/15/40 $ 354,676 134,723 Pool 711543.................................................. 4.00% 11/15/40 153,086 842,428 Pool 711563.................................................. 4.50% 03/15/41 972,361 7,956,250 Pool 720225.................................................. 4.50% 07/15/39 9,007,067 419,643 Pool 723216.................................................. 4.50% 08/15/40 471,638 94,605 Pool 723248.................................................. 5.00% 10/15/39 108,981 376,946 Pool 724230.................................................. 5.00% 08/15/39 434,559 99,669 Pool 724267.................................................. 5.00% 09/15/39 114,838 293,725 Pool 724340.................................................. 4.50% 09/15/39 332,289 85,619 Pool 725272.................................................. 4.50% 11/15/39 93,812 70,660 Pool 726394.................................................. 4.50% 10/15/39 80,013 41,083 Pool 728921.................................................. 4.50% 12/15/24 42,982 292,096 Pool 733595.................................................. 4.50% 04/15/40 330,708 136,705 Pool 733733.................................................. 5.00% 06/15/40 157,142 781,681 Pool 736317.................................................. 4.25% 06/20/36 845,663 133,952 Pool 736617.................................................. 4.00% 12/15/35 143,332 1,235,964 Pool 737673.................................................. 4.50% 11/15/40 1,386,591 255,366 Pool 737996.................................................. 4.00% 02/15/41 286,805 260,507 Pool 739341.................................................. 3.50% 10/15/41 294,159 216,902 Pool 743673.................................................. 4.50% 07/15/40 246,370 443,274 Pool 745478.................................................. 5.00% 08/20/40 491,462 766,938 Pool 748939.................................................. 4.00% 09/20/40 867,726 122,352 Pool 754384.................................................. 4.50% 03/20/42 136,156 537,971 Pool 762905.................................................. 4.50% 04/15/41 605,198 1,756,822 Pool 769102.................................................. 4.50% 07/20/41 1,968,429 498,127 Pool 781623.................................................. 5.00% 06/15/33 565,078 68,149 Pool 781697.................................................. 6.00% 11/15/33 81,162 413,036 Pool 781824.................................................. 5.50% 11/15/34 484,174 14,177 Pool 781862.................................................. 5.50% 01/15/35 16,617 60,228 Pool 782070.................................................. 7.00% 06/15/32 67,998 48,069 Pool 782133.................................................. 6.00% 01/15/22 48,896 146,268 Pool 782259.................................................. 5.00% 02/15/36 168,599 81,886 Pool 782810.................................................. 4.50% 11/15/39 91,181 1,390,031 Pool 783009.................................................. 6.10% 12/20/33 1,584,953 127,328 Pool 783091.................................................. 5.50% 06/15/40 149,065 49,372 Pool 783220.................................................. 5.50% 09/15/24 52,382 203,113 Pool 783375.................................................. 5.00% 08/15/41 232,649 13,349,378 Pool 783590.................................................. 4.50% 06/20/41 14,878,549 316,671 Pool 783760.................................................. 5.00% 02/15/42 365,108 5,374,395 Pool 784063.................................................. 5.00% 09/20/45 5,949,510 232,782 Pool 784343.................................................. 5.00% 02/15/41 268,193 3,767,484 Pool 784573.................................................. 5.00% 12/15/43 4,340,058 4,520,203 Pool 784752.................................................. 4.00% 03/15/45 4,976,058 12,074,681 Pool 784758.................................................. 5.50% 05/20/49 13,652,514 3,906,453 Pool AC0197.................................................. 4.00% 12/20/42 4,215,392 520,973 Pool AD0026.................................................. 3.50% 06/20/33 556,304 116,333 Pool AD0856.................................................. 3.75% 08/20/33 124,519 52,630 Pool AG8899.................................................. 4.00% 12/20/43 58,346 1,266,503 Pool AI6317.................................................. 4.50% 06/20/44 1,371,665 571,365 Pool AK2389.................................................. 4.50% 11/20/44 623,059 312,188 Pool AN4469.................................................. 5.00% 12/15/40 345,756 408,731 Pool AR8421.................................................. 5.00% 10/20/41 445,488 </TABLE> See Notes to Financial Statements Page 37 <PAGE>FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------ ------------ ---------------- <S> <C> <C> <C> <C> U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED) PASS-THROUGH SECURITIES (CONTINUED) Government National Mortgage Association (Continued) $ 1,570,926 Pool BB1216.................................................. 4.50% 06/20/47 $ 1,762,989 722,201 Pool BB4731.................................................. 4.00% 07/20/47 800,374 532,869 Pool BB4757.................................................. 4.00% 08/20/47 582,711 421,194 Pool BB4769.................................................. 4.00% 08/20/47 458,810 820,555 Pool BD0483.................................................. 4.50% 11/20/47 916,150 549,997 Pool BF0415.................................................. 5.00% 06/20/35 601,927 1,209,554 Pool BF2472.................................................. 5.50% 04/20/48 1,362,296 574,572 Pool BF2604.................................................. 5.50% 05/20/48 645,132 803,373 Pool BG1872.................................................. 5.50% 04/20/48 926,137 968,055 Pool BG1886.................................................. 5.50% 05/20/48 1,087,784 910,698 Pool BG1888.................................................. 5.50% 05/20/48 1,007,850 754,861 Pool BG5094.................................................. 5.50% 08/20/48 854,514 665,682 Pool BH7648.................................................. 5.50% 08/20/48 764,867 832,877 Pool BI2592.................................................. 5.50% 09/20/48 953,665 945,711 Pool BJ9554.................................................. 5.50% 01/20/49 1,062,314 680,573 Pool BK0831.................................................. 5.50% 12/20/48 771,872 312,238 Pool BK4821.................................................. 5.50% 12/20/48 350,196 1,082,454 Pool BK5396.................................................. 5.50% 12/20/48 1,212,019 448,370 Pool BK7681.................................................. 5.50% 12/20/48 493,483 384,092 Pool BL1291.................................................. 5.50% 01/20/49 421,652 694,254 Pool BL4638.................................................. 5.50% 04/20/49 778,182 524,019 Pool BL6909.................................................. 5.00% 03/20/49 579,068 187,607 Pool BL6923.................................................. 6.00% 03/20/49 205,178 1,168,845 Pool BL7446.................................................. 5.50% 03/20/49 1,321,210 1,112,769 Pool BL7950.................................................. 5.50% 05/20/49 1,252,783 844,051 Pool BL9104.................................................. 5.50% 05/20/49 939,796 476,495 Pool BL9105.................................................. 5.50% 05/20/49 524,037 3,248,332 Pool BM5456.................................................. 5.50% 07/20/49 3,677,038 2,277,976 Pool BM5457.................................................. 5.50% 07/20/49 2,560,886 1,087,136 Pool BM9249.................................................. 5.50% 05/20/49 1,223,889 587,053 Pool BM9832.................................................. 5.50% 06/20/49 652,907 761,494 Pool BN1982.................................................. 5.50% 05/20/49 862,660 890,619 Pool BN1985.................................................. 5.50% 05/20/49 1,022,894 868,307 Pool BN1986.................................................. 5.50% 05/20/49 981,637 1,088,096 Pool BN1987.................................................. 5.50% 05/20/49 1,229,848 1,579,633 Pool BN1989.................................................. 5.50% 05/20/49 1,774,773 1,760,584 Pool BN3607.................................................. 5.50% 05/20/49 2,009,020 1,416,288 Pool BN3608.................................................. 5.50% 05/20/49 1,579,564 1,027,999 Pool BN8877.................................................. 5.50% 07/20/49 1,164,153 2,329,219 Pool BN9929.................................................. 5.50% 08/20/49 2,634,988 947,056 Pool BO2380.................................................. 5.50% 07/20/49 1,094,392 1,045,469 Pool BO5553.................................................. 5.50% 08/20/49 1,195,342 1,476,751 Pool BO5554.................................................. 5.50% 08/20/49 1,670,317 1,550,283 Pool BO5555.................................................. 5.50% 08/20/49 1,743,748 953,476 Pool BO6139.................................................. 5.50% 07/20/49 1,071,338 2,116,659 Pool BO8096.................................................. 5.50% 08/20/49 2,392,080 1,884,731 Pool BO8097.................................................. 5.50% 08/20/49 2,105,822 228,433 Pool MA1017.................................................. 6.00% 05/20/43 265,652 135,171 Pool MA1162.................................................. 6.00% 07/20/43 154,561 236,403 Pool MA2077.................................................. 5.50% 07/20/44 278,072 33,654 Pool MA2215.................................................. 3.50% 09/20/44 34,966 141,250 Pool MA2683.................................................. 6.00% 03/20/45 162,433 </TABLE> Page 38 See Notes to Financial Statements <PAGE> FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <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) $ 150,608 Pool MA2759.................................................. 6.00% 01/20/45 $ 173,759 419,943 Pool MA2829.................................................. 5.00% 05/20/45 477,610 57,246 Pool MA2897.................................................. 6.00% 03/20/45 65,614 292,823 Pool MA2966.................................................. 6.00% 09/20/39 331,959 300,250 Pool MA3249.................................................. 6.00% 04/20/40 345,690 50,164 Pool MA3380.................................................. 5.50% 01/20/46 58,631 582,066 Pool MA3459.................................................. 6.00% 08/20/39 669,801 335,943 Pool MA3525.................................................. 5.50% 03/20/46 391,325 338,419 Pool MA3941.................................................. 5.50% 09/20/46 398,670 700,548 Pool MA4076.................................................. 7.00% 01/20/39 835,172 6,544,252 Pool MA5714.................................................. 6.00% 01/20/49 7,297,744 ---------------- 2,995,154,546 ---------------- TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES..................................... 5,593,329,238 (Cost $5,494,021,487) ---------------- MORTGAGE-BACKED SECURITIES -- 2.9% COLLATERALIZED MORTGAGE OBLIGATIONS -- 2.9% Alternative Loan Trust 47,917 Series 2003-J3, Class 2A1.................................... 6.25% 12/25/33 49,016 American Home Mortgage Investment Trust 2,078 Series 2004-3, Class 6A1..................................... 5.32% 10/25/34 2,105 Banc of America Funding Corp. 2,838 Series 2008-R2, Class 1A2 (h)................................ 6.00% 09/25/37 2,838 Banc of America Funding Trust 997 Series 2005-2, Class 2A4..................................... 5.75% 04/25/35 1,122 Banc of America Mortgage Trust 355,488 Series 2005-A, Class 2A2 (c)................................. 3.69% 02/25/35 356,371 BCAP LLC Trust 7,101 Series 2009-RR5, Class 8A1 (h)............................... 5.50% 11/26/34 7,123 Chase Home Lending Mortgage Trust 10,067,616 Series 2019-1, Class A11, 1 Mo. LIBOR + 0.85% (a) (h)........ 1.00% 03/25/50 10,075,308 CHL Mortgage Pass-Through Trust 48,000 Series 2004-8, Class 1A7..................................... 5.75% 07/25/34 49,317 30,798 Series 2004-8, Class 2A1..................................... 4.50% 06/25/19 31,927 CIM Trust 4,088,402 Series 2017-7, Class A (h)................................... 3.00% 04/25/57 4,186,025 12,712,566 Series 2019-INV1, Class A11 (h).............................. 4.00% 02/25/49 13,143,110 Citigroup Global Markets Mortgage Securities VII, Inc. 250 Series 2003-UP2, Class PO1, PO............................... (b) 12/25/18 229 Citigroup Mortgage Loan Trust 7,718 Series 2003-1, Class WA2..................................... 6.50% 06/25/31 7,951 COLT Mortgage Loan Trust 5,655,679 Series 2019-1, Class A1 (h).................................. 3.71% 03/25/49 5,692,234 Credit Suisse First Boston Mortgage Securities Corp. 3,932 Series 2003-11, Class 1A39................................... 5.25% 06/25/33 3,996 16,304 Series 2003-AR18, Class 2A3 (c).............................. 3.20% 07/25/33 16,366 2,227 Series 2004-AR8, Class 2A1 (c) (f)........................... 2.99% 09/25/34 2,230 61,098 Series 2005-5, Class 3A2, 1 Mo. LIBOR + 0.30% (a)............ 0.45% 07/25/35 59,253 2,109 Series 2005-7, Class 1A5..................................... 5.15% 08/25/35 2,202 CSFB Mortgage-Backed Trust 496 Series 2004-7, Class 6A1..................................... 5.25% 10/25/19 514 </TABLE> See Notes to Financial Statements Page 39 <PAGE>FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------ ------------ ---------------- <S> <C> <C> <C> <C> MORTGAGE-BACKED SECURITIES (CONTINUED) COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED) CSMC $ 822,522 Series 2017-HL1, Class A3 (h)................................ 3.50% 06/25/47 $ 827,727 1,244,318 Series 2017-HL2, Class A3 (h)................................ 3.50% 10/25/47 1,251,623 Deutsche Alt-A Securities, Inc. Mortgage Loan Trust 2,829 Series 2005-3, Class 1A1 (c)................................. 4.27% 06/25/20 2,825 Flagstar Mortgage Trust 1,690,929 Series 2018-2, Class A4 (h).................................. 3.50% 04/25/48 1,711,954 2,573,999 Series 2018-4, Class B1 (c) (h).............................. 4.28% 07/25/48 2,713,511 6,364,775 Series 2019-2, Class A11 (h)................................. 3.50% 12/25/49 6,608,806 Galton Funding Mortgage Trust 2,511,676 Series 2018-1, Class A43 (h)................................. 3.50% 11/25/57 2,537,683 4,281,750 Series 2018-2, Class A41 (h)................................. 4.50% 10/25/58 4,381,495 GMACM Mortgage Loan Trust 892 Series 2003-J10, Class A1.................................... 4.75% 01/25/19 894 GS Mortgage-Backed Securities Corp. Trust 6,251,600 Series 2019-PJ3, Class A1 (h)................................ 3.50% 03/25/50 6,409,543 GSR Mortgage Loan Trust 25,403 Series 2004-8F, Class 2A3.................................... 6.00% 09/25/34 26,099 205,073 Series 2004-12, Class 3A6 (c)................................ 2.65% 12/25/34 202,180 Impac CMB Trust 359,917 Series 2004-6, Class M3, 1 Mo. LIBOR + 1.05% (a)............. 1.20% 10/25/34 370,630 JP Morgan Resecuritization Trust 33,037 Series 2009-7, Class 11A1 (c) (h)............................ 3.30% 09/27/36 33,127 249,323 Series 2009-7, Class 17A1 (c) (h)............................ 5.42% 07/27/37 251,061 JPMorgan Mortgage Trust 7,228 Series 2004-S2, Class 5A1.................................... 5.50% 12/25/19 7,231 37,823 Series 2014-IVR3, Class 2A1 (c) (h).......................... 3.00% 09/25/44 38,227 448,071 Series 2015-3, Class A5 (h).................................. 3.50% 05/25/45 449,280 6,348,774 Series 2015-IVR2, Class A5 (c) (h)........................... 2.70% 01/25/45 6,443,991 375,608 Series 2016-1, Class A5 (h).................................. 3.50% 05/25/46 377,992 690,325 Series 2016-3, Class 1A3 (h)................................. 3.49% 10/25/46 696,592 10,049,712 Series 2019-1, Class A11, 1 Mo. LIBOR + 0.95% (a) (h)........ 1.10% 05/25/49 10,061,322 3,193,428 Series 2019-2, Class A11, 1 Mo. LIBOR + 0.95% (a) (h)........ 1.10% 08/25/49 3,197,106 5,013,079 Series 2019-3, Class A11, 1 Mo. LIBOR + 0.95% (a) (h)........ 1.10% 09/25/49 5,016,320 4,186,842 Series 2019-5, Class A11, 1 Mo. LIBOR + 0.90% (a) (h)........ 1.05% 11/25/49 4,186,277 7,199,691 Series 2020-LTV1, Class A11, 1 Mo. LIBOR + 1.00% (a) (h)..... 1.15% 06/25/50 7,203,590 MASTR Alternative Loan Trust 4,431 Series 2004-13, Class 8A1.................................... 5.50% 01/25/25 4,361 MASTR Asset Securitization Trust 130,978 Series 2003-11, Class 7A5.................................... 5.25% 12/25/33 135,885 209,604 Series 2003-12, Class 1A1.................................... 5.25% 12/25/24 213,599 31,053 Series 2003-12, Class 1A2.................................... 5.25% 12/25/24 30,915 7,638 Series 2004-1, Class 30PO, PO................................ (b) 02/25/34 6,365 8,454 Series 2004-3, Class 1A3..................................... 5.25% 03/25/24 8,502 MASTR Seasoned Securitization Trust 58,096 Series 2005-1, Class 3A1 (c)................................. 3.15% 10/25/32 58,313 2,423 Series 2005-2, Class 3A1..................................... 6.00% 11/25/17 2,423 MetLife Securitization Trust 5,129,143 Series 2018-1A, Class A (h).................................. 3.75% 03/25/57 5,524,662 Morgan Stanley Mortgage Loan Trust 1,298,366 Series 2005-6AR, Class 1M1, 1 Mo. LIBOR + 0.46% (a).......... 0.61% 11/25/35 1,297,836 </TABLE> Page 40 See Notes to Financial Statements <PAGE> FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------ ------------ ---------------- <S> <C> <C> <C> <C> MORTGAGE-BACKED SECURITIES (CONTINUED) COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED) New Residential Mortgage Loan Trust $ 614,461 Series 2014-2A, Class A3 (h)................................. 3.75% 05/25/54 $ 665,452 6,863,382 Series 2015-2A, Class B1 (h)................................. 4.50% 08/25/55 7,421,432 7,448,574 Series 2016-1A, Class A1 (h)................................. 3.75% 03/25/56 8,008,903 11,776,105 Series 2018-4A, Class A1S, 1 Mo. LIBOR + 0.75% (a) (h)....... 0.90% 01/25/48 11,767,730 Nomura Asset Acceptance Corp. Alternative Loan Trust 3,020 Series 2004-AP3, Class A6.................................... 5.29% 10/25/34 3,032 2,954 Series 2005-WF1, Class 2A5, steps up to 5.66% after Redemption Date (g)....................................... 5.16% 03/25/35 3,136 Oaks Mortgage Trust 806,773 Series 2015-2, Class A8 (h).................................. 3.50% 10/25/45 807,730 OBX Trust 5,558,478 Series 2018-EXP1, Class 1A3 (h).............................. 4.00% 04/25/48 5,756,552 1,417,537 Series 2018-EXP2, Class 1A1 (h).............................. 4.00% 07/25/58 1,442,587 Provident Funding Mortgage Trust 233,946 Series 2019-1, Class A3 (h).................................. 3.00% 12/25/49 237,244 4,790,607 Series 2019-1, Class A5 (h).................................. 3.00% 12/25/49 4,909,920 1,073,562 Series 2020-1, Class A3 (h).................................. 3.00% 02/25/50 1,093,939 6,297,076 Series 2020-1, Class A5 (h).................................. 3.00% 02/25/50 6,408,782 RBSSP Resecuritization Trust 46,862 Series 2009-6, Class 9A4, 1 Mo. LIBOR + 0.45% (a) (h)........ 0.60% 11/26/36 46,530 Residential Accredit Loans, Inc. 3,397 Series 2003-QS20, Class CB................................... 5.00% 11/25/18 3,491 Residential Asset Securitization Trust 51 Series 2004-A3, Class A4..................................... 5.25% 06/25/34 51 RFMSI Trust 362 Series 2005-S3, Class A1..................................... 4.75% 03/25/20 364 Sequoia Mortgage Trust 112,296 Series 2000-4, Class A, 1 Mo. LIBOR + 0.72% (a).............. 0.88% 11/22/24 112,314 916,252 Series 2017-3, Class A4 (h).................................. 3.50% 04/25/47 928,381 1,483,259 Series 2018-CH2, Class A12 (h)............................... 4.00% 06/25/48 1,491,821 964,103 Series 2018-CH3, Class A10 (h)............................... 4.50% 08/25/48 972,846 136,388 Series 2018-CH3, Class A11 (h)............................... 4.00% 08/25/48 137,353 626,927 Series 2018-CH4, Class A10 (h)............................... 4.50% 10/25/48 630,419 5,501,341 Series 2020-1, Class A4 (h).................................. 3.50% 02/25/50 5,581,605 1,987,802 Series 2020-1, Class A19 (h)................................. 3.50% 02/25/50 2,025,176 Shellpoint Co-Originator Trust 612,162 Series 2016-1, Class 1A10 (h)................................ 3.50% 11/25/46 620,841 810,179 Series 2017-1, Class A4 (h).................................. 3.50% 04/25/47 822,475 Structured Asset Securities Corp................................ 2,062 Series 2004-4XS, Class A3A (j)............................... 5.19% 02/25/34 2,108 Structured Asset Securities Corp. Mortgage Loan Trust 3,718 Series 2002-9, Class A2, 1 Mo. LIBOR + 0.60% (a)............. 0.75% 10/25/27 3,718 Structured Asset Securities Corp. Mortgage Pass-Through Certificates 12,923 Series 2004-11XS, Class 1A6 (j).............................. 5.19% 06/25/34 13,235 WaMu Mortgage Pass-Through Certificates Trust 25,651 Series 2003-S3, Class 3A1.................................... 5.50% 05/25/33 27,110 8,518 Series 2004-RS1, Class A11................................... 5.50% 11/25/33 8,827 Wells Fargo Mortgage Backed Securities Trust 2,624 Series 2004-K, Class 2A12 (c)................................ 3.12% 07/25/34 2,611 5,591,608 Series 2019-1, Class A1 (h).................................. 4.00% 11/25/48 5,695,697 1,124,135 Series 2019-3, Class A1 (h).................................. 3.50% 07/25/49 1,153,190 </TABLE> See Notes to Financial Statements Page 41 <PAGE>FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------ ------------ ---------------- <S> <C> <C> <C> <C> MORTGAGE-BACKED SECURITIES (CONTINUED) COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED) WinWater Mortgage Loan Trust $ 4,052,758 Series 2016-1, Class 1A18 (h)................................ 3.50% 01/20/46 $ 4,203,346 1,728,896 Series 2016-1, Class 2A3 (h)................................. 3.00% 12/20/30 1,761,711 4,774,695 Series 2016-1, Class B1 (c) (h).............................. 3.83% 01/20/46 4,939,582 ---------------- TOTAL MORTGAGE-BACKED SECURITIES............................................................ 185,690,425 (Cost $183,261,858) ---------------- ASSET-BACKED SECURITIES -- 2.2% Aegis Asset Backed Securities Trust 1,003,972 Series 2005-2, Class M2, 1 Mo. LIBOR + 0.44% (a)............. 0.59% 06/25/35 998,272 AMSR Trust 2,500,000 Series 2020-SFR2, Class A (h)................................ 1.63% 07/17/37 2,531,016 6,393,000 Series 2020-SFR5, Class A (h)................................ 1.38% 11/17/37 6,397,251 CIT Home Equity Loan Trust 70 Series 2003-1, Class A6 (j).................................. 4.56% 10/20/32 70 Citicorp Residential Mortgage Trust 15,512 Series 2007-2, Class A6 (j).................................. 4.99% 06/25/37 15,860 Citigroup Global Markets Mortgage Securities VII, Inc........... 1,268 Series 1998-AQ1, Class A6.................................... 6.63% 06/25/28 1,295 Countrywide Asset-Backed Certificates........................... 2,680,785 Series 2005-9, Class M1, 1 Mo. LIBOR + 0.52% (a)............. 0.67% 01/25/36 2,682,746 Credit-Based Asset Servicing & Securitization LLC 3,618,151 Series 2007-MX1, Class A3, steps up to 6.33% after Redemption Date (g) (h)................................... 5.83% 12/25/36 3,635,367 FBR Securitization Trust 2,185,058 Series 2005-2, Class M2, 1 Mo. LIBOR + 0.75% (a)............. 0.90% 09/25/35 2,180,361 FCI Funding LLC 21,458,798 Series 2019-1A, Class A (h).................................. 3.63% 02/18/31 21,775,993 Fieldstone Mortgage Investment Trust 323,693 Series 2005-3, Class 2A2, 1 Mo. LIBOR + 0.52% (a)............ 0.67% 02/25/36 323,822 First Alliance Mortgage Loan Trust 25,988 Series 1999-1, Class A1...................................... 7.18% 06/20/30 26,320 FirstKey Homes Trust 15,000,000 Series 2020-SFR2, Class A (h)................................ 1.27% 10/19/37 14,942,061 Foursight Capital Automobile Receivables Trust 13,000,000 Series 2020-1, Class A3 (h).................................. 2.05% 10/15/24 13,317,543 Fremont Home Loan Trust 889,230 Series 2005-1, Class M4, 1 Mo. LIBOR + 1.02% (a)............. 1.17% 06/25/35 892,813 GMACM Home Equity Loan Trust 57,429 Series 2000-HE2, Class A1, 1 Mo. LIBOR + 0.44% (a)........... 0.61% 06/25/30 46,455 107,900 Series 2004-HE1, Class A3, 1 Mo. LIBOR + 0.50% (a)........... 0.65% 06/25/34 105,992 GSAMP Trust 7,994,000 Series 2006-SEA1, Class M2, 1 Mo. LIBOR + 1.10% (a) (h)...... 1.25% 05/25/36 7,975,476 Home Partners of America Trust 14,758,000 Series 2020-2, Class A (h)................................... 1.53% 01/17/41 14,757,890 Morgan Stanley Dean Witter Capital I, Inc. Trust 5,331 Series 2003-NC2, Class M2, 1 Mo. LIBOR + 3.00% (a)........... 3.15% 02/25/33 5,421 New Century Home Equity Loan Trust 11,315 Series 2003-5, Class AI7..................................... 5.01% 11/25/33 11,735 Park Place Securities, Inc. Asset-Backed Pass-Through Certificates 1,938,900 Series 2004-WCW2, Class M2, 1 Mo. LIBOR + 0.98% (a).......... 1.12% 10/25/34 1,951,169 Progress Residential Trust 10,685,000 Series 2018-SFR2, Class A (h)................................ 3.71% 08/17/35 10,923,575 </TABLE> Page 42 See Notes to Financial Statements <PAGE> FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------ ------------ ---------------- <S> <C> <C> <C> <C> ASSET-BACKED SECURITIES (CONTINUED) Progress Residential Trust (Continued) $ 6,493,587 Series 2019-SFR1, Class A (h)................................ 3.42% 08/17/35 $ 6,704,242 1,444,251 Series 2019-SFR3, Class A (h)................................ 2.27% 09/17/36 1,474,138 1,470,000 Series 2019-SFR4, Class A (h)................................ 2.69% 10/17/36 1,513,886 Saxon Asset Securities Trust 3,783 Series 2004-2, Class MV3, 1 Mo. LIBOR + 1.91% (a)............ 2.05% 08/25/35 3,566 Towd Point Mortgage Trust 2,090,000 Series 2015-1, Class A2 (h).................................. 3.25% 10/25/53 2,123,014 792,499 Series 2015-2, Class 1A12 (h)................................ 2.75% 11/25/60 801,633 340,383 Series 2015-3, Class A4B (h)................................. 3.50% 03/25/54 352,501 763,041 Series 2015-4, Class A1B (h)................................. 2.75% 04/25/55 767,427 1,500,000 Series 2015-4, Class A2A (h)................................. 3.50% 04/25/55 1,556,516 756,875 Series 2015-5, Class A1B (h)................................. 2.75% 05/25/55 764,319 1,300,000 Series 2015-5, Class A2 (h).................................. 3.50% 05/25/55 1,350,601 905,472 Series 2016-1, Class A1B (h)................................. 2.75% 02/25/55 919,948 Tricon American Homes Trust 15,000,000 Series 2020-SFR2, Class A (h)................................ 1.48% 11/17/39 14,999,639 ---------------- TOTAL ASSET-BACKED SECURITIES............................................................... 138,829,933 (Cost $138,194,079) ---------------- </TABLE> <TABLE> <CAPTION> SHARES DESCRIPTION VALUE ---------------- -------------------------------------------------------------------------------------------- ---------------- <S> <C> <C> EXCHANGE-TRADED FUNDS -- 0.0% CAPITAL MARKETS -- 0.0% 11,750 First Trust Long Duration Opportunities ETF (k)............................................. 342,924 (Cost $305,193) ---------------- MONEY MARKET FUNDS -- 20.9% 1,333,812,789 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 0.01% (l).............................................. 1,333,812,789 (Cost $1,333,812,789) ---------------- TOTAL INVESTMENTS -- 113.5%................................................................. 7,252,005,309 (Cost $7,149,595,406) (m) ---------------- </TABLE> <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------ ------------ ---------------- <S> <C> <C> <C> <C> U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES SOLD SHORT -- (9.0)% Federal National Mortgage Association $ (45,000,000) Pool TBA (i)................................................. 1.50% 11/15/50 (45,307,617) (75,000,000) Pool TBA (i)................................................. 3.00% 11/15/50 (78,393,087) (335,000,000) Pool TBA (i)................................................. 4.00% 11/15/50 (357,861,130) (20,000,000) Pool TBA (i)................................................. 4.50% 11/15/50 (21,631,641) (22,000,000) Pool TBA (i)................................................. 5.00% 11/15/50 (24,175,937) (45,000,000) Pool TBA..................................................... 3.00% 12/15/50 (47,042,010) ---------------- TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES SOLD SHORT.......................... (574,411,422) (Proceeds $574,179,180) ---------------- NET OTHER ASSETS AND LIABILITIES -- (4.5)%.................................................. (287,852,124) ---------------- NET ASSETS -- 100.0%........................................................................ $ 6,389,741,763 ================ </TABLE> See Notes to Financial Statements Page 43 <PAGE>FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 FUTURES CONTRACTS AT OCTOBER 31, 2020 (See Note 2D - Futures Contracts in the Notes to Financial Statements): <TABLE> <CAPTION> UNREALIZED APPRECIATION NUMBER OF EXPIRATION NOTIONAL (DEPRECIATION)/ FUTURES CONTRACTS POSITION CONTRACTS DATE VALUE VALUE ------------------------------------------------------ ----------- ----------- ----------- --------------- ---------------- <S> <C> <C> <C> <C> <C> U.S. Treasury Ultra Bond Futures Long 214 Dec-2020 $ 46,010,000 $ (312,342) U.S. 5-Year Treasury Notes Short 4,757 Dec-2020 (597,486,635) 1,761,137 U.S. 10-Year Treasury Notes Short 2,135 Dec-2020 (295,097,031) 2,639,165 U.S. 10-Year Ultra Treasury Notes Short 961 Dec-2020 (151,147,281) 1,759,631 U.S. Treasury Long Bond Futures Short 1,102 Dec-2020 (190,060,563) 3,410,847 --------------- ---------------- $(1,187,781,510) $ 9,258,438 =============== ================ </TABLE> ----------------------------- (a) Floating or variable rate security. (b) Zero coupon security. (c) Collateral Strip Rate bond. Coupon is based on the weighted net interest rate of the investment's underlying collateral. The interest rate resets periodically. (d) Inverse floating rate security. (e) Weighted Average Coupon security. Coupon is based on the blended interest rate of the underlying holdings, which may have different coupons. The coupon may change in any period. (f) Pursuant to procedures adopted by the Trust's Board of Trustees, this security has been determined to be illiquid by First Trust Advisors L.P., the Fund's advisor (the "Advisor"). (g) Step-up security. A security where the coupon increases or steps up at a predetermined date. (h) This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A of the Securities Act of 1933, as amended, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Pursuant to procedures adopted by the Trust's Board of Trustees, this security has been determined to be liquid by the Advisor. Although market instability can result in periods of increased overall market illiquidity, liquidity for each security is determined based on security specific factors and assumptions, which require subjective judgment. At October 31, 2020, securities noted as such amounted to $337,110,138 or 5.3% of net assets. (i) All or a portion of this security is part of a mortgage dollar roll agreement (see Note 2I- Mortgage Dollar Rolls and TBA Transactions in the Notes to Financial Statements). (j) Step security. The coupon rate is determined based on the underlying investments. The coupon rate resets periodically. (k) Investment in an affiliated fund. (l) Rate shown reflects yield as of October 31, 2020. (m) Aggregate cost for federal income tax purposes is $6,570,558,787. As of October 31, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $168,139,031 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $51,845,493. The net unrealized appreciation was $116,293,538. The amounts presented are inclusive of investments sold short and derivative contracts. IO - Interest-Only Security - Principal amount shown represents par value on which interest payments are based. LIBOR - London Interbank Offered Rate PO - Principal-Only Security STRIPS - Separate Trading of Registered Interest and Principal of Securities TBA - To-Be-Announced SecurityPage 44 See Notes to Financial Statements <PAGE> FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of October 31, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): <TABLE> <CAPTION> ASSETS TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 10/31/2020 PRICES INPUTS INPUTS --------------- --------------- --------------- --------------- <S> <C> <C> <C> <C> U.S. Government Agency Mortgage-Backed Securities..... $ 5,593,329,238 $ -- $ 5,593,329,238 $ -- Mortgage-Backed Securities............................ 185,690,425 -- 185,690,425 -- Asset-Backed Securities............................... 138,829,933 -- 138,829,933 -- Exchange-Traded Funds*................................ 342,924 342,924 -- -- Money Market Funds.................................... 1,333,812,789 1,333,812,789 -- -- --------------- --------------- --------------- --------------- Total Investments..................................... 7,252,005,309 1,334,155,713 5,917,849,596 -- Futures Contracts**................................... 9,570,780 9,570,780 -- -- --------------- --------------- --------------- --------------- Total................................................. $ 7,261,576,089 $ 1,343,726,493 $ 5,917,849,596 $ -- =============== =============== =============== =============== LIABILITIES TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 10/31/2020 PRICES INPUTS INPUTS --------------- --------------- --------------- --------------- U.S. Government Agency Mortgage-Backed Securities Sold Short......................................... $ (574,411,422) $ -- $ (574,411,422) $ -- Futures Contracts**................................... (312,342) (312,342) -- -- --------------- --------------- --------------- --------------- Total................................................. $ (574,723,764) $ (312,342) $ (574,411,422) $ -- =============== =============== =============== =============== </TABLE> * See Portfolio of Investments for industry breakout. ** Includes cumulative appreciation/depreciation on futures contracts as reported in the Futures Contracts table. Only the current day's variation margin is presented on the Statement of Assets and Liabilities. See Notes to Financial Statements Page 45 <PAGE>FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 2020 <TABLE> <CAPTION> ASSETS: <S> <C> Investments, at value - Unaffiliated...................................... $7,251,662,385 Investments, at value - Affiliated........................................ 342,924 -------------- Total investments, at value............................................... 7,252,005,309 Cash segregated as collateral for open futures contracts.................. 14,072,960 Receivables: Investment securities sold............................................. 1,898,055,666 Capital shares sold.................................................... 66,937,293 Interest............................................................... 20,731,127 Dividends.............................................................. 10,917 Variation margin....................................................... 1,280,317 -------------- Total Assets........................................................ 9,253,093,589 -------------- LIABILITIES: Investments sold short, at value (proceeds $574,179,180).................. 574,411,422 Payables: Investment securities purchased........................................ 2,274,584,852 Distributions to shareholders.......................................... 10,921,500 Investment advisory fees............................................... 3,434,052 -------------- Total Liabilities................................................... 2,863,351,826 -------------- NET ASSETS................................................................ $6,389,741,763 ============== NET ASSETS CONSIST OF: Paid-in capital........................................................... $6,392,070,212 Par value................................................................. 1,242,000 Accumulated distributable earnings (loss)................................. (3,570,449) -------------- NET ASSETS................................................................ $6,389,741,763 ============== NET ASSET VALUE, per share................................................ $ 51.45 ============== Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share)............................................. 124,200,002 ============== Investments, at cost - Unaffiliated....................................... $7,149,290,213 ============== Investments, at cost - Affiliated......................................... $ 305,193 ============== Total investments, at cost................................................ $7,149,595,406 ============== </TABLE> Page 46 See Notes to Financial Statements <PAGE> FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 2020 <TABLE> <CAPTION> INVESTMENT INCOME: <S> <C> Interest.................................................................. $ 111,934,020 Dividends - Unaffiliated.................................................. 1,865,188 Dividends - Affiliated.................................................... 13,246 -------------- Total investment income................................................... 113,812,454 -------------- EXPENSES: Investment advisory fees.................................................. 33,259,927 -------------- Total expenses......................................................... 33,259,927 -------------- NET INVESTMENT INCOME (LOSS).............................................. 80,552,527 -------------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments - Unaffiliated............................................. 8,210,261 Investments - Affiliated............................................... -- Investments sold short................................................. (5,626,759) Futures contracts...................................................... (68,365,332) Purchased options contracts............................................ (350,534) Written options contracts.............................................. 1,862,427 -------------- Net realized gain (loss).................................................. (64,269,937) -------------- Net change in unrealized appreciation (depreciation) on: Investments - Unaffiliated............................................. 42,037,401 Investments - Affiliated............................................... 16,626 Investments sold short................................................. 62,315 Futures contracts...................................................... 6,755,997 Purchased options contracts............................................ (29,558) Written options contracts.............................................. -- -------------- Net change in unrealized appreciation (depreciation)...................... 48,842,781 -------------- NET REALIZED AND UNREALIZED GAIN (LOSS)................................... (15,427,156) -------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................................................ $ 65,125,371 ============== </TABLE> See Notes to Financial Statements Page 47 <PAGE>FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) STATEMENTS OF CHANGES IN NET ASSETS <TABLE> <CAPTION> YEAR YEAR ENDED ENDED 10/31/2020 10/31/2019 -------------- -------------- <S> <C> <C> OPERATIONS: Net investment income (loss).............................................. $ 80,552,527 $ 65,051,358 Net realized gain (loss).................................................. (64,269,937) (28,220,321) Net change in unrealized appreciation (depreciation)...................... 48,842,781 87,648,689 -------------- -------------- Net increase (decrease) in net assets resulting from operations........... 65,125,371 124,479,726 -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations..................................................... (98,308,815) (67,215,845) Return of capital......................................................... (19,702,687) (4,340,158) -------------- -------------- Total distributions to shareholders....................................... (118,011,502) (71,556,003) -------------- -------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................................. 2,755,885,309 1,983,467,078 Cost of shares redeemed................................................... (78,726,417) -- -------------- -------------- Net increase (decrease) in net assets resulting from shareholder transactions............................................... 2,677,158,892 1,983,467,078 -------------- -------------- Total increase (decrease) in net assets................................... 2,624,272,761 2,036,390,801 NET ASSETS: Beginning of period....................................................... 3,765,469,002 1,729,078,201 -------------- -------------- End of period............................................................. $6,389,741,763 $3,765,469,002 ============== ============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period................................... 72,600,002 34,050,002 Shares sold............................................................... 53,150,000 38,550,000 Shares redeemed........................................................... (1,550,000) -- -------------- -------------- Shares outstanding, end of period......................................... 124,200,002 72,600,002 ============== ============== </TABLE> Page 48 See Notes to Financial Statements <PAGE> FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD <TABLE> <CAPTION> YEAR ENDED OCTOBER 31, ---------------------------------------------------------------------------- 2020 2019 2018 2017 2016 ------------ ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Net asset value, beginning of period ........... $ 51.87 $ 50.78 $ 51.76 $ 52.54 $ 50.32 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) ................... 0.87 1.24 1.17 1.13 1.31 Net realized and unrealized gain (loss) ........ (0.10) 1.21 (0.74) (0.50) 2.41 ---------- ---------- ---------- ---------- ---------- Total from investment operations ............... 0.77 2.45 0.43 0.63 3.72 ---------- ---------- ---------- ---------- ---------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income........................... (0.99) (1.23) (1.13) (1.14) (1.50) Net realized gain............................... -- (0.05) (0.28) (0.02) -- Return of capital............................... (0.20) (0.08) -- (0.25) -- ---------- ---------- ---------- ---------- ---------- Total distributions............................. (1.19) (1.36) (1.41) (1.41) (1.50) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period ................. $ 51.45 $ 51.87 $ 50.78 $ 51.76 $ 52.54 ========== ========== ========== ========== ========== TOTAL RETURN (a)................................ 1.50% 4.88% 0.84% 1.22% 7.49% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)............ $6,389,742 $3,765,469 $1,729,078 $ 846,322 $ 270,586 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets (b)............................... 0.65% 0.65% 0.65% 0.65% 0.65% Ratio of net investment income (loss) to average net assets .................................. 1.57% 2.41% 2.32% 2.20% 2.06% Portfolio turnover rate (c)..................... 434% (d) 373% (d) 331% (d) 190% (d) 92% </TABLE> (a) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. (b) The Fund indirectly bears its proportionate share of fees and expenses incurred by the underlying funds in which the Fund invests. This ratio does not include these indirect fees and expenses. (c) 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) The portfolio turnover rate not including mortgage dollar rolls was 245%, 246%, 117% and 97% for the years ended October 31, 2020, 2019, 2018 and 2017, respectively. See Notes to Financial Statements Page 49 <PAGE> --------------------------------------------------------------------------------NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) OCTOBER 31, 2020 1. ORGANIZATION First Trust Exchange-Traded Fund IV (the "Trust") is an open-end management investment company organized as a Massachusetts business trust on September 15, 2010, and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust currently consists of nine funds that are offering shares. This report covers the First Trust Low Duration Opportunities ETF (the "Fund"), a diversified series of the Trust, which trades under the ticker "LMBS" on The Nasdaq Stock Market LLC ("Nasdaq"). Unlike conventional mutual funds, the Fund issues and redeems shares on a continuous basis, at net asset value ("NAV"), only in large specified blocks consisting of 50,000 shares called a "Creation Unit." Creation Units are generally issued and redeemed for cash and, in certain circumstances, in-kind for securities in which the Fund invests, and only to and from broker-dealers and large institutional investors that have entered into participation agreements. Except when aggregated in Creation Units, the Fund's shares are not redeemable securities. The Fund is an actively managed exchange-traded fund ("ETF"). The Fund's primary investment objective is to generate current income. The Fund's secondary investment objective is to provide capital appreciation. The Fund seeks to achieve its investment objectives by investing, under normal market conditions, at least 60% of its net assets (including investment borrowings) in mortgage-related debt securities and other mortgage-related instruments (collectively, "Mortgage-Related Investments"). The Fund normally expects to invest in Mortgage-Related Investments tied to residential and commercial mortgages. Mortgage-Related Investments include residential mortgage-backed securities, commercial mortgage-backed securities, stripped mortgage-backed securities, collateralized mortgage obligations and real estate mortgage investment conduits. The Fund may also invest in investment companies, including ETFs, that invest primarily in Mortgage-Related Investments. The Fund will limit its investments in Mortgage-Related Investments that are not issued or guaranteed by Government Entities(1) to 20% of its net assets (including investment borrowings). The Fund may invest, without limitation, in mortgage dollar rolls. The Fund intends to enter into mortgage dollar rolls only with high quality securities dealers and banks, as determined by the Fund's investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"). The Fund may also invest in to-be-announced transactions ("TBA Transactions"). Further, the Fund may enter into short sales as part of its overall portfolio management strategies or to offset a potential decline in the value of a security; however, the Fund does not expect, under normal market conditions, to engage in short sales with respect to more than 30% of the value of its net assets (including investment borrowings). Although the Fund intends to invest primarily in investment grade securities, the Fund may invest up to 20% of its net assets (including investment borrowings) in securities of any credit quality, including securities that are below investment grade, which are also known as high yield securities, or commonly referred to as "junk" bonds, or unrated securities that have not been judged by the Advisor to be of comparable quality to rated investment grade securities. In the case of a split rating between one or more of the nationally recognized statistical rating organizations, the Fund will consider the highest rating. The Fund targets an estimated effective duration of three years or less. 2. SIGNIFICANT ACCOUNTING POLICIES The Fund is considered an investment company and follows accounting and reporting guidance under Financial Accounting Standards Board ("FASB") Accounting Standards Codification Topic 946, "Financial Services-Investment Companies." The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of the financial statements. The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. PORTFOLIO VALUATION The Fund's NAV is determined daily as of the close of regular trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV is determined as of that time. Domestic debt securities and foreign securities are priced using data reflecting the earlier closing of the principal markets for those securities. The Fund's NAV is calculated by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding. The Fund's investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Advisor's Pricing Committee, in ----------------------------- (1) "Government Entities" means the U.S. government, its agencies and instrumentalities, and U.S. government-sponsored entities. Page 50 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) OCTOBER 31, 2020 accordance with valuation procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act. Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. The Fund's investments are valued as follows: U.S. government securities, mortgage-backed securities, asset-backed securities and other debt securities are fair valued on the basis of valuations provided by dealers who make markets in such securities or by a third-party pricing service approved by the Trust's Board of Trustees, which may use the following valuation inputs when available: 1) benchmark yields; 2) reported trades; 3) broker/dealer quotes; 4) issuer spreads; 5) benchmark securities; 6) bids and offers; and 7) reference data including market research publications. Securities traded in an over-the-counter market are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price. Common stocks and other equity securities listed on any national or foreign exchange (excluding Nasdaq and the London Stock Exchange Alternative Investment Market ("AIM")) are valued at the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price. Securities traded on more than one securities exchange are valued at the last sale price or official closing price, as applicable, at the close of the securities exchange representing the principal market for such securities. Shares of open-end funds are valued at fair value which is based on NAV per share. Exchange-traded futures contracts are valued at the closing price in the market where such contracts are principally traded. If no closing price is available, exchange-traded futures contracts are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price. Exchange-traded options contracts are valued at the closing price in the market where such contracts are principally traded. If no closing price is available, exchange-traded options contracts are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price. Fixed income and other debt securities having a remaining maturity of sixty days or less when purchased are fair valued at cost adjusted for amortization of premiums and accretion of discounts (amortized cost), provided the Advisor's Pricing Committee has determined that the use of amortized cost is an appropriate reflection of fair value given market and issuer-specific conditions existing at the time of the determination. Factors that may be considered in determining the appropriateness of the use of amortized cost include, but are not limited to, the following: 1) the credit conditions in the relevant market and changes thereto; 2) the liquidity conditions in the relevant market and changes thereto; 3) the interest rate conditions in the relevant market and changes thereto (such as significant changes in interest rates); 4) issuer-specific conditions (such as significant credit deterioration); and 5) any other market-based data the Advisor's Pricing Committee considers relevant. In this regard, the Advisor's Pricing Committee may use last-obtained market-based data to assist it when valuing portfolio securities using amortized cost. Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Trust's Board of Trustees or its delegate, the Advisor's Pricing Committee, at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of the Fund's NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security's fair value. As a general principle, the current fair value of a security would appear to be the Page 51 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) OCTOBER 31, 2020 amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities, including, but not limited to, the following: 1) the fundamental business data relating to the issuer; 2) an evaluation of the forces which influence the market in which these securities are purchased and sold; 3) the type, size and cost of a security; 4) the financial statements of the issuer; 5) the credit quality and cash flow of the issuer, based on the Advisor's or external analysis; 6) the information as to any transactions in or offers for the security; 7) the price and extent of public trading in similar securities of the issuer/borrower, or comparable companies; 8) the coupon payments; 9) the quality, value and salability of collateral, if any, securing the security; 10) the business prospects of the issuer, including any ability to obtain money or resources from a parent or affiliate and an assessment of the issuer's management (for corporate debt only); 11) the prospects for the issuer's industry, and multiples (of earnings and/or cash flows) being paid for similar businesses in that industry (for corporate debt only); and 12) other relevant factors. The Fund is subject to fair value accounting standards that define fair value, establish the framework for measuring fair value and provide a three-level hierarchy for fair valuation based upon the inputs to the valuation as of the measurement date. The three levels of the fair value hierarchy are as follows: o Level 1 - Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis. o Level 2 - Level 2 inputs are observable inputs, either directly or indirectly, and include the following: o Quoted prices for similar investments in active markets. o Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly. o Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). o Inputs that are derived principally from or corroborated by observable market data by correlation or other means. o Level 3 - Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the investment. The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A summary of the inputs used to value the Fund's investments as of October 31, 2020, is included with the Fund's Portfolio of Investments. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income is recorded daily on the accrual basis. Amortization of premiums and accretion of discounts are recorded using the effective interest method. In July 2017, the Financial Conduct Authority ("FCA") announced that it will no longer persuade or compel banks to submit rates for the calculations of the London Interbank Offered Rates ("LIBOR") after 2021. Further, the FCA has subsequently stated, as recently as March 2020, that the central assumption continues to be that firms should not rely on LIBOR being published after the end of 2021. In the United States, the Alternative Reference Rates Committee (the "ARRC"), a group of market participants convened by the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of New York in cooperation with other federal and state government agencies, has since 2014 undertaken efforts to identify U.S. dollar reference interest rates as alternatives to LIBOR and to facilitate the mitigation of LIBOR-related risks. In June 2017, the ARRC identified the Secured Overnight Financing Rate ("SOFR"), a broad measure of the cost of cash overnight borrowing collateralized by U.S. Treasury securities, as the preferred alternative for U.S. dollar LIBOR. The Federal Reserve Bank of New York began daily publishing of SOFR in April 2018. Page 52 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) OCTOBER 31, 2020 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 October 31, 2020, the Fund had no when-issued or delayed-delivery securities. At October 31, 2020, the Fund held $1,123,862,050 of forward purchase commitments. C. SHORT SALES Short sales are utilized to manage interest rate and spread risk, and are transactions in which securities or other instruments (such as options, forwards, futures or other derivative contracts) are sold that are not currently owned in the Fund's portfolio. When the Fund engages in a short sale, the Fund must borrow the security sold short and deliver the security to the counterparty. Short selling allows the Fund to profit from a decline in a market price to the extent such decline exceeds the transaction costs and the costs of borrowing the securities. The Fund is charged a fee or premium to borrow the securities sold short and is obligated to repay the lenders of the securities. Any dividends or interest that accrues on the securities during the period of the loan are due to the lenders. A gain, limited to the price at which the security was sold short, or a loss, unlimited in size, will be recognized upon the termination of the short sale; which is effected by the Fund purchasing the security sold short and delivering the security to the lender. Any such gain or loss may be offset, completely or in part, by the change in the value of the long portion of the Fund's portfolio. The Fund is subject to the risk it may be unable to reacquire a security to terminate a short position except at a price substantially in excess of the last quoted price. Also, there is the risk that the counterparty to a short sale may fail to honor its contractual terms, causing a loss to the Fund. D. FUTURES CONTRACTS The Fund may purchase or sell (i.e., is long or short) exchange-listed futures contracts to hedge against or gain exposure to changes in interest rates (interest rate risk). Futures contracts are agreements between the Fund and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the contract, futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date. Open futures contracts can also be closed out prior to settlement by entering into an offsetting transaction in a matching futures contract. If the Fund is not able to enter into an offsetting transaction, the Fund will continue to be required to maintain margin deposits on the futures contract. When the contract is closed or expires, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed or expired. This gain or loss is included in "Net realized gain (loss) on futures contracts" on the Statement of Operations. Upon entering into a futures contract, the Fund must deposit funds, called margin, with its custodian in the name of the clearing broker equal to a specified percentage of the current value of the contract. Open futures contracts are marked-to-market daily with the change in value recognized as a component of "Net change in unrealized appreciation (depreciation) on futures contracts" on the Statement of Operations. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are included in "Variation margin" receivable or payable on the Statement of Assets and Liabilities. If market conditions change unexpectedly, the Fund may not achieve the anticipated benefits of the futures contract and may realize a loss. The use of futures contracts involves the risk of imperfect correlation in movements in the price of the futures contracts, interest rates and the underlying instruments. E. OPTIONS CONTRACTS The Fund may invest in exchange-listed options on U.S. Treasury securities, exchange-listed options on U.S. Treasury futures contracts and exchange-listed U.S. Treasury futures contracts. The Fund may also invest up to 20% of its net assets in over-the-counter derivatives. The Fund uses derivative instruments primarily to hedge interest rate risk and actively manage interest rate exposure. The primary risk exposure is interest rate risk. Page 53 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) OCTOBER 31, 2020 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. 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. Page 54 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) OCTOBER 31, 2020 H. STRIPPED MORTGAGE-BACKED SECURITIES Stripped mortgage-backed securities are created by segregating the cash flows from underlying mortgage loans or mortgage securities to create two or more new securities, each with a specified percentage of the underlying security's principal or interest payments. Mortgage-backed securities may be partially stripped so that each investor class receives some interest and some principal. When securities are completely stripped, however, all of the interest is distributed to holders of one type of security known as an IO Security and all of the principal is distributed to holders of another type of security known as a PO Security. These securities, if any, are identified on the Portfolio of Investments. I. MORTGAGE DOLLAR ROLLS AND TBA TRANSACTIONS The Fund may invest, without limitation, in mortgage dollar rolls. The Fund intends to enter into mortgage dollar rolls only with high quality securities dealers and banks, as determined by the Fund's investment advisor. In a mortgage dollar roll, the Fund will sell (or buy) mortgage-backed securities for delivery on a specified date and simultaneously contract to repurchase (or sell) substantially similar (same type, coupon and maturity) securities on a future date. Mortgage dollar rolls are recorded as separate purchase and sales in the Fund. The Fund may also invest in TBA Transactions. A TBA Transaction is a method of trading mortgage-backed securities. TBA Transactions generally are conducted in accordance with widely-accepted guidelines which establish commonly observed terms and conditions for execution, settlement and delivery. In a TBA Transaction, the buyer and the seller agree on general trade parameters such as agency, settlement date, par amount and price. 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 October 31, 2020 and for the fiscal year then ended are as follows: <TABLE> <CAPTION> CHANGES IN UNREALIZED REALIZED SHARES AT VALUE AT APPRECIATION GAIN VALUE AT DIVIDEND SECURITY NAME 10/31/2020 10/31/2019 PURCHASES SALES (DEPRECIATION) (LOSS) 10/31/2020 INCOME --------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> <C> <C> First Trust Long Duration Opportunities ETF 11,750 $ 326,298 $ -- $ -- $ 16,626 $ -- $ 342,924 $ 13,246 ==================================================================================== </TABLE> K. DIVIDENDS AND DISTRIBUTION TO SHAREHOLDERS Dividends from net investment income, if any, are declared and paid monthly by the Fund, or as the Board of Trustees may determine from time to time. Distributions of net realized gains earned by the Fund, if any, are distributed at least annually. Distributions in cash may be reinvested automatically in additional whole shares only if the broker through whom the shares were purchased makes such option available. Such shares will generally be reinvested by the broker based upon the market price of those shares and investors may be subject to customary brokerage commissions charged by the broker. Distributions from net investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on portfolio securities held by the Fund and have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will reverse at some time in the future. Page 55 <PAGE> --------------------------------------------------------------------------------NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) OCTOBER 31, 2020 The tax character of distributions paid during the fiscal years ended October 31, 2020 and 2019 was as follows: Distributions paid from: 2020 2019 Ordinary income................................. $ 87,387,315 $ 69,256,766 Capital gains................................... -- 1,877,704 Return of capital............................... 19,702,687 4,340,158 As of October 31, 2020, the components of distributable earnings on a tax basis for the Fund were as follows:Undistributed ordinary income................... $ (10,921,500) Accumulated capital and other gain (loss)....... (108,942,487) Net unrealized appreciation (depreciation)...... 116,293,538 L. INCOME TAXES The Fund intends to continue to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, which includes distributing substantially all of its net investment income and net realized gains to shareholders. Accordingly, no provision has been made for federal and state income taxes. However, due to the timing and amount of distributions, the Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of the Fund's taxable income exceeds the distributions from such taxable income for the calendar year. The Fund is subject to accounting standards that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. The taxable years ended 2017, 2018, 2019, and 2020 remain open to federal and state audit. As of October 31, 2020, management has evaluated the application of these standards to the Fund and has determined that no provision for income tax is required in the Fund's financial statements for uncertain tax positions. The Fund intends to utilize provisions of the federal income tax laws, which allow it to carry a realized capital loss forward indefinitely following the year of the loss and offset such loss against any future realized capital gains. The Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. At October 31, 2020, the Fund had non-expiring capital loss carryforwards available for federal income tax purposes of $108,942,487. Certain losses realized during the current fiscal year may be deferred and treated as occurring on the first day of the following fiscal year for federal income tax purposes. For the fiscal year ended October 31, 2020, the Fund had no net late year ordinary or capital losses. In order to present paid-in capital and accumulated distributable earnings (loss) (which consists of accumulated net investment income (loss), accumulated net realized gain (loss) on investments and net unrealized appreciation (depreciation) on investments) on the Statement of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to paid-in capital, accumulated net investment income (loss) and accumulated net realized gain (loss) on investments. These adjustments are primarily due to the difference between book and tax treatments of income and gains on various investment securities held by the Fund. The results of operations and net assets were not affected by these adjustments. For the fiscal year ended October 31, 2020, the adjustments for the Fund were as follows:ACCUMULATED ACCUMULATED NET REALIZED NET INVESTMENT GAIN (LOSS) INCOME (LOSS) ON INVESTMENTS PAID-IN CAPITAL -------------- -------------- --------------- $ 3,910,958 $ (3,910,958) $ -- M. EXPENSES Expenses, other than the investment advisory fee and other excluded expenses, are paid by the Advisor (see Note 3). N. NEW ACCOUNTING PRONOUNCEMENT On March 30, 2017, the FASB issued Accounting Standards Update ("ASU") 2017-08 "Premium Amortization on Purchased Callable Debt Securities", which amends the amortization period for certain purchased callable debt securities held at a premium by shortening such period to the earliest call date. The new guidance requires an entity to amortize the premium on a callable debt security within its scope to the earliest call date, unless the guidance for considering estimated prepayments is applied. If the call option is not exercised at the earliest call date, the yield is reset to the effective yield using the payment Page 56 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) OCTOBER 31, 2020 terms of the security. If the security has more than one call date and the premium was amortized to a call price greater than the next call price, any excess of the amortized cost basis over the amount repayable at the next call date will be amortized to that date. If there are no other call dates, any excess of the amortized cost basis over the par amount will be amortized to maturity. Discounts on purchased callable debt securities will continue to be amortized to the security's maturity date. The ASU 2017-08 is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. ASU 2017-08 was adopted for these financial statements and did not have a material impact. 3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS First Trust, the investment advisor to the Fund, is a limited partnership with one limited partner, Grace Partners of DuPage L.P., and one general partner, The Charger Corporation. The Charger Corporation is an Illinois corporation controlled by James A. Bowen, Chief Executive Officer of First Trust. First Trust is responsible for the selection and ongoing monitoring of the securities in the Fund's portfolio, managing the Fund's business affairs and providing certain administrative services necessary for the management of the Fund. Pursuant to the Investment Management Agreement between the Trust and the Advisor, First Trust manages the investment of the Fund's assets and is responsible for the Fund's expenses, including the cost of transfer agency, custody, fund administration, legal, audit and other services, but excluding fee payments under the Investment Management Agreement, interest, taxes, pro rata share of fees and expenses attributable to investments in other investment companies ("acquired fund fees and expenses"), brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees payable pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses. The Fund has agreed to pay First Trust an annual unitary management fee equal to 0.65% of its average daily net assets. In addition, the Fund incurs acquired fund fees and expenses. The total of the unitary management fee and acquired fund fees and expenses represents the Fund's total annual operating expenses. The Trust has multiple service agreements with The Bank of New York Mellon ("BNYM"). Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services, and transfer agency services for the Fund. As custodian, BNYM is responsible for custody of the Fund's assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of the Fund's securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for the Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company. Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, a defined-outcome fund or is an index fund. Additionally, the Lead Independent Trustee and the Chairmen of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and Committee Chairmen will rotate every three years. The officers and "Interested" Trustee receive no compensation from the Trust for acting in such capacities. 4. PURCHASES AND SALES OF SECURITIES The cost of purchases of U.S. Government securities and non-U.S. Government securities, excluding investments sold short and short-term investments, for the fiscal year ended October 31, 2020, were $15,190,987,877 and $638,826,656, 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 fiscal year ended October 31, 2020, were $12,581,961,687 and $819,862,941, respectively. The cost of purchases to cover investments sold short and the proceeds of investments sold short were $10,195,353,198 and $10,421,697,846, respectively. For the fiscal year ended October 31, 2020, the Fund had no in-kind transactions. Page 57 <PAGE> --------------------------------------------------------------------------------NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) OCTOBER 31, 2020 5. DERIVATIVE TRANSACTIONS The following table presents the types of derivatives held by the Fund at October 31, 2020, the primary underlying risk exposure and the location of these instruments as presented on the Statement of Assets and Liabilities. <TABLE> <CAPTION> ASSET DERIVATIVES LIABILITY DERIVATIVES ---------------------------------------- -------------------------------------- DERIVATIVE RISK STATEMENT OF ASSETS AND STATEMENT OF ASSETS AND INSTRUMENTS EXPOSURE LIABILITIES LOCATION VALUE LIABILITIES LOCATION VALUE ----------- --------- ---------------------------- ---------- -------------------------- ---------- <S> <C> <C> <C> <C> <C> Futures Interest Unrealized appreciation on Unrealized depreciation on rate risk futures contracts* $9,570,780 futures contracts* $ 312,342 </TABLE> * Includes cumulative appreciation/depreciation on futures contracts as reported in the Portfolio of Investments. Only the current day's variation margin is reported within the Statement of Assets and Liabilities. The following table presents the amount of net realized gain (loss) and change in net unrealized appreciation (depreciation) recognized for the year ended October 31, 2020, on derivative instruments, as well as the primary underlying risk exposure associated with the instruments.<TABLE> <CAPTION> STATEMENT OF OPERATIONS LOCATION INTEREST RATE RISK ---------------------------------------------------------------------------------- <S> <C> Net realized gain (loss) on: Futures contracts $ (68,365,332) Purchased options contracts (350,534) Written options contracts 1,862,427 Net change in unrealized appreciation (depreciation) on: Futures contracts 6,755,997 Purchased options contracts (29,558) Written options contracts -- </TABLE> For the fiscal year ended October 31, 2020, the notional value of futures contracts opened and closed were $7,040,138,863 and $6,212,222,254, respectively. During the fiscal year ended October 31, 2020, the premiums for purchased options contracts opened were $441,961 and the premiums for purchased options contracts closed, exercised and expired were $480,840. During the fiscal year ended October 31, 2020, the premiums for written options contracts opened were $3,628,674 and the premiums for written options contracts closed, exercised and expired were $3,628,674. The Fund does not have the right to offset financial assets and financial liabilities related to futures and options contracts on the Statement of Assets and Liabilities. 6. CREATIONS, REDEMPTIONS AND TRANSACTION FEES Shares are created and redeemed by the Fund only in Creation Unit size aggregations of 50,000 shares in transactions with broker dealers or large institutional investors that have entered into a participation agreement (an "Authorized Participant"). Due to the nature of the Fund's investments, the Fund's Creation Units are generally issued and redeemed for cash, although Creation Units may be issued in-kind for securities in which the Fund invests in limited circumstances. Authorized Participants purchasing Creation Units must pay to BNYM, as transfer agent, a creation transaction fee (the "Creation Transaction Fee") regardless of the number of Creation Units purchased in the transaction. The Creation Transaction Fee may increase or decrease with changes in the Fund's portfolio. The price for each Creation Unit will equal the daily NAV per share times the number of shares in a Creation Unit plus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees or stamp taxes. When Creation Units are issued for cash, the Authorized Participant may also be assessed an amount to cover the cost of purchasing portfolio securities, including operational processing and brokerage costs, transfer fees, stamp taxes, and part or all of the spread between the expected bid and offer side of the market related to such securities. Authorized Participants redeeming Creation Units must pay to BNYM, as transfer agent, a standard redemption transaction fee (the "Redemption Transaction Fee"), regardless of the number of Creation Units redeemed in the transaction. The Redemption Transaction Fee may increase or decrease with changes in the Fund's Page 58 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) OCTOBER 31, 2020 portfolio. When shares are redeemed for cash, the Authorized Participant may also be assessed an amount to cover other costs, including operational processing and brokerage costs, transfer fees, stamp taxes and part or all of the spread between the expected bid and offer side of the market related to portfolio securities sold in connection with the redemption. 7. DISTRIBUTION PLAN The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Fund is authorized to pay an amount up to 0.25% of its average daily net assets each year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the Fund, for amounts expended to finance activities primarily intended to result in the sale of Creation Units or the provision of investor services. FTP may also use this amount to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and educational and promotional services. No 12b-1 fees are currently paid by the Fund, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before March 31, 2022. 8. INDEMNIFICATION The Trust, on behalf of the Fund, has a variety of indemnification obligations under contracts with its service providers. The Trust's maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 9. OTHER MATTERS By operation of law, LMBS now operates as a diversified open-end management investment company as defined in Section 5(b) of the 1940 Act. 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 no subsequent events, requiring recognition or disclosure in the financial statements that have not already been disclosed. Page 59 <PAGE> --------------------------------------------------------------------------------REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED FUND IV: OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS We have audited the accompanying statement of assets and liabilities of First Trust Low Duration Opportunities ETF (the "Fund"), a series of the First Trust Exchange-Traded Fund IV, including the portfolio of investments, as of October 31, 2020, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2020, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended in conformity with accounting principles generally accepted in the United States of America. BASIS FOR OPINION These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund's financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2020, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP Chicago, Illinois December 23, 2020 We have served as the auditor of one or more First Trust investment companies since 2001. Page 60 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) OCTOBER 31, 2020 (UNAUDITED) PROXY VOTING POLICIES AND PROCEDURES A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how the Fund voted proxies relating to its portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on the Fund's website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov. PORTFOLIO HOLDINGS The Fund files portfolio holdings information for each month in a fiscal quarter within 60 days after the end of the relevant fiscal quarter on Form N-PORT. Portfolio holdings information for the third month of each fiscal quarter will be publicly available on the SEC's website at www.sec.gov. The Fund's complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year is included in the semi-annual and annual reports to shareholders, respectively, and is filed with the SEC on Form N-CSR. The semi-annual and annual report for the Fund is available to investors within 60 days after the period to which it relates. The Fund's Forms N-PORT and Forms N-CSR are available on the SEC's website listed above. FEDERAL TAX INFORMATION Distributions paid to foreign shareholders during the Fund's fiscal year ended October 31, 2020 that were properly designated by the Fund as "interest-related dividends" or "short-term capital gain dividends," may not be subject to federal income tax provided that the income was earned directly by such foreign shareholders. Of the ordinary income (including short-term capital gain) distributions made by the Fund during the fiscal year ended October 31, 2020, none qualify for the corporate dividends received deduction available to corporate shareholders or as qualified dividend income. RISK CONSIDERATIONS RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE, RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND. CONCENTRATION RISK. To the extent that a fund is able to invest a large percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund's investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund's corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is not concentrated. CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer's ability to make such payments. CYBER SECURITY RISK. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. In addition, cyber security breaches of a fund's third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or issuers in which the fund invests, can also subject a fund to many of the same risks associated with direct cyber security breaches. DERIVATIVES RISK. To the extent a fund uses derivative instruments such as futures contracts, options contracts and swaps, the fund may experience losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivative. These risks are heightened when a fund's portfolio managers use derivatives to enhance the fund's return or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the fund. Page 61 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) OCTOBER 31, 2020 (UNAUDITED) 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 CONSTITUENT RISK. Certain funds may be a constituent of one or more indices. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could significantly increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, a fund's net asset value could be negatively impacted and the fund's market price may be significantly below its net asset value during certain periods. INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject to Index Provider Risk. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, maintained, constructed, reconstituted, rebalanced, composed, calculated or disseminated accurately. To correct any such error, the Index Provider may carry out an unscheduled rebalance or other modification of the Index constituents or weightings, which may increase the fund's costs. The Index Provider does not provide any representation or warranty in relation to the quality, accuracy or completeness of data in the Index, and it does not guarantee that the Index will be calculated in accordance with its stated methodology. Losses or costs associated with any Index Provider errors generally will be borne by the fund and its shareholders. INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of other investment vehicles, the fund will incur additional fees and expenses that would not be present in a direct investment in those investment vehicles. Furthermore, the fund's investment performance and risks are directly related to the investment performance and risks of the investment vehicles in which the fund invests. LIBOR RISK. To the extent a fund invests in floating or variable rate obligations that use the London Interbank Offered Rate ("LIBOR") as a reference interest rate, it is subject to LIBOR Risk. In 2017, the United Kingdom's Financial Conduct Authority announced that LIBOR will cease to be available for use after 2021. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition away from LIBOR on the fund or on certain instruments in which the fund invests can be difficult to ascertain, and they may vary depending on a variety of factors. Any such effects of the transition away from LIBOR, as well as other unforeseen effects, could result in losses to the fund. MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund's investment portfolio, the fund's portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective. Page 62 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) OCTOBER 31, 2020 (UNAUDITED) MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than others. The outbreak of the respiratory disease designated as COVID-19 in December 2019 has caused significant volatility and declines in global financial markets, which have caused losses for investors. The COVID-19 pandemic may last for an extended period of time and will continue to impact the economy for the foreseeable future. NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic issuers. Non-U.S. securities are subject to higher volatility than securities of domestic issuers due to: possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries. PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets. NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE ADVISORY AGREEMENT BOARD CONSIDERATIONS REGARDING APPROVAL OF CONTINUATION OF INVESTMENT MANAGEMENT AGREEMENT The Board of Trustees of First Trust Exchange-Traded Fund IV (the "Trust"), including the Independent Trustees, unanimously approved the continuation of the Investment Management Agreement (the "Agreement") with First Trust Advisors L.P. (the "Advisor") on behalf of the First Trust Low Duration Opportunities ETF (the "Fund"). The Board approved the continuation of the Agreement for a one-year period ending June 30, 2021 at a meeting held on June 8, 2020. The Board determined that the continuation of the Agreement is in the best interests of the Fund in light of the nature, extent and quality of the services provided and such other matters as the Board considered to be relevant in the exercise of its reasonable business judgment. To reach this determination, the Board considered its duties under the Investment Company Act of 1940, as amended (the "1940 Act"), as well as under the general principles of state law, in reviewing and approving advisory contracts; the requirements of the 1940 Act in such matters; the fiduciary duty of investment advisors with respect to advisory agreements and compensation; the standards used by courts in determining whether investment company boards have fulfilled their duties; and the factors to be considered by the Board in voting on such agreements. At meetings held on May 11, 2020 and June 8, 2020, the Board, including the Independent Trustees, reviewed materials provided by the Advisor 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 provided by the Advisor to the Fund (including the relevant personnel responsible for these services and their experience); the unitary fee rate payable by the Fund as compared to fees charged to a peer group of funds (the "Expense Group") and a broad peer universe of funds (the "Expense Universe"), each assembled by Broadridge Financial Solutions, Inc. ("Broadridge"), an independent source, and as compared to fees charged to other clients of the Advisor, including other exchange-traded funds ("ETFs") managed by the Advisor; the expense ratio of the Fund as compared to expense ratios of the funds in the Fund's Expense Group and Expense Universe; performance information for the Fund, including comparisons of the Fund's performance to that of one or more relevant benchmark indexes and to that of a performance group of funds and a broad performance universe of funds (the "Performance Universe"), each assembled by Broadridge; the nature of expenses incurred in providing services to the Fund and the potential for the Advisor to realize economies of scale, if any; profitability and other financial data for the Advisor; any fall-out benefits to the Advisor and its affiliate, First Trust Portfolios L.P. ("FTP"); and information on the Advisor's compliance program. The Board reviewed initial materials with the Advisor at the meeting held on May 11, 2020, prior to which the Independent Trustees and their counsel met separately to discuss the information provided by the Advisor. Following the May meeting, counsel to the Independent Trustees, on behalf of the Independent Trustees, requested certain clarifications and supplements to the materials provided, and the information provided in response to those requests was considered at an executive session of the Independent Trustees and their counsel Page 63 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) OCTOBER 31, 2020 (UNAUDITED) held prior to the June 8, 2020 meeting, as well as at the meeting held that day. The Board considered supplemental information provided by the Advisor on the operations of the Advisor and the performance of the Fund since the onset of the COVID-19 pandemic. The Board applied its business judgment to determine whether the arrangement between the Trust and the Advisor continues to be a reasonable business arrangement from the Fund's perspective. The Board determined that, given the totality of the information provided with respect to the Agreement, the Board had received sufficient information to renew the Agreement. The Board considered that shareholders chose to invest or remain invested in the Fund knowing that the Advisor manages the Fund and knowing the Fund's unitary fee. In reviewing the Agreement, the Board considered the nature, extent and quality of the services provided by the Advisor under the Agreement. The Board considered that the Advisor is responsible for the overall management and administration of the Trust and the Fund and reviewed all of the services provided by the Advisor to the Fund, as well as the background and experience of the persons responsible for such services. The Board noted that the Fund is an actively-managed ETF and noted that the Advisor's Mortgage Securities Team is responsible for the day-to-day management of the Fund's investments. The Board considered the background and experience of the members of the Mortgage Securities Team and noted the Board's prior meetings with members of the Team. The Board considered the Advisor's statement that it applies the same oversight model internally with its Mortgage Securities Team as it uses for overseeing external sub-advisors, including portfolio risk monitoring and performance review. In reviewing the services provided, the Board noted the compliance program that had been developed by the Advisor and considered that it includes a robust program for monitoring the Advisor's and the Fund's compliance with the 1940 Act, as well as the Fund's compliance with its investment objectives, policies and restrictions. The Board also considered a report from the Advisor with respect to its risk management functions related to the operation of the Fund. Finally, as part of the Board's consideration of the Advisor's services, the Advisor, in its written materials and at the May 11, 2020 meeting, described to the Board the scope of its ongoing investment in additional infrastructure and personnel to maintain and improve the quality of services provided to the Fund and the other funds in the First Trust Fund Complex. In light of the information presented and the considerations made, the Board concluded that the nature, extent and quality of the services provided to the Trust and the Fund by the Advisor under the Agreement have been and are expected to remain satisfactory and that the Advisor has managed the Fund consistent with its investment objectives, policies and restrictions. The Board considered the unitary fee rate payable by the Fund under the Agreement for the services provided. The Board considered that as part of the unitary fee the Advisor is responsible for the Fund's expenses, including the cost of transfer agency, custody, fund administration, legal, audit and other services and license fees, if any, but excluding the fee payment under the Agreement and interest, taxes, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses, if any. The Board received and reviewed information showing the advisory 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 to other fund (including ETFs) and non-fund clients, as applicable. Because the Fund pays a unitary fee, the Board determined that expense ratios were the most relevant comparative data point. Based on the information provided, the Board noted that the unitary fee rate for the Fund was above the median total (net) expense ratio of the peer funds in the Expense Group. With respect to the Expense Group, the Board, at the May 11, 2020 meeting, discussed with Broadridge its methodology for assembling peer groups and discussed with the Advisor limitations in creating peer groups for actively-managed ETFs, including that there were no other actively-managed ETFs in the Expense Group, and different business models that may affect the pricing of services among ETF sponsors. The Board took these limitations and differences into account in considering the peer data. With respect to fees charged to other non-ETF clients, the Board considered differences between the Fund and other non-ETF clients that limited their comparability. In considering the unitary fee rate overall, the Board also considered the Advisor's statement that it seeks to meet investor needs through innovative and value-added investment solutions and the Advisor's demonstrated long-term commitment to the Fund and the other funds in the First Trust Fund Complex. The Board considered performance information for the Fund. The Board noted the process it has established for monitoring the Fund's performance and portfolio risk on an ongoing basis, which includes quarterly performance reporting from the Advisor for the Fund. The Board determined that this process continues to be effective for reviewing the Fund's performance. The Board received and reviewed information comparing the Fund's performance for periods ended December 31, 2019 to the performance of the funds in the Performance Universe and to that of a benchmark index. Based on the information provided, the Board noted that the Fund underperformed the Performance Universe median for the one- and three-year periods ended December 31, 2019 but outperformed the Performance Universe median for the five-year period ended December 31, 2019. The Board also noted that the Fund underperformed the benchmark index for the one-year period ended December 31, 2019 but outperformed the benchmark index for the three- and five-year periods ended December 31, 2019. The Board noted the Advisor's discussion of the Fund's performance at the May 11, 2020 meeting. Page 64 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) OCTOBER 31, 2020 (UNAUDITED) On the basis of all the information provided on the unitary fee and performance of the Fund and the ongoing oversight by the Board, the Board concluded that the unitary fee for the Fund continues to be reasonable and appropriate in light of the nature, extent and quality of the services provided by the Advisor to the Fund under the Agreement. The Board considered information and discussed with the Advisor whether there were any economies of scale in connection with providing advisory services to the Fund and noted the Advisor's statement that it believes its expenses will likely increase over the next twelve months as the Advisor continues to hire personnel and build infrastructure, including technology, to improve the services to the Fund. The Board noted that any reduction in fixed costs associated with the management of the Fund would benefit the Advisor, but that the unitary fee structure provides a level of certainty in expenses for the Fund. The Board considered the revenues and allocated costs (including the allocation methodology) of the Advisor in serving as investment advisor to the Fund for the twelve months ended December 31, 2019 and the estimated profitability level for the Fund calculated by the Advisor based on such data, as well as complex-wide and product-line profitability data, for the same period. The Board noted the inherent limitations in the profitability analysis and concluded that, based on the information provided, the Advisor's profitability level for the Fund was not unreasonable. In addition, the Board considered fall-out benefits described by the Advisor that may be realized from its relationship with the Fund. The Board considered that the Advisor had identified as a fall-out benefit to the Advisor and FTP their exposure to investors and brokers who, absent their exposure to the Fund, may have had no dealings with the Advisor or FTP, and noted that the Advisor does not utilize soft dollars in connection with the Fund. The Board concluded that the character and amount of potential fall-out benefits to the Advisor were not unreasonable. Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, unanimously determined that the terms of the Agreement continue to be fair and reasonable and that the continuation of the Agreement is in the best interests of the Fund. No single factor was determinative in the Board's analysis. LIQUIDITY RISK MANAGEMENT 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 May 11, 2020 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 June 1, 2019 (the initial compliance date for certain requirements of Rule 22e-4) through the Liquidity Committee's annual meeting held on March 20, 2020 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 a highly liquid investment minimum. As stated in the written report, during the review period, no fund breached the 15% limitation on illiquid investments, no fund with a highly liquid investment minimum breached that minimum and no fund filed a Form N-LIQUID. The Advisor concluded that each fund's investment strategy is appropriate for an open-end fund; that the Program operated effectively in all material respects during the review period; and that the Program is reasonably designed to assess and manage the liquidity risk of each fund and to maintain compliance with Rule 22e-4. REMUNERATION First Trust Advisors L.P. ("First Trust") is authorised and regulated by the U.S. Securities and Exchange Commission and is entitled to market shares of certain funds it manages, including First Trust Low Duration Opportunities ETF (the "Fund"), in certain member states in the European Economic Area in accordance with the cooperation arrangements in Article 42 of the Alternative Page 65 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) OCTOBER 31, 2020 (UNAUDITED) Investment Fund Managers Directive (the "Directive"). First Trust is required under the Directive to make disclosures in respect of remuneration. The following disclosures are made in line with First Trust's interpretation of currently available regulatory guidance on remuneration disclosures. During the year ended December 31, 2019, the amount of remuneration paid (or to be paid) by First Trust in respect of the Fund is $3,453,778. This figure is comprised of $580,971 paid (or to be paid) in fixed compensation and $2,872,807 paid (or to be paid) in variable compensation. There were a total of 15 beneficiaries of the remuneration described above. Those amounts include $687,434 paid (or to be paid) to senior management of First Trust and $2,766,344 paid (or to be paid) to other employees whose professional activities have a material impact on the risk profiles of First Trust or the Fund (collectively, "Code Staff"). Code Staff included in the aggregated figures disclosed above are rewarded in line with First Trust's remuneration policy (the "Remuneration Policy") which is determined and implemented by First Trust's senior management. The Remuneration Policy reflects First Trust's ethos of good governance and encapsulates the following principal objectives: i. to provide a clear link between remuneration and performance of First Trust and to avoid rewarding for failure; ii. to promote sound and effective risk management consistent with the risk profiles of the funds managed by First Trust; and iii. to remunerate staff in line with the business strategy, objectives, values and interests of First Trust and the funds managed by First Trust in a manner that avoids conflicts of interest. First Trust assesses various risk factors which it is exposed to when considering and implementing remuneration for Code Staff and considers whether any potential award to such person(s) would give rise to a conflict of interest. First Trust does not reward failure, or consider the taking of risk or failure to take risk in its remuneration of Code Staff. First Trust assesses performance for the purposes of determining payments in respect of performance-related remuneration of Code Staff by reference to a broad range of measures including (i) individual performance (using financial and non-financial criteria), and (ii) the overall performance of First Trust. Remuneration is not based upon the performance of the Fund. The elements of remuneration are balanced between fixed and variable and the senior management sets fixed salaries at a level sufficient to ensure that variable remuneration incentivises and rewards strong individual performance but does not encourage excessive risk taking. No individual is involved in setting his or her own remuneration. Page 66 <PAGE> -------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) OCTOBER 31, 2020 (UNAUDITED) The following tables identify the Trustees and Officers of the Trust. Unless otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite 400, Wheaton, IL 60187. The Trust's statement of additional information includes additional information about the Trustees and is available, without charge, upon request, by calling (800) 988-5891. <TABLE> <CAPTION> NUMBER OF OTHER PORTFOLIOS IN TRUSTEESHIPS OR THE FIRST TRUST DIRECTORSHIPS NAME, TERM OF OFFICE AND FUND COMPLEX HELD BY TRUSTEE YEAR OF BIRTH AND YEAR FIRST ELECTED PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST POSITION WITH THE TRUST OR APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ INDEPENDENT TRUSTEES ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 189 None (1951) Limited Partner, Gundersen Real Estate o Since Inception Limited Partnership (June 1992 to December 2016); Member, Sportsmed LLC (April 2007 to November 2015) Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 189 Director of ADM (1957) (Futures Commission Merchant) Investor Services, o Since Inception Inc., ADM Investor Services International, Futures Industry Association, and National Futures Association Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 189 Director of Trust (1956) and Management Consulting) Company of o Since Inception Illinois Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 189 None (1954) Managing Director and Chief Operating o Since Inception Officer (January 2015 to August 2018), Pelita Harapan Educational Foundation (Educational Product and Services) ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED TRUSTEE ------------------------------------------------------------------------------------------------------------------------------------ James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 189 None Chairman of the Board Advisors L.P. and First Trust Portfolios (1955) o Since Inception L.P., Chairman of the Board of Directors, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) </TABLE> ----------------------------- (1) Mr. Bowen is deemed an "interested person" of the Trust due to his position as Chief Executive Officer of First Trust Advisors L.P., investment advisor of the Trust. Page 67 <PAGE> --------------------------------------------------------------------------------BOARD OF TRUSTEES AND OFFICERS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) OCTOBER 31, 2020 (UNAUDITED) <TABLE> <CAPTION> NAME AND POSITION AND OFFICES TERM OF OFFICE AND PRINCIPAL OCCUPATIONS YEAR OF BIRTH WITH TRUST LENGTH OF SERVICE DURING PAST 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS(2) ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> James M. Dykas President and Chief Executive o Indefinite Term Managing Director and Chief Financial Officer (1966) Officer (January 2016 to Present), Controller (January 2011 o Since January 2016 to January 2016), Senior Vice President (April 2007 to January 2016), First Trust Advisors L.P. and First Trust Portfolios L.P.; Chief Financial Officer (January 2016 to Present), BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President (July 2016 to Present), Vice (1972) Officer and Chief President (April 2012 to July 2016), First Trust Accounting Officer o Since January 2016 Advisors L.P. and First Trust Portfolios L.P. W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and First (1960) Legal Officer Trust Portfolios L.P.; Secretary and General o Since Inception Counsel, BondWave LLC; Secretary, Stonebridge Advisors LLC Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and (1970) First Trust Portfolios L.P. o Since Inception Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P. (1966) and Assistant Secretary and First Trust Portfolios L.P. o Since Inception Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. (1966) and First Trust Portfolios L.P. o Since Inception Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. (1970) and First Trust Portfolios L.P. o Since Inception </TABLE> ----------------------------- (2) The term "officer" means the president, vice president, secretary, treasurer, controller or any other officer who performs a policy making function. Page 68 <PAGE> -------------------------------------------------------------------------------- PRIVACY POLICY -------------------------------------------------------------------------------- FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS) OCTOBER 31, 2020 (UNAUDITED) PRIVACY POLICY First Trust values our relationship with you and considers your privacy an important priority in maintaining that relationship. We are committed to protecting the security and confidentiality of your personal information. SOURCES OF INFORMATION We collect nonpublic personal information about you from the following sources: o Information we receive from you and your broker-dealer, investment advisor or financial representative through interviews, applications, agreements or other forms; o Information about your transactions with us, our affiliates or others; o Information we receive from your inquiries by mail, e-mail or telephone; and o Information we collect on our website through the use of "cookies". For example, we may identify the pages on our website that your browser requests or visits. INFORMATION COLLECTED The type of data we collect may include your name, address, social security number, age, financial status, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, investment objectives, marital status, family relationships and other personal information. DISCLOSURE OF INFORMATION We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. In addition to using this information to verify your identity (as required under law), the permitted uses may also include the disclosure of such information to unaffiliated companies for the following reasons: o In order to provide you with products and services and to effect transactions that you request or authorize, we may disclose your personal information as described above to unaffiliated financial service providers and other companies that perform administrative or other services on our behalf, such as transfer agents, custodians and trustees, or that assist us in the distribution of investor materials such as trustees, banks, financial representatives, proxy services, solicitors and printers. o We may release information we have about you if you direct us to do so, if we are compelled by law to do so, or in other legally limited circumstances (for example to protect your account from fraud). In addition, in order to alert you to our other financial products and services, we may share your personal information within First Trust. USE OF WEBSITE ANALYTICS We currently use third party analytics tools, Google Analytics and AddThis, to gather information for purposes of improving First Trust's website and marketing our products and services to you. These tools employ cookies, which are small pieces of text stored in a file by your web browser and sent to websites that you visit, to collect information, track website usage and viewing trends such as the number of hits, pages visited, videos and PDFs viewed and the length of user sessions in order to evaluate website performance and enhance navigation of the website. We may also collect other anonymous information, which is generally limited to technical and web navigation information such as the IP address of your device, internet browser type and operating system for purposes of analyzing the data to make First Trust's website better and more useful to our users. The information collected does not include any personal identifiable information such as your name, address, phone number or email address unless you provide that information through the website for us to contact you in order to answer your questions or respond to your requests. To find out how to opt-out of these services click on: Google Analytics and AddThis. CONFIDENTIALITY AND SECURITY With regard to our internal security procedures, First Trust restricts access to your nonpublic personal information to those First Trust employees who need to know that information to provide products or services to you. We maintain physical, electronic and procedural safeguards to protect your nonpublic personal information. POLICY UPDATES AND INQUIRIES As required by federal law, we will notify you of our privacy policy annually. We reserve the right to modify this policy at any time, however, if we do change it, we will tell you promptly. For questions about our policy, or for additional copies of this notice, please go to www.ftportfolios.com, or contact us at 1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust Advisors). March 2019 Page 69 <PAGE> This page intentionally left blank. <PAGE> This page intentionally left blank. <PAGE> This page intentionally left blank. <PAGE> FIRST TRUST First Trust Exchange-Traded Fund IV INVESTMENT ADVISOR First Trust Advisors L.P. 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 ADMINISTRATOR, CUSTODIAN, FUND ACCOUNTANT & TRANSFER AGENT The Bank of New York Mellon 240 Greenwich Street New York, NY 10286 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deloitte & Touche LLP 111 S. Wacker Drive Chicago, IL 60606 LEGAL COUNSEL Chapman and Cutler LLP 111 W. Monroe Street Chicago, IL 60603 <PAGE> [BLANK BACK COVER] <PAGE>
First Trust Exchange-Traded Fund IV
First
Trust SSI Strategic Convertible Securities ETF (FCVT)
Annual Report
For the Year Ended
October 31, 2020
For the Year Ended
October 31, 2020
Table of Contents
First Trust SSI Strategic
Convertible Securities ETF (FCVT)
Annual Report
October 31, 2020
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Caution Regarding
Forward-Looking Statements
This report contains
certain forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. (“First Trust” or the “Advisor”) and/or SSI Investment Management LLC (“SSI” or the “Sub-Advisor”)
and their respective representatives, taking into account the information currently available to them. Forward-looking statements include all statements that do not relate solely to current or historical fact. For
example, forward-looking statements include the use of words such as “anticipate,” “estimate,” “intend,” “expect,” “believe,” “plan,”
“may,” “should,” “would” or other words that convey uncertainty of future events or outcomes.
Forward-looking
statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the series of First Trust Exchange-Traded Fund IV (the “Trust”)
described in this report (First Trust SSI Strategic Convertible Securities ETF; hereinafter referred to as the “Fund”) to be materially different from any future results, performance or achievements
expressed or implied by the forward-looking statements. When evaluating the information included in this report, you are cautioned not to place undue reliance on these forward-looking statements, which reflect the
judgment of the Advisor and/or Sub-Advisor and their respective representatives only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events
and circumstances that arise after the date hereof.
Performance and Risk
Disclosure
There is no assurance
that the Fund will achieve its investment objective. The Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the
Fund’s shares may therefore be less than what you paid for them. Accordingly, you can lose money by investing in the Fund. See “Risk Considerations” in the Additional Information section of this
report for a discussion of certain other risks of investing in the Fund.
Performance data quoted
represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. For the most recent month-end performance figures, please visit www.ftportfolios.com or speak with your financial advisor. Investment returns, net asset value and share price will fluctuate and Fund shares, when sold, may be
worth more or less than their original cost.
The Advisor may also
periodically provide additional information on Fund performance on the Fund’s web page at www.ftportfolios.com.
How to Read This
Report
This report contains
information that may help you evaluate your investment in the Fund. It includes details about the Fund and presents data and analysis that provide insight into the Fund’s performance and investment approach.
By reading the portfolio
commentary by the portfolio management team of the Fund, you may obtain an understanding of how the market environment affected the Fund’s performance. 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
First Trust SSI Strategic
Convertible Securities ETF (FCVT)
Annual Letter from the Chairman and
CEO
October 31, 2020
Dear Shareholders,
First Trust is pleased
to provide you with the annual report for the First Trust SSI Strategic Convertible Securities ETF (the “Fund”), which contains detailed information about the Fund for the twelve months ended October 31,
2020.
As I was collecting my
thoughts for this annual roundup it occurred to me that my message this year should touch on the tone of the markets and the investing climate rather than belabor all the news and events that brought us to this
juncture. We all know how tumultuous our lives have become over the past eight or so months. The phrase “shelter-at-home” says it all. I would rather talk about why I believe investors should be optimistic
about where we could be headed.
Having said that, allow
me to at least acknowledge the two elephants in the room: the coronavirus (“COVID-19”) and the election. In the first 12 days of November, we learned the following: that we likely have a new
president-elect (Joe Biden), though it may not be official for some time because it is being contested by President Donald Trump and some of his loyal backers in the Republican Party citing voter fraud in certain
states; that we still do not know which political party will have control of the Senate due to a couple of run-offs in Georgia to be held on January 5, 2021; and, that it looks as though we may be fortunate enough to
have an FDA-approved COVID-19 vaccine by either the end of 2020 or the start of 2021, though that too is not yet official. It could be a game-changer in the COVID-19 battle. And, we may gain access to additional
vaccines as well. The key to getting the economy back to running on all cylinders is to fully reopen, and a vaccine is “what the doctor ordered.”
With respect to the tone
of the markets and investment climate, to say that I am encouraged about what has transpired in 2020 would be an understatement. Despite the extraordinary challenges so far this year, the S&P 500® Index posted a total return of 2.77% over the first 10 months of 2020, this despite plunging 33.8% into bear market
territory from February 19, 2020 through March 23, 2020, according to Bloomberg. As impressive as that feat is, the future looks even brighter. While Bloomberg’s consensus earnings growth rate estimate for the
S&P 500® Index for 2020 was -16.51%, as of November 13, 2020, its 2021 and 2022 estimates were 21.74% and 16.95%, respectively.
That is a strong take on the prospects for a rebound in Corporate America over the next 24 months. One of the tailwinds that is providing a good deal of support to the economy and markets is the decision by the
Federal Reserve (the “Fed”) to keep interest rates artificially low for as long as need be to meet both its employment and inflation targets. By keeping rates lower for longer, the Fed is essentially
inviting investors to assume more risk to generate higher returns. Brian Wesbury, Chief Economist at First Trust, believes that the Fed could need until 2024 to accomplish its goals. That is a lot of runway for
investors to reposition their portfolios, if needed, and a very generous, and perhaps unprecedented, amount of guidance from the Fed, in our opinion. Those investors with cash on the sidelines earning next to nothing
have options if they choose to act.
We are encouraged about
the prospects for the economy and the markets, but investors should be prepared to weather some volatility until the COVID-19 pandemic is better contained. As always, we encourage investors to stay the course!
Thank you for giving
First Trust the opportunity to play a role in your financial future. We value our relationship with you and will report on the Fund again in six months.
Sincerely,
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust
Advisors L.P.
Page 1
Fund Performance
Overview (Unaudited)
First Trust SSI Strategic Convertible
Securities ETF (FCVT)
The First Trust SSI
Strategic Convertible Securities ETF (the “Fund”) is an actively managed exchange-traded fund that seeks total return by investing, under normal market conditions, at least 80% of its net assets (including
investment borrowings) in a portfolio of U.S. and non-U.S. convertible securities. The shares of the Fund are listed and traded on The Nasdaq Stock Market LLC under the ticker symbol “FCVT.”
| Performance | |||
|
Average Annual
Total Returns |
Cumulative
Total Returns |
||
|
1 Year Ended
10/31/20 |
Inception (11/3/15)
to 10/31/20 |
Inception (11/3/15)
to 10/31/20 |
|
| Fund Performance | |||
| NAV | 29.10% | 12.02% | 76.23% |
| Market Price | 30.51% | 12.19% | 77.57% |
| Index Performance | |||
| ICE BofA All US Convertible Index | 28.10% | 12.57% | 80.61% |
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 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 SSI Strategic Convertible
Securities ETF (FCVT) (Continued)
| Sector Allocation |
% of Total
Investments |
| Information Technology | 35.6% |
| Consumer Discretionary | 23.8 |
| Health Care | 17.9 |
| Communication Services | 11.9 |
| Industrials | 7.1 |
| Financials | 1.5 |
| Materials | 1.3 |
| Energy | 0.5 |
| Real Estate | 0.4 |
| Total | 100.0% |
| Top Ten Holdings |
% of Total
Investments |
| Tesla, Inc., 5/15/24 | 4.2% |
| Broadcom, Inc., Series A, 9/30/22 | 2.3 |
| Tesla, Inc., 3/15/22 | 1.9 |
| Square, Inc., 5/15/23 | 1.9 |
| Sea Ltd., 12/1/25 | 1.7 |
| Teladoc Health, Inc., 6/1/27 | 1.6 |
| Inphi Corp., 4/15/25 | 1.4 |
| Workday, Inc., 10/1/22 | 1.3 |
| Microchip Technology, Inc., 2/15/27 | 1.3 |
| Danaher Corp., Series A, 4/15/22 | 1.3 |
| Total | 18.9% |
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund’s past performance does not predict future performance.
Frequency
Distribution of Discounts and Premiums
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 a Fund, if shorter), is available at https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 3
Portfolio Commentary
First Trust SSI
Strategic Convertible Securities ETF (FCVT)
Annual Report
October 31, 2020
(Unaudited)
Advisor
First Trust Advisors L.P.
(“First Trust” or the “Advisor”) serves as the investment advisor to the First Trust SSI Strategic Convertible Securities ETF (the “Fund”). First Trust is responsible for the
ongoing monitoring of the Fund’s investment portfolio, managing the Fund’s business affairs and providing certain administrative services necessary for the management of the Fund.
Sub-Advisor
SSI Investment Management
LLC
SSI Investment Management
LLC (“SSI” or the “Sub-Advisor”) is the sub-advisor to the Fund and is a registered investment advisor based in Los Angeles, California. SSI is an innovative investment management firm
specializing in alternative investment solutions utilizing convertible assets, equity securities and hedging strategies.
Portfolio Management
Team
George M. Douglas –
CFA, Chief Investment Officer, Principal of SSI
Ravi Malik – CFA,
Portfolio Manager, Principal of SSI
Michael J. Opre –
CFA, Portfolio Manager of SSI
Florian Eitner – CFA,
Portfolio Manager of SSI
Stephen R. Wachtel –
Portfolio Manager of SSI
Commentary
Market Recap – For
the 12-month period ended October 31, 2020:
| • | Prior to the emergence of the coronavirus (“COVID-19”), U.S. gross domestic product was positive, the unemployment rate stood at multi-year lows, the S&P 500® Index was near its 52-week high and credit spreads were near 52-week lows, according to Bloomberg. |
| • | The COVID-19 pandemic exacted a terrible human toll and led to extreme challenges in all areas of society. Preventative measures led to a dramatic contraction in economic activity, but fiscal and monetary stimulus coupled with improved medical treatments and vaccine progress spurred recovery in the economy and capital markets. |
| • | As U.S. election politics took center stage, the markets grappled with bouts of additional volatility. |
| • | U.S. economic activity, which experienced an unprecedented drop and rebound, is expected to grow at 3.8% in 2021, according to Bloomberg. |
| • | Corporate earnings growth is expected to decline 18% in 2020 before rebounding 26% in 2021, according to Yardeni Research, Inc. |
| • | After spiking in March 2020 to levels not seen since 2008, credit spreads declined to pre-pandemic levels on Federal Reserve (the “Fed”) buying and economic recovery. |
| • | Ten-year Treasury yields fell by 81 basis points to 0.88% on low inflation and Fed buying. |
| • | Within the convertible universe, Consumer Discretionary, Health Care, and Technology generated significant gains, while Energy, Utilities, and Materials lagged. |
| • | Large cap and equity alternatives convertibles outperformed. |
| • | The convertible market remains healthy, in our view, evidenced by $102 billion in new issuance for the year, the strongest new issuance since the financial crisis. |
Fund Performance
| • | Convertible performance was driven by strong returns in growth equities and stable high yield markets for the 12-month period ended October 31, 2020. The Russell 1000® Growth Index advanced 29.22% and the Bloomberg Barclays High Yield Index rose 3.49% for the same period. |
| • | Fixed income posted positive returns with the Bloomberg Barclays US Aggregate Bond Index up 6.19% for the same period. |
| • | On a one-year trailing basis, as of October 31, 2020, the Fund generated a net gain of 29.1% based on net asset value. This exceeded the return of the ICE BofA All US Convertible Index (VXA0), which was 28.1%. |
Page 4
Portfolio Commentary (Continued)
First Trust SSI
Strategic Convertible Securities ETF (FCVT)
Annual Report
October 31, 2020
(Unaudited)
| • | Technology and Energy made the largest contribution to portfolio returns on a relative basis. Sea Ltd. benefitted from strength in its mobile gaming e-commerce segments, driven in part by consumer demand during “stay-at-home” orders. Underweights in distressed energy credits such as Chesapeake Energy Corp. and Transocean Ltd. also aided relative performance. |
| • | Consumer Discretionary was the largest detractor on a relative basis due primarily to being underweight the convertibles of automaker, Tesla, Inc. and e-commerce retailer, Wayfair LLC. An underweight in the Financials sector also detracted from relative performance. |
Investment Outlook
| • | The outlook for the Fund is positive, as we believe many of the drivers contributing to the strong returns during the 12-month period ended October 31, 2020 remain in place. |
| • | The economy bottomed early in the second quarter and data has consistently exceeded expectations during the recovery. |
| • | The S&P 500® equity market returns are up 48% off the March lows. The Technology sector which makes up a significant portion of the convertible market, is up 58% during the 12-month period ended October 31, 2020. |
| • | Although markets have done well and economic activity is improving, the ongoing impact of COVID-19 remains difficult to quantify. |
| • | The Fed has indicated that highly accommodative policies will continue for an extended period, providing significant support to the economy and financial markets. |
| • | In the coming year, we believe convertibles are positioned to participate if the market continues higher due to their equity-like characteristics. Convertibles may also offer some downside protection if a more adverse environment develops, due to their bond-like feature of return of principal (par value) at maturity. |
Page 5
First Trust SSI Strategic Convertible
Securities ETF (FCVT)
Understanding Your Fund
Expenses
October 31, 2020
(Unaudited)
As a shareholder of the
First Trust SSI Strategic Convertible Securities ETF (the “Fund”), you incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, distribution and/or service (12b-1)
fees, if any, and other Fund expenses. This Example is intended to help you understand your ongoing costs of investing in the Fund and to compare these costs with the ongoing costs of investing in other funds.
The Example is based on
an investment of $1,000 invested at the beginning of the period and held through the six-month period ended October 31, 2020.
Actual Expenses
The first line in the
following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses
Paid During the Six-Month Period” to estimate the expenses you paid on your account during this six-month period.
Hypothetical Example for
Comparison Purposes
The second line in the
following table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is
not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the
expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as brokerage commissions. Therefore, the second line in the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| (a) | Expenses are equal to the annualized expense ratios as indicated in the table multiplied by the average account value over the period (May 1, 2020 through October 31, 2020), multiplied by 184/366 (to reflect the six-month period). |
Page 6
First Trust SSI Strategic Convertible
Securities ETF (FCVT)
Portfolio of Investments
October 31, 2020
|
Principal
Value |
Description |
Stated
Coupon |
Stated
Maturity |
Value | ||||
| CONVERTIBLE CORPORATE BONDS – 87.6% | ||||||||
| Air Freight & Logistics – 0.6% | ||||||||
| $625,000 |
Air Transport Services Group, Inc.
|
1.13% | 10/15/24 | $695,021 | ||||
| 570,000 |
Atlas Air Worldwide Holdings, Inc.
|
1.88% | 06/01/24 | 678,181 | ||||
| 1,373,202 | ||||||||
| Airlines – 1.9% | ||||||||
| 1,000,000 |
Air Canada (a)
|
4.00% | 07/01/25 | 1,094,410 | ||||
| 1,785,000 |
Southwest Airlines Co.
|
1.25% | 05/01/25 | 2,409,750 | ||||
| 635,000 |
Spirit Airlines, Inc.
|
4.75% | 05/15/25 | 1,003,848 | ||||
| 4,508,008 | ||||||||
| Automobiles – 7.2% | ||||||||
| 162,000 |
NIO, Inc.
|
4.50% | 02/01/24 | 538,954 | ||||
| 445,000 |
Tesla, Inc.
|
1.25% | 03/01/21 | 2,403,948 | ||||
| 745,000 |
Tesla, Inc.
|
2.38% | 03/15/22 | 4,421,070 | ||||
| 1,545,000 |
Tesla, Inc.
|
2.00% | 05/15/24 | 9,692,467 | ||||
| 17,056,439 | ||||||||
| Biotechnology – 4.5% | ||||||||
| 1,050,000 |
BioMarin Pharmaceutical, Inc.
|
0.60% | 08/01/24 | 1,082,812 | ||||
| 665,000 |
Bridgebio Pharma, Inc. (a)
|
2.50% | 03/15/27 | 767,015 | ||||
| 1,930,000 |
Exact Sciences Corp.
|
0.38% | 03/15/27 | 2,542,775 | ||||
| 755,000 |
Halozyme Therapeutics, Inc. (a)
|
1.25% | 12/01/24 | 1,003,725 | ||||
| 765,000 |
Insmed, Inc.
|
1.75% | 01/15/25 | 845,665 | ||||
| 600,000 |
Invitae Corp.
|
2.00% | 09/01/24 | 907,513 | ||||
| 860,000 |
Neurocrine Biosciences, Inc.
|
2.25% | 05/15/24 | 1,206,214 | ||||
| 1,135,000 |
Sarepta Therapeutics, Inc.
|
1.50% | 11/15/24 | 2,269,105 | ||||
| 10,624,824 | ||||||||
| Communications Equipment – 1.2% | ||||||||
| 2,545,000 |
Lumentum Holdings, Inc., Series QIB (a)
|
0.50% | 12/15/26 | 2,868,722 | ||||
| Construction & Engineering – 0.4% | ||||||||
| 800,000 |
Vinci S.A., Series DGFP (b)
|
0.38% | 02/16/22 | 848,488 | ||||
| Consumer Finance – 0.2% | ||||||||
| 500,000 |
LendingTree, Inc. (a)
|
0.50% | 07/15/25 | 499,375 | ||||
| Diversified Consumer Services – 1.4% | ||||||||
| 1,325,000 |
Chegg, Inc.
|
0.13% | 03/15/25 | 2,050,464 | ||||
| 1,350,000 |
Chegg, Inc. (a)
|
(c) | 09/01/26 | 1,368,525 | ||||
| 3,418,989 | ||||||||
| Diversified Financial Services – 0.5% | ||||||||
| 1,125,000 |
AXA S.A. (a)
|
7.25% | 05/15/21 | 1,123,594 | ||||
| Diversified Telecommunication Services – 0.5% | ||||||||
| 645,000 |
Bandwidth, Inc. (a)
|
0.25% | 03/01/26 | 1,197,326 | ||||
| Electrical Equipment – 0.5% | ||||||||
| 775,000 |
Bloom Energy Corp. (a)
|
2.50% | 08/15/25 | 838,162 | ||||
| 160,000 |
Plug Power, Inc. (a)
|
3.75% | 06/01/25 | 457,408 | ||||
| 1,295,570 | ||||||||
| Electronic Equipment, Instruments & Components – 0.4% | ||||||||
| 725,000 |
II-VI, Inc.
|
0.25% | 09/01/22 | 868,155 | ||||
| Entertainment – 4.4% | ||||||||
| 930,000 |
Bilibili, Inc. (a)
|
1.25% | 06/15/27 | 1,189,630 | ||||
See Notes to Financial Statements
Page 7
First Trust SSI Strategic Convertible
Securities ETF (FCVT)
Portfolio of Investments
(Continued)
October 31, 2020
|
Principal
Value |
Description |
Stated
Coupon |
Stated
Maturity |
Value | ||||
| CONVERTIBLE CORPORATE BONDS (Continued) | ||||||||
| Entertainment (Continued) | ||||||||
| $700,000 |
Liberty Media Corp. - Liberty Formula One
|
1.00% | 01/30/23 | $833,000 | ||||
| 1,250,000 |
Live Nation Entertainment, Inc.
|
2.50% | 03/15/23 | 1,342,969 | ||||
| 540,000 |
Sea Ltd.
|
1.00% | 12/01/24 | 1,696,800 | ||||
| 2,100,000 |
Sea Ltd. (a)
|
2.38% | 12/01/25 | 4,003,943 | ||||
| 1,005,000 |
Zynga, Inc.
|
0.25% | 06/01/24 | 1,268,185 | ||||
| 10,334,527 | ||||||||
| Health Care Equipment & Supplies – 4.3% | ||||||||
| 1,300,000 |
CONMED Corp.
|
2.63% | 02/01/24 | 1,486,241 | ||||
| 486,000 |
DexCom, Inc.
|
0.75% | 12/01/23 | 970,050 | ||||
| 2,335,000 |
DexCom, Inc. (a)
|
0.25% | 11/15/25 | 2,257,042 | ||||
| 670,000 |
Envista Holdings Corp. (a)
|
2.38% | 06/01/25 | 975,148 | ||||
| 205,000 |
Insulet Corp.
|
1.38% | 11/15/24 | 493,328 | ||||
| 2,215,000 |
Insulet, Corp.
|
0.38% | 09/01/26 | 2,716,196 | ||||
| 1,085,000 |
Tandem Diabetes Care, Inc. (a)
|
1.50% | 05/01/25 | 1,366,268 | ||||
| 10,264,273 | ||||||||
| Health Care Technology – 2.2% | ||||||||
| 780,000 |
Livongo Health, Inc. (a)
|
0.88% | 06/01/25 | 1,524,413 | ||||
| 3,100,000 |
Teladoc Health, Inc. (a)
|
1.25% | 06/01/27 | 3,624,744 | ||||
| 5,149,157 | ||||||||
| Hotels, Restaurants & Leisure – 3.3% | ||||||||
| 730,000 |
Bloomin’ Brands, Inc. (a)
|
5.00% | 05/01/25 | 1,039,640 | ||||
| 860,000 |
Carnival Corp. (a)
|
5.75% | 04/01/23 | 1,340,301 | ||||
| 1,500,000 |
NCL Corp. Ltd. (a)
|
6.00% | 05/15/24 | 2,128,406 | ||||
| 635,000 |
NCL Corp. Ltd. (a)
|
5.38% | 08/01/25 | 737,791 | ||||
| 465,000 |
Penn National Gaming, Inc.
|
2.75% | 05/15/26 | 1,144,830 | ||||
| 1,365,000 |
Royal Caribbean Cruises Ltd. (a)
|
4.25% | 06/15/23 | 1,420,891 | ||||
| 7,811,859 | ||||||||
| Interactive Media & Services – 5.7% | ||||||||
| 370,000 |
JOYY, Inc.
|
1.38% | 06/15/26 | 427,026 | ||||
| 1,925,000 |
Match Group Financeco 2, Inc. (a)
|
0.88% | 06/15/26 | 2,890,181 | ||||
| 545,000 |
Match Group Financeco, Inc. (a)
|
0.88% | 10/01/22 | 1,452,438 | ||||
| 1,025,000 |
Snap, Inc. (a)
|
0.25% | 05/01/25 | 1,959,538 | ||||
| 1,330,000 |
Snap, Inc.
|
0.75% | 08/01/26 | 2,479,714 | ||||
| 530,000 |
Twitter, Inc.
|
0.25% | 06/15/24 | 579,979 | ||||
| 590,000 |
Zillow Group, Inc.
|
0.75% | 09/01/24 | 1,239,030 | ||||
| 1,595,000 |
Zillow Group, Inc.
|
2.75% | 05/15/25 | 2,508,659 | ||||
| 13,536,565 | ||||||||
| Internet & Direct Marketing Retail – 6.3% | ||||||||
| 1,325,000 |
Booking Holdings, Inc. (a)
|
0.75% | 05/01/25 | 1,663,751 | ||||
| 992,000 |
Etsy, Inc.
|
0.13% | 10/01/26 | 1,558,310 | ||||
| 1,100,000 |
Etsy, Inc. (a)
|
0.13% | 09/01/27 | 1,144,899 | ||||
| 1,180,000 |
Fiverr International Ltd. (a)
|
(c) | 11/01/25 | 1,212,450 | ||||
| 1,410,000 |
JPMorgan Chase Bank N.A. (a)
|
0.13% | 01/01/23 | 1,840,931 | ||||
| 995,000 |
MercadoLibre, Inc.
|
2.00% | 08/15/28 | 2,799,700 | ||||
| 625,000 |
Pinduoduo, Inc.
|
(c) | 10/01/24 | 1,343,638 | ||||
| 955,000 |
Wayfair, Inc.
|
1.13% | 11/01/24 | 2,122,285 | ||||
| 1,300,000 |
Wayfair, Inc. (a)
|
0.63% | 10/01/25 | 1,246,059 | ||||
| 14,932,023 | ||||||||
| IT Services – 7.1% | ||||||||
| 2,450,000 |
Akamai Technologies, Inc.
|
0.13% | 05/01/25 | 2,874,156 | ||||
Page 8
See Notes to Financial Statements
First Trust SSI Strategic Convertible
Securities ETF (FCVT)
Portfolio of Investments
(Continued)
October 31, 2020
|
Principal
Value |
Description |
Stated
Coupon |
Stated
Maturity |
Value | ||||
| CONVERTIBLE CORPORATE BONDS (Continued) | ||||||||
| IT Services (Continued) | ||||||||
| $700,000 |
MongoDB, Inc. (a)
|
0.25% | 01/15/26 | $910,614 | ||||
| 1,950,000 |
Okta, Inc.
|
0.13% | 09/01/25 | 2,556,938 | ||||
| 1,185,000 |
Shopify, Inc.
|
0.13% | 11/01/25 | 1,302,019 | ||||
| 2,100,000 |
Square, Inc.
|
0.50% | 05/15/23 | 4,347,398 | ||||
| 385,000 |
Square, Inc. (a)
|
0.13% | 03/01/25 | 566,801 | ||||
| 735,000 |
Twilio, Inc.
|
0.25% | 06/01/23 | 2,868,860 | ||||
| 1,425,000 |
Wix.com Ltd. (a)
|
(c) | 08/15/25 | 1,399,432 | ||||
| 16,826,218 | ||||||||
| Leisure Products – 0.4% | ||||||||
| 815,000 |
Callaway Golf, Co. (a)
|
2.75% | 05/01/26 | 976,981 | ||||
| Life Sciences Tools & Services – 1.5% | ||||||||
| 815,000 |
Illumina, Inc.
|
0.50% | 06/15/21 | 1,008,211 | ||||
| 975,000 |
NanoString Technologies, Inc. (a)
|
2.63% | 03/01/25 | 1,056,053 | ||||
| 925,000 |
Repligen Corp.
|
0.38% | 07/15/24 | 1,445,990 | ||||
| 3,510,254 | ||||||||
| Machinery – 1.2% | ||||||||
| 855,000 |
Chart Industries, Inc. (a)
|
1.00% | 11/15/24 | 1,359,450 | ||||
| 1,275,000 |
Meritor, Inc.
|
3.25% | 10/15/37 | 1,387,138 | ||||
| 2,746,588 | ||||||||
| Media – 1.3% | ||||||||
| 1,425,000 |
GCI Liberty, Inc. (a)
|
1.75% | 09/30/46 | 2,384,737 | ||||
| 675,000 |
Liberty Media Corp.
|
1.38% | 10/15/23 | 757,916 | ||||
| 3,142,653 | ||||||||
| Metals & Mining – 0.7% | ||||||||
| 750,000 |
Cleveland-Cliffs, Inc.
|
1.50% | 01/15/25 | 922,208 | ||||
| 630,000 |
SSR Mining, Inc.
|
2.50% | 04/01/39 | 839,869 | ||||
| 1,762,077 | ||||||||
| Mortgage Real Estate Investment Trusts – 0.4% | ||||||||
| 815,000 |
Hannon Armstrong Sustainable Infrastructure Capital, Inc.
|
(c) | 08/15/23 | 848,847 | ||||
| Oil, Gas & Consumable Fuels – 0.5% | ||||||||
| 475,000 |
CNX Resources Corp. (a)
|
2.25% | 05/01/26 | 503,675 | ||||
| 545,000 |
Pioneer Natural Resources Co. (a)
|
0.25% | 05/15/25 | 583,359 | ||||
| 1,087,034 | ||||||||
| Pharmaceuticals – 1.5% | ||||||||
| 965,000 |
Jazz Investments I Ltd. (a)
|
2.00% | 06/15/26 | 1,159,224 | ||||
| 1,420,000 |
Pacira BioSciences, Inc. (a)
|
0.75% | 08/01/25 | 1,447,261 | ||||
| 898,000 |
Revance Therapeutics, Inc. (a)
|
1.75% | 02/15/27 | 959,686 | ||||
| 3,566,171 | ||||||||
| Real Estate Management & Development – 0.4% | ||||||||
| 950,000 |
Redfin Corp. (a)
|
(c) | 10/15/25 | 896,610 | ||||
| Road & Rail – 0.2% | ||||||||
| 450,000 |
Lyft, Inc. (a)
|
1.50% | 05/15/25 | 433,289 | ||||
| Semiconductors & Semiconductor Equipment – 8.7% | ||||||||
| 225,000 |
Advanced Micro Devices, Inc.
|
2.13% | 09/01/26 | 2,113,245 | ||||
| 775,000 |
Canadian Solar, Inc. (a)
|
2.50% | 10/01/25 | 937,436 | ||||
| 435,000 |
Cree, Inc. (a)
|
1.75% | 05/01/26 | 666,909 | ||||
| 2,600,000 |
Inphi Corp. (a)
|
0.75% | 04/15/25 | 3,339,247 | ||||
See Notes to Financial Statements
Page 9
First Trust SSI Strategic Convertible
Securities ETF (FCVT)
Portfolio of Investments
(Continued)
October 31, 2020
Page 10
See Notes to Financial Statements
First Trust SSI Strategic Convertible
Securities ETF (FCVT)
Portfolio of Investments
(Continued)
October 31, 2020
| Shares | Description |
Stated
Rate |
Stated
Maturity (d) |
Value | ||||
| CONVERTIBLE PREFERRED SECURITIES (Continued) | ||||||||
| Capital Markets – 0.4% | ||||||||
| 19,975 |
KKR & Co., Inc., Series C
|
6.00% | 09/15/23 | $1,039,499 | ||||
| Health Care Equipment & Supplies – 1.9% | ||||||||
| 1,925 |
Danaher Corp., Series A
|
4.75% | 04/15/22 | 3,022,038 | ||||
| 1,150 |
Danaher Corp., Series B
|
5.00% | 04/15/23 | 1,527,269 | ||||
| 4,549,307 | ||||||||
| Internet & Direct Marketing Retail – 0.6% | ||||||||
| 1,000 |
2020 Mandatory Exchangeable Trust (a)
|
6.50% | 05/16/23 | 1,462,000 | ||||
| Life Sciences Tools & Services – 1.0% | ||||||||
| 30,600 |
Avantor, Inc., Series A
|
6.25% | 05/15/22 | 2,298,366 | ||||
| Machinery – 2.2% | ||||||||
| 10,550 |
Colfax Corp.
|
5.75% | 01/15/22 | 1,246,694 | ||||
| 1,815 |
Fortive Corp., Series A
|
5.00% | 07/01/21 | 1,677,659 | ||||
| 22,000 |
Stanley Black & Decker, Inc.
|
5.25% | 11/15/22 | 2,296,360 | ||||
| 5,220,713 | ||||||||
| Metals & Mining – 0.6% | ||||||||
| 37,725 |
ArcelorMittal S.A.
|
5.50% | 05/18/23 | 1,308,680 | ||||
| Semiconductors & Semiconductor Equipment – 2.3% | ||||||||
| 4,572 |
Broadcom, Inc., Series A
|
8.00% | 09/30/22 | 5,440,634 | ||||
| Wireless Telecommunication Services – 1.0% | ||||||||
| 2,255 |
2020 Cash Mandatory Exchangeable Trust (a)
|
5.25% | 06/01/23 | 2,354,446 | ||||
|
Total Convertible Preferred Securities
|
25,280,985 | |||||||
| (Cost $21,723,388) | ||||||||
|
Total Investments – 98.3%
|
232,670,636 | |||||||
| (Cost $175,143,646) (e) | ||||||||
|
Net Other Assets and Liabilities – 1.7%
|
4,131,442 | ||
|
Net Assets – 100.0%
|
$236,802,078 |
|
|
|
| (a) | This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A under the Securities Act of 1933, as amended (the “1933 Act”), and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Pursuant to procedures adopted by the Trust’s Board of Trustees, this security has been determined to be liquid by SSI Investment Management LLC (“SSI”), the Fund’s sub-advisor. Although market instability can result in periods of increased overall market illiquidity, liquidity for each security is determined based on security specific factors and assumptions, which require subjective judgment. At October 31, 2020, securities noted as such amounted to $93,786,929 or 39.6% of net assets. |
| (b) | This security may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the 1933 Act. |
| (c) | Zero coupon security. |
| (d) | Stated maturity represents the mandatory conversion date. |
| (e) | Aggregate cost for federal income tax purposes was $179,128,818. As of October 31, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $55,714,893 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $2,173,075. The net unrealized appreciation was $53,541,818. |
See Notes to Financial Statements
Page 11
First Trust SSI Strategic Convertible
Securities ETF (FCVT)
Portfolio of Investments
(Continued)
October 31, 2020
Valuation Inputs
A summary of the inputs
used to value the Fund’s investments as of October 31, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
|
Total
Value at 10/31/2020 |
Level 1
Quoted Prices |
Level 2
Significant Observable Inputs |
Level 3
Significant Unobservable Inputs |
|
|
Convertible Corporate Bonds*
|
$ 207,389,651 | $ — | $ 207,389,651 | $ — |
| Convertible Preferred Securities: | ||||
|
Health Care Equipment & Supplies
|
4,549,307 | 3,022,038 | 1,527,269 | — |
|
Internet & Direct Marketing Retail
|
1,462,000 | — | 1,462,000 | — |
|
Wireless Telecommunication Services
|
2,354,446 | — | 2,354,446 | — |
|
Other industry categories*
|
16,915,232 | 16,915,232 | — | — |
|
Total Investments
|
$ 232,670,636 | $ 19,937,270 | $ 212,733,366 | $— |
| * | See Portfolio of Investments for industry breakout. |
Page 12
See Notes to Financial Statements
First Trust SSI Strategic Convertible
Securities ETF (FCVT)
Statement of Assets and
Liabilities
October 31, 2020
| ASSETS: | |
|
Investments, at value
(Cost $175,143,646)
|
$ 232,670,636 |
|
Cash
|
2,994,254 |
| Receivables: | |
|
Investment securities sold
|
995,644 |
|
Interest
|
543,786 |
|
Dividends
|
23,868 |
|
Total Assets
|
237,228,188 |
| LIABILITIES: | |
| Payables: | |
|
Investment securities purchased
|
225,515 |
|
Investment advisory fees
|
199,595 |
|
Other liabilities
|
1,000 |
|
Total Liabilities
|
426,110 |
|
NET ASSETS
|
$236,802,078 |
| NET ASSETS consist of: | |
|
Paid-in capital
|
$ 180,916,941 |
|
Par value
|
59,000 |
|
Accumulated distributable earnings (loss)
|
55,826,137 |
|
NET ASSETS
|
$236,802,078 |
|
NET ASSET VALUE, per share
|
$40.14 |
|
Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share)
|
5,900,002 |
See Notes to Financial Statements
Page 13
First Trust SSI Strategic Convertible
Securities ETF (FCVT)
Statement of Operations
For the Year Ended October
31, 2020
| INVESTMENT INCOME: | ||
|
Dividends
|
$ 1,882,769 | |
|
Interest
|
(2,794,571) | |
|
Other
|
19,047 | |
|
Total investment income
|
(892,755) | |
| EXPENSES: | ||
|
Investment advisory fees
|
2,082,721 | |
|
Excise tax expense
|
6,159 | |
|
Total expenses
|
2,088,880 | |
|
NET INVESTMENT INCOME (LOSS)
|
(2,981,635) | |
| NET REALIZED AND UNREALIZED GAIN (LOSS): | ||
|
Net realized gain (loss) on investments
|
9,201,568 | |
|
Net change in unrealized appreciation (depreciation) on investments
|
39,005,257 | |
|
NET REALIZED AND UNREALIZED GAIN (LOSS)
|
48,206,825 | |
|
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
|
$ 45,225,190 | |
Page 14
See Notes to Financial Statements
First Trust SSI Strategic Convertible
Securities ETF (FCVT)
Statements of Changes in
Net Assets
|
Year
Ended 10/31/2020 |
Year
Ended 10/31/2019 |
||
| OPERATIONS: | |||
|
Net investment income (loss)
|
$ (2,981,635) | $ (1,161,320) | |
|
Net realized gain (loss)
|
9,201,568 | 4,565,461 | |
|
Net change in unrealized appreciation (depreciation)
|
39,005,257 | 14,922,374 | |
|
Net increase (decrease) in net assets resulting from operations
|
45,225,190 | 18,326,515 | |
| DISTRIBUTIONS TO SHAREHOLDERS FROM: | |||
|
Investment operations
|
(3,308,156) | (2,995,341) | |
| SHAREHOLDER TRANSACTIONS: | |||
|
Proceeds from shares sold
|
106,145,960 | 29,071,259 | |
|
Cost of shares redeemed
|
(105,418,747) | (52,711,960) | |
|
Net increase (decrease) in net assets resulting from shareholder transactions
|
727,213 | (23,640,701) | |
|
Total increase (decrease) in net assets
|
42,644,247 | (8,309,527) | |
| NET ASSETS: | |||
|
Beginning of period
|
194,157,831 | 202,467,358 | |
|
End of period
|
$236,802,078 | $194,157,831 | |
| CHANGES IN SHARES OUTSTANDING: | |||
|
Shares outstanding, beginning of period
|
6,150,002 | 7,050,002 | |
|
Shares sold
|
3,050,000 | 950,000 | |
|
Shares redeemed
|
(3,300,000) | (1,850,000) | |
|
Shares outstanding, end of period
|
5,900,002 | 6,150,002 |
See Notes to Financial Statements
Page 15
First Trust SSI Strategic Convertible
Securities ETF (FCVT)
Financial Highlights
For a share outstanding
throughout each period
| Year Ended October 31, |
Period
Ended 10/31/2016 (a) |
||||||||
| 2020 | 2019 | 2018 | 2017 | ||||||
|
Net asset value, beginning of period
|
$ 31.57 | $ 28.72 | $ 29.01 | $ 25.21 | $ 25.00 | ||||
| Income from investment operations: | |||||||||
|
Net investment income (loss)
|
(0.55) | (0.24) | (0.09) | (0.14) | (0.24) | ||||
|
Net realized and unrealized gain (loss)
|
9.65 | 3.58 | 0.52 | 4.45 | 0.90 | ||||
|
Total from investment operations
|
9.10 | 3.34 | 0.43 | 4.31 | 0.66 | ||||
| Distributions paid to shareholders from: | |||||||||
|
Net investment income
|
(0.53) | (0.49) | (0.67) | (0.51) | (0.45) | ||||
|
Net realized gain
|
— | — | (0.05) | — | — | ||||
|
Total distributions
|
(0.53) | (0.49) | (0.72) | (0.51) | (0.45) | ||||
|
Net asset value, end of period
|
$40.14 | $31.57 | $28.72 | $29.01 | $25.21 | ||||
|
Total return (b)
|
29.10% | 11.72% | 1.46% | 17.29% | 2.68% | ||||
| Ratios to average net assets/supplemental data: | |||||||||
|
Net assets, end of period (in 000’s)
|
$ 236,802 | $ 194,158 | $ 202,467 | $ 58,016 | $ 7,564 | ||||
|
Ratio of total expenses to average net assets
|
0.95% | 0.95% | 0.95% | 0.95% | 0.95% (c) | ||||
|
Ratio of net investment income (loss) to average net assets
|
(1.36)% | (0.63)% | (2.16)% | (1.86)% | (2.34)% (c) | ||||
|
Portfolio turnover rate (d)
|
119% | 64% | 71% | 56% | 54% | ||||
| (a) | Inception date is November 3, 2015, which is consistent with the commencement of investment operations and is the date the initial creation units were established. |
| (b) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. |
| (c) | Annualized. |
| (d) | Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. |
Page 16
See Notes to Financial Statements
Notes to Financial Statements
First Trust SSI
Strategic Convertible Securities ETF (FCVT)
October 31, 2020
1. Organization
First Trust
Exchange-Traded Fund IV (the “Trust”) is an open-end management investment company organized as a Massachusetts business trust on September 15, 2010, and is registered with the Securities and Exchange
Commission (“SEC”) under the Investment Company Act of 1940, as amended (the “1940 Act”).
The Trust currently
consists of nine funds that are offering shares. This report covers the First Trust SSI Strategic Convertible Securities ETF (the “Fund”), a diversified series of the Trust, which trades under the ticker
“FCVT” on The Nasdaq Stock Market LLC (“Nasdaq”). Unlike conventional mutual funds, the Fund issues and redeems shares on a continuous basis, at net asset value (“NAV”), only in
large specified blocks consisting of 50,000 shares called a “Creation Unit.” Creation Units are issued and redeemed for cash and, in certain circumstances, in-kind for securities in which the Fund invests.
Except when aggregated in Creation Units, the Fund’s shares are not redeemable securities.
The Fund is an actively
managed exchange-traded fund. The investment objective of the Fund is to seek total return. Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its net
assets (including investment borrowings) in a portfolio of U.S. and non-U.S. convertible securities. There can be no assurances that the Fund will achieve its investment objective. The Fund may not be appropriate for
all investors.
2. Significant
Accounting Policies
The Fund is considered an
investment company and follows accounting and reporting guidance under Financial Accounting Standards Board Accounting Standards Codification Topic 946, “Financial Services-Investment Companies.” The
following is a summary of significant accounting policies consistently followed by the Fund in the preparation of the financial statements. The preparation of the financial statements in accordance with accounting
principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
A. Portfolio
Valuation
The Fund’s NAV is
determined daily as of the close of regular trading on the New York Stock Exchange (“NYSE”), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a
valuation day, the NAV is determined as of that time. Domestic debt securities are priced using data reflecting the earlier closing of the principal markets for those securities. The Fund’s NAV is calculated by
dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares
outstanding.
The Fund’s
investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent last sale or official closing prices from a
national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained
from a third-party pricing service or are determined by the Pricing Committee of the Fund’s investment advisor, First Trust Advisors L.P. (“First Trust” or the “Advisor”), in accordance
with valuation procedures adopted by the Trust’s Board of Trustees, and in accordance with provisions of the 1940 Act. Investments valued by the Advisor’s Pricing Committee, if any, are footnoted as such
in the footnotes to the Portfolio of Investments. The Fund’s investments are valued as follows:
Convertible preferred stocks and other equity securities listed on any national or foreign exchange (excluding Nasdaq and the London Stock Exchange Alternative Investment Market (“AIM”)) are valued at
the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price. Securities traded on more than one securities exchange are valued at the last
sale price or official closing price, as applicable, at the close of the securities exchange representing the principal market for such securities.
Convertible corporate bonds, notes and other debt securities are fair valued on the basis of valuations provided by dealers who make markets in such securities or by a third-party pricing service approved by the
Trust’s Board of Trustees, which may use the following valuation inputs when available:
| 1) | benchmark yields; |
| 2) | reported trades; |
| 3) | broker/dealer quotes; |
| 4) | issuer spreads; |
| 5) | benchmark securities; |
| 6) | bids and offers; and |
| 7) | reference data including market research publications. |
Page 17
Notes to Financial Statements (Continued)
First Trust SSI
Strategic Convertible Securities ETF (FCVT)
October 31, 2020
Securities traded in an over-the-counter market are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price.
Fixed
income and other debt securities having a remaining maturity of sixty days or less when purchased are fair valued at cost adjusted for amortization of premiums and accretion of discounts (amortized cost), provided the
Advisor’s Pricing Committee has determined that the use of amortized cost is an appropriate reflection of fair value given market and issuer-specific conditions existing at the time of the determination. Factors
that may be considered in determining the appropriateness of the use of amortized cost include, but are not limited to, the following:
| 1) | the credit conditions in the relevant market and changes thereto; |
| 2) | the liquidity conditions in the relevant market and changes thereto; |
| 3) | the interest rate conditions in the relevant market and changes thereto (such as significant changes in interest rates); |
| 4) | issuer-specific conditions (such as significant credit deterioration); and |
| 5) | any other market-based data the Advisor’s Pricing Committee considers relevant. In this regard, the Advisor’s Pricing Committee may use last-obtained market-based data to assist it when valuing portfolio securities using amortized cost. |
Certain securities may
not be able to be priced by pre-established pricing methods. Such securities may be valued by the Trust’s Board of Trustees or its delegate, the Advisor’s Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a third-party pricing service is
unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to
which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of the Fund’s NAV or make it difficult or impossible to obtain a
reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security’s fair value. As a general principle, the current fair value of a security
would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official
closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities.
Fair valuation of a debt
security will be based on the consideration of all available information, including, but not limited to, the following:
| 1) | the fundamental business data relating to the issuer; |
| 2) | an evaluation of the forces which influence the market in which these securities are purchased and sold; |
| 3) | the type, size and cost of the security; |
| 4) | the financial statements of the issuer; |
| 5) | the credit quality and cash flow of the issuer, based on the sub-advisor’s or external analysis; |
| 6) | the information as to any transactions in or offers for the security; |
| 7) | the price and extent of public trading in similar securities (or equity securities) of the issuer/borrower, or comparable companies; |
| 8) | the coupon payments; |
| 9) | the quality, value and salability of collateral, if any, securing the security; |
| 10) | the business prospects of the issuer, including any ability to obtain money or resources from a parent or affiliate and an assessment of the issuer’s management; |
| 11) | the prospects for the issuer’s industry, and multiples (of earnings and/or cash flows) being paid for similar businesses in that industry; and |
| 12) | other relevant factors. |
Fair valuation of an
equity security will be based on the consideration of all available information, including, but not limited to, the following:
| 1) | the type of security; |
| 2) | the size of the holding; |
| 3) | the initial cost of the security; |
| 4) | transactions in comparable securities; |
| 5) | price quotes from dealers and/or third-party pricing services; |
| 6) | relationships among various securities; |
| 7) | information obtained by contacting the issuer, analysts, or the appropriate stock exchange; |
Page 18
Notes to Financial Statements (Continued)
First Trust SSI
Strategic Convertible Securities ETF (FCVT)
October 31, 2020
| 8) | an analysis of the issuer’s financial statements; and |
| 9) | the existence of merger proposals or tender offers that might affect the value of the security. |
The Fund is subject to
fair value accounting standards that define fair value, establish the framework for measuring fair value and provide a three-level hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
| • | Level 1 – Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
| • | Level 2 – Level 2 inputs are observable inputs, either directly or indirectly, and include the following: |
| o | Quoted prices for similar investments in active markets. |
| o | Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly. |
| o | Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). |
| o | Inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
| • | Level 3 – Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the investment. |
The inputs or
methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A summary of the inputs used to value the Fund’s investments as of October
31, 2020, is included with the Fund’s Portfolio of Investments.
B. Securities
Transactions and Investment Income
Securities transactions
are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income is recorded
daily on the accrual basis. Amortization of premiums and accretion of discounts are recorded using the effective interest method.
The Fund invests in
convertible securities that are acquired at a price significantly above the principal value. Consequently, the amortization of premium may exceed the interest income earned on the securities.
C. Dividends and
Distributions to Shareholders
Dividends from net
investment income, if any, are declared and paid monthly by the Fund, or as the Board of Trustees may determine from time to time. Distributions of net realized capital gains earned by the Fund, if any, are
distributed at least annually.
Distributions from net
investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically
adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on portfolio securities held by the Fund and
have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will
reverse at some time in the future.
The tax character of
distributions paid by the Fund during the fiscal years ended October 31, 2020 and 2019, was as follows:
| Distributions paid from: | 2020 | 2019 |
|
Ordinary income
|
$3,308,156 | $2,995,341 |
|
Capital gains
|
— | — |
|
Return of capital
|
— | — |
As of October 31, 2020,
the components of distributable earnings on a tax basis were as follows:
|
Undistributed ordinary income
|
$— |
|
Accumulated capital and other gain (loss)
|
2,284,319 |
|
Net unrealized appreciation (depreciation)
|
53,541,818 |
Page 19
Notes to Financial Statements (Continued)
First Trust SSI
Strategic Convertible Securities ETF (FCVT)
October 31, 2020
D. Income Taxes
The Fund intends to
continue to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no provision has been made for federal and state income taxes. However, due to the timing and amount of distributions, the Fund may be subject to
an excise tax of 4% of the amount by which approximately 98% of the Fund’s taxable income exceeds the distributions from such taxable income for the calendar year.
The Fund intends to
utilize provisions of the federal income tax laws, which allow it to carry a realized capital loss forward indefinitely following the year of the loss and offset such loss against any future realized capital gains.
The Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. At
October 31, 2020, for federal income tax purposes, the Fund had no capital loss carryforwards available to the extent provided by regulations to offset future capital gains.
Certain losses realized
during the current fiscal year may be deferred and treated as occurring on the first day of the following fiscal year for federal income tax purposes. For the fiscal year ended October 31, 2020, the Fund had no net
ordinary losses.
The Fund is subject to
accounting standards that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. Taxable years ended 2017, 2018, 2019,
and 2020 remain open to federal and state audit. As of October 31, 2020, management has evaluated the application of these standards to the Fund, and has determined that no provision for income tax is required in the
Fund’s financial statements for uncertain tax positions.
In order to present
paid-in capital and accumulated distributable earnings (loss) (which consists of accumulated net investment income (loss), accumulated net realized gain (loss) on investments and net unrealized appreciation
(depreciation) on investments) on the Statement of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to paid-in capital, accumulated net investment income
(loss) and accumulated net realized gain (loss) on investments. These adjustments are primarily due to the difference between book and tax treatments of income and gains on various investment securities held by the
Fund and in-kind transactions. The results of operations and net assets were not affected by these adjustments. For the fiscal year ended October 31, 2020, the adjustments for the Fund were as follows:
|
Accumulated
Net Investment Income (Loss) |
Accumulated
Net Realized Gain (Loss) on Investments |
Paid-in
Capital |
||
| $6,112,462 | $(6,803,752) | $691,290 |
E. Expenses
Expenses, other than the
investment advisory fee and other excluded expenses, are paid by the Advisor (See Note 3).
3. Investment
Advisory Fee, Affiliated Transactions and Other Fee Arrangements
First Trust, the
investment advisor to the Fund, is a limited partnership with one limited partner, Grace Partners of DuPage L.P., and one general partner, The Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First Trust is responsible for supervising the selection and ongoing monitoring of the securities in the Fund’s portfolio, managing the
Fund’s business affairs and providing certain administrative services necessary for the management of the Fund.
The Fund and First Trust
have retained SSI Investment Management LLC (“SSI” or the “Sub-Advisor”) to serve as its investment sub-advisor. In this capacity, SSI is responsible for the selection and on-going monitoring
of the securities in the Fund’s investment portfolio. Pursuant to the Investment Management Agreement between the Trust and the Advisor, First Trust will supervise SSI and its management of the investment of the
Fund’s assets and will pay SSI for its services as the Fund’s sub-advisor. First Trust will also be responsible for the Fund’s expenses, including the cost of transfer agency, custody, fund
administration, legal, audit and other services, but excluding fee payments under the Investment Management Agreement, interest, taxes, acquired fund fees and expenses, brokerage commissions and other expenses
connected with the execution of portfolio transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses. The Fund has agreed to pay First Trust an annual unitary
management fee equal to 0.95% of its average daily net assets. SSI receives a sub-advisory fee from First Trust equal to 50% of any remaining monthly investment management fee paid to First Trust after the average
Fund expenses accrued during the most recent twelve months are subtracted from the investment management fee in a given month. First Trust also provides fund reporting services to the Fund for a flat annual fee in the
amount of $9,250, which is covered under the annual unitary management fee.
Page 20
Notes to Financial Statements (Continued)
First Trust SSI
Strategic Convertible Securities ETF (FCVT)
October 31, 2020
The Trust has multiple
service agreements with Brown Brothers Harriman & Co. (“BBH”). Under the service agreements, BBH performs custodial, fund accounting, certain administrative services, and transfer agency services for
the Fund. As custodian, BBH is responsible for custody of the Fund’s assets. As fund accountant and administrator, BBH is responsible for maintaining the books and records of the Fund’s securities and
cash. As transfer agent, BBH is responsible for maintaining shareholder records for the Fund.
Each Trustee who is not
an officer or employee of First Trust, any sub-advisor or any of their affiliates (“Independent Trustees”) is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, a defined-outcome fund or an index fund.
Additionally, the Lead
Independent Trustee and the Chairmen of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata
among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and
Committee Chairmen rotate every three years. The officers and “Interested” Trustee receive no compensation from the Trust for acting in such capacities.
4. Purchases and
Sales of Securities
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and in-kind transactions, for the fiscal year ended October 31, 2020, were $253,484,871 and $255,203,654, respectively.
For the fiscal year ended
October 31, 2020, the Fund had no in-kind transactions.
5. Creations,
Redemptions and Transaction Fees
Shares are created and
redeemed by the Fund only in Creation Unit size aggregations of 50,000 shares in transactions with broker-dealers or large institutional investors that have entered into a participation agreement (an “Authorized
Participant”). Due to the nature of the Fund’s investments, the Fund’s Creation Units are generally issued and redeemed for cash, although Creation Units may be issued in-kind for securities in which
the Fund invests in limited circumstances. Authorized Participants purchasing Creation Units must pay to BBH, as transfer agent, a creation transaction fee (the “Creation Transaction Fee”) regardless of
the number of Creation Units purchased in the transaction. The Creation Transaction Fee may vary and is based on the composition of the securities included in the Fund’s portfolio and/or the countries in which
the transactions are settled. The Creation Transaction Fee may increase or decrease with changes in the Fund’s portfolio. The price for each Creation Unit will equal the daily NAV per share times the number of
shares in a Creation Unit plus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees or stamp taxes. When Creation Units are issued for cash, the Authorized
Participant may also be assessed an amount to cover the cost of purchasing portfolio securities, including operational processing and brokerage costs, transfer fees, stamp taxes, and part or all of the spread between
the expected bid and offer side of the market related to such securities.
Authorized Participants
redeeming Creation Units must pay to BBH, as transfer agent, a standard redemption transaction fee (the “Redemption Transaction Fee”), regardless of the number of Creation Units redeemed in the
transaction. The Redemption Transaction Fee may vary and is based on the composition of the securities included in the Fund’s portfolio and/or the countries in which the transactions are settled. The Redemption
Transaction Fee may increase or decrease with changes in the Fund’s portfolio. When shares are redeemed for cash, the Authorized Participant may also be assessed an amount to cover other costs, including
operational processing and brokerage costs, transfer fees, stamp taxes and part or all of the spread between the expected bid and offer side of the market related to portfolio securities sold in connection with the
redemption.
6. Distribution
Plan
The Board of Trustees
adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Fund is authorized to pay an amount up to 0.25% of its average daily net assets each year
to reimburse First Trust Portfolios L.P. (“FTP”), the distributor of the Fund, for amounts expended to finance activities primarily intended to result in the sale of Creation Units or to provide investor
services. FTP may also use this amount to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and
educational and promotional services.
No 12b-1 fees are
currently paid by the Fund, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before March 31, 2022.
Page 21
Notes to Financial Statements (Continued)
First Trust SSI
Strategic Convertible Securities ETF (FCVT)
October 31, 2020
7. Indemnification
The Trust, on behalf of
the Fund, has a variety of indemnification obligations under contracts with its service providers. The Trust’s maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or
losses pursuant to these contracts and expects the risk of loss to be remote.
8. Other
Matters
By operation of law, the
Fund now operates as a diversified open-end management investment company as defined in Section 5(b) of the 1940 Act.
9. Subsequent
Events
Management has evaluated
the impact of all subsequent events to the Fund through the date the financial statements were issued, and has determined that there were no subsequent events requiring recognition or disclosure in the financial
statements that have not already been disclosed.
Page 22
Report of Independent
Registered Public Accounting Firm
To the Shareholders and the
Board of Trustees of First Trust Exchange-Traded Fund IV:
Opinion on the Financial
Statements and Financial Highlights
We have audited the
accompanying statement of assets and liabilities of First Trust SSI Strategic Convertible Securities ETF (the “Fund”), a series of the First Trust Exchange-Traded Fund IV, including the portfolio of
investments, as of October 31, 2020, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights
for the years ended October 31, 2020, 2019, 2018, and 2017, and the period from November 3, 2015 (commencement of operations) through October 31, 2016, and the related notes. In our opinion, the financial statements
and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2020, and the results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights for the years ended October 31, 2020, 2019, 2018, and 2017, and for the period from November 3, 2015 (commencement of operations)
through October 31, 2016, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial
statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits
in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of
material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required
to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly,
we express no such opinion.
Our audits included
performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October
31, 2020, by correspondence with the custodian and brokers, when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our
opinion.
Chicago, Illinois
December 23, 2020
We have served as the
auditor of one or more First Trust investment companies since 2001.
Page 23
Additional Information
First Trust SSI
Strategic Convertible Securities ETF (FCVT)
October 31, 2020
(Unaudited)
Proxy Voting Policies
and Procedures
A description of the
policies and procedures that the Trust uses to determine how to vote proxies and information on how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on the Fund’s website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission’s (“SEC”) website at www.sec.gov.
Portfolio Holdings
The Fund files portfolio
holdings information for each month in a fiscal quarter within 60 days after the end of the relevant fiscal quarter on Form N-PORT. Portfolio holdings information for the third month of each fiscal quarter will be
publicly available on the SEC’s website at www.sec.gov. The Fund’s complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year is included in the semi-annual and
annual reports to shareholders, respectively, and is filed with the SEC on Form N-CSR. The semi-annual and annual report for the Fund is available to investors within 60 days after the period to which it relates. The
Fund’s Forms N-PORT and Forms N-CSR are available on the SEC’s website listed above.
Federal Tax
Information
For the taxable year
ended October 31, 2020, the following percentages of income dividend paid by the Fund qualify for the dividends received deduction available to corporations and are hereby designated as qualified dividend income:
| Dividends Received Deduction | Qualified Dividend Income | |
| 35.15% | 35.15% |
A portion of the ordinary
dividends (including short-term capital gains) that the Fund paid to shareholders during the taxable year ended October 31, 2020, may be eligible for the Qualified Business Income (QBI) Deduction under the Internal
Revenue Code of 1986, as amended, section 199A for the aggregate dividends the Fund received from the underlying Real Estate Investment Trusts (REITs) it invests in.
Risk Considerations
Risks are inherent in all
investing. Certain general risks that may be applicable to a Fund are identified below, but not all of the material risks relevant to each Fund are included in this report and not all of the risks below apply to each
Fund. The material risks of investing in each Fund are spelled out in its prospectus, statement of additional information and other regulatory filings. Before investing, you should consider each Fund’s
investment objective, risks, charges and expenses, and read each Fund’s prospectus and statement of additional information carefully. You can download each Fund’s prospectus at www.ftportfolios.com or
contact First Trust Portfolios L.P. at (800) 621-1675 to request a prospectus, which contains this and other information about each Fund.
Concentration Risk. To the extent that a fund is able to invest a large percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or
sector, an adverse economic, business or political development may affect the value of the fund’s investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated
to the extent the fund’s corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is not
concentrated.
Credit Risk. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and the related risk that the value of a
security may decline because of concerns about the issuer’s ability to make such payments.
Cyber Security Risk. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a
fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with
corrective measures and/or financial loss. In addition, cyber security breaches of a fund’s third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or
issuers in which the fund invests, can also subject a fund to many of the same risks associated with direct cyber security breaches.
Derivatives Risk. To the extent a fund uses derivative instruments such as futures contracts, options contracts and swaps, the fund may experience losses because of adverse movements in the price or value
of the underlying asset, index or rate, which may be magnified
Page 24
Additional Information (Continued)
First Trust SSI
Strategic Convertible Securities ETF (FCVT)
October 31, 2020
(Unaudited)
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 Constituent
Risk. Certain funds may be a constituent of one or more indices. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component
security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could significantly increase demand for the fund
and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, a fund’s net asset value could be negatively impacted and the fund’s market price may
be significantly below its net asset value during certain periods.
Index Provider Risk. To the extent a fund seeks to track an index, it is subject to Index Provider Risk. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will
be determined, maintained, constructed, reconstituted, rebalanced, composed, calculated or disseminated accurately. To correct any such error, the Index Provider may carry out an unscheduled rebalance or other
modification of the Index constituents or weightings, which may increase the fund’s costs. The Index Provider does not provide any representation or warranty in relation to the quality, accuracy or completeness
of data in the Index, and it does not guarantee that the Index will be calculated in accordance with its stated methodology. Losses or costs associated with any Index Provider errors generally will be borne by the
fund and its shareholders.
Investment Companies
Risk. To the extent a fund invests in the securities of other investment vehicles, the fund will incur additional fees and expenses that would not be present in a direct investment in those
investment vehicles. Furthermore, the fund’s investment performance and risks are directly related to the investment performance and risks of the investment vehicles in which the fund invests.
LIBOR Risk. To the extent a fund invests in floating or variable rate obligations that use the London Interbank Offered Rate (“LIBOR”) as a reference interest rate, it is subject to LIBOR
Risk. In 2017, the United Kingdom’s Financial Conduct Authority announced that LIBOR will cease to be available for use after 2021. The unavailability or replacement of LIBOR may affect the value, liquidity or
return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition away from LIBOR on the fund or on
certain instruments in which the fund invests can be difficult to ascertain, and they may vary depending on a variety of factors. Any such effects of the transition away from LIBOR, as well as other unforeseen
effects, could result in losses to the fund.
Page 25
Additional Information (Continued)
First Trust SSI
Strategic Convertible Securities ETF (FCVT)
October 31, 2020
(Unaudited)
Management Risk. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund’s investment portfolio, the fund’s portfolio managers will
apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective.
Market Risk. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or
market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these
market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public health issues, recessions, or other events could have a significant
negative impact on a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than others. The outbreak of the respiratory disease designated as
COVID-19 in December 2019 has caused significant volatility and declines in global financial markets, which have caused losses for investors. The COVID-19 pandemic may last for an extended period of time and will
continue to impact the economy for the foreseeable future.
Non-U.S. Securities
Risk. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic issuers. Non-U.S. securities are subject to higher
volatility than securities of domestic issuers due to: possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; lack of liquidity; currency exchange
rates; excessive taxation; government seizure of assets; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities
may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities
of companies located, or with significant operations, in emerging market countries.
Passive Investment
Risk. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally
will not attempt to take defensive positions in declining markets.
| NOT FDIC INSURED | NOT BANK GUARANTEED | MAY LOSE VALUE |
Advisory and
Sub-Advisory Agreements
Board Considerations
Regarding Approval of Continuation of 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 continuation of the Investment Management Agreement (the “Advisory Agreement”)
with First Trust Advisors L.P. (the “Advisor”) on behalf of the First Trust SSI Strategic Convertible Securities ETF (the “Fund”). The Board approved the continuation of the Advisory Agreement
for a one-year period ending June 30, 2021 at a meeting held on June 8, 2020. The Board determined that the continuation of the Advisory Agreement is in the best interests of the Fund in light of the nature, extent
and quality of the services provided and such other matters as the Board considered to be relevant in the exercise of its reasonable business judgment.
To reach this
determination, the Board considered its duties under the Investment Company Act of 1940, as amended (the “1940 Act”), as well as under the general principles of state law, in reviewing and approving
advisory contracts; the requirements of the 1940 Act in such matters; the fiduciary duty of investment advisors with respect to advisory agreements and compensation; the standards used by courts in determining whether
investment company boards have fulfilled their duties; and the factors to be considered by the Board in voting on such agreements. At meetings held on May 11, 2020 and June 8, 2020, the Board, including the
Independent Trustees, reviewed materials provided by the Advisor 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 provided by the Advisor to the Fund (including the relevant personnel responsible for these services and their experience); the unitary fee rate payable by the Fund as compared to fees
charged to a peer group of funds (the “Expense Group”) and a broad peer universe of funds (the “Expense Universe”), each assembled by Broadridge Financial Solutions, Inc.
(“Broadridge”), an independent source, and as compared to fees charged to other clients of the Advisor, including other exchange-traded funds (“ETFs”) managed by the Advisor; the expense ratio
of the Fund as compared to expense ratios of the funds in the Fund’s Expense Group and Expense Universe; performance information for the Fund, including comparisons of the Fund’s performance to that of one
or more relevant benchmark indexes and to that of a performance group of funds and a broad performance universe of funds (the “Performance Universe”), each assembled by Broadridge; the nature of expenses
incurred in providing services to the Fund and the potential for the Advisor to realize economies of scale, if any; profitability and other financial data for the Advisor; any fall-out benefits to the Advisor and its
affiliate, First Trust Portfolios L.P. (“FTP”); and information on the Advisor’s compliance program. The Board reviewed initial materials with the Advisor at the meeting held on May 11, 2020, prior
to which the Independent Trustees and their counsel met separately to discuss the information provided by the Advisor. Following the May meeting, counsel to the Independent Trustees, on behalf of the Independent
Trustees,
Page 26
Additional Information (Continued)
First Trust SSI
Strategic Convertible Securities ETF (FCVT)
October 31, 2020
(Unaudited)
requested certain clarifications and
supplements to the materials provided, and the information provided in response to those requests was considered at an executive session of the Independent Trustees and their counsel held prior to the June 8, 2020
meeting, as well as at the meeting held that day. The Board considered supplemental information provided by the Advisor on the operations of the Advisor and the performance of the Fund since the onset of the COVID-19
pandemic. The Board applied its business judgment to determine whether the arrangement between the Trust and the Advisor continues to be a reasonable business arrangement from the Fund’s perspective. The Board
determined that, given the totality of the information provided with respect to the Advisory Agreement, the Board had received sufficient information to renew the Advisory Agreement. The Board considered that
shareholders chose to invest or remain invested in the Fund knowing that the Advisor manages the Fund and knowing the Fund’s unitary fee.
The Board noted that it
had approved a new Investment Sub-Advisory Agreement (the “Sub-Advisory Agreement”) among the Fund, the Advisor and SSI Investment Management LLC (the “Sub-Advisor”) at a meeting held on March
11, 2019 for an initial two-year term and that shareholders of the Fund approved the Sub-Advisory Agreement at a meeting held on July 11, 2019. Accordingly, the Board did not consider the renewal of the Sub-Advisory
Agreement at the June 8, 2020 meeting and will first consider its renewal at its June 2021 meeting.
In reviewing the Advisory
Agreement, the Board considered the nature, extent and quality of the services provided by the Advisor under the Advisory Agreement. With respect to the Advisory Agreement, the Board considered that the Advisor is
responsible for the overall management and administration of the Trust and the Fund and reviewed all of the services 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 noted that the Advisor oversees the Sub-Advisor’s day-to-day management of the Fund’s investments, including portfolio risk
monitoring and performance review. In reviewing the services 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 also considered a
report from the Advisor with respect to its risk management functions related to the operation of the Fund. Finally, as part of the Board’s consideration of the Advisor’s services, the Advisor, in its
written materials and at the May 11, 2020 meeting, described to the Board the scope of its ongoing investment in additional infrastructure and personnel to maintain and improve the quality of services provided to the
Fund and the other funds in the First Trust Fund Complex. In light of the information presented and the considerations made, the Board concluded that the nature, extent and quality of the services provided to the
Trust and the Fund by the Advisor under the Advisory Agreement have been and are expected to remain satisfactory.
The Board considered the
unitary fee rate payable by the Fund under the Advisory Agreement for the services provided. The Board considered that as part of the unitary fee the Advisor is 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, brokerage
commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses, if any. The Board received and
reviewed information showing the advisory 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 to other fund (including ETFs) and
non-fund clients, as applicable. Because the Fund pays a unitary fee, the Board determined that expense ratios were the most relevant comparative data point. Based on the information provided, the Board noted that the
unitary fee rate for the Fund was above the median total (net) expense ratio of the peer funds in the Expense Group. With respect to the Expense Group, the Board, at the May 11, 2020 meeting, discussed with Broadridge
its methodology for assembling peer groups and discussed with the Advisor limitations in creating peer groups for actively-managed ETFs, including that there were no other actively-managed ETFs in the Expense Group,
and different business models that may affect the pricing of services among ETF sponsors. The Board also noted that not all peer funds employ an advisor/sub-advisor management structure. The Board took these
limitations and differences into account in considering the peer data. With respect to fees charged to other non-ETF clients, the Board considered differences between the Fund and other non-ETF clients that limited
their comparability. In considering the unitary fee rate overall, the Board also considered the Advisor’s statement that it seeks to meet investor needs through innovative and value-added investment solutions
and the Advisor’s demonstrated long-term commitment to the Fund and the other funds in the First Trust Fund Complex.
The Board considered
performance information for the Fund. The Board noted the process it has established for monitoring the Fund’s performance and portfolio risk on an ongoing basis, which includes quarterly performance reporting
from the Advisor and Sub-Advisor for the Fund. The Board determined that this process continues to be effective for reviewing the Fund’s performance. The Board received and reviewed information comparing the
Fund’s performance for periods ended December 31, 2019 to the performance of the funds in the Performance Universe and to that of a benchmark index. Based on the information provided, the Board noted that the
Fund underperformed the Performance Universe median and the benchmark index for the one- and three-year periods ended December 31, 2019.
Page 27
Additional Information (Continued)
First Trust SSI
Strategic Convertible Securities ETF (FCVT)
October 31, 2020
(Unaudited)
On the basis of all the
information provided on the unitary fee and performance of the Fund and the ongoing oversight by the Board, the Board concluded that the unitary fee for the Fund (out of which the Sub-Advisor is compensated) continues
to be reasonable and appropriate in light of the nature, extent and quality of the services provided by the Advisor to the Fund under the Advisory Agreement.
The Board considered
information and discussed with the Advisor whether there were any economies of scale in connection with providing advisory services to the Fund and noted the Advisor’s statement that it believes its expenses
will likely increase over the next twelve months as the Advisor continues to hire personnel and build infrastructure, including technology, to improve the services to the Fund. The Board noted that any reduction in
fixed costs associated with the management of the Fund would benefit the Advisor, but that the unitary fee structure provides a level of certainty in expenses for the Fund. The Board considered the revenues and
allocated costs (including the allocation methodology) of the Advisor in serving as investment advisor to the Fund for the twelve months ended December 31, 2019 and the estimated profitability level for the Fund
calculated by the Advisor based on such data, as well as complex-wide and product-line profitability data, for the same period. The Board noted the inherent limitations in the profitability analysis and concluded
that, based on the information provided, the Advisor’s profitability level for the Fund was not unreasonable. In addition, the Board considered fall-out benefits described by the Advisor that may be realized
from its relationship with the Fund. The Board considered that the Advisor had identified as a fall-out benefit to the Advisor and FTP their exposure to investors and brokers who, absent their exposure to the Fund,
may have had no dealings with the Advisor or FTP. The Board also considered the Advisor’s compensation for fund reporting services provided to the Fund pursuant to a separate Fund Reporting Services Agreement,
which is paid from the unitary fee. The Board concluded that the character and amount of potential fall-out benefits to the Advisor were not unreasonable.
Based on all of the
information considered and the conclusions reached, the Board, including the Independent Trustees, unanimously determined that the terms of the Advisory Agreement continue to be fair and reasonable and that the
continuation of the Advisory Agreement 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 May 11, 2020
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 June 1, 2019 (the initial compliance date for certain requirements of Rule 22e-4) through the Liquidity Committee’s annual meeting held on March 20, 2020 and assessed the Program’s adequacy and
effectiveness of implementation during this period, including the operation of the highly liquid investment minimum for each fund that is required under the Program to have one, and any material changes to the
Program. Note that because the Fund primarily holds assets that are highly liquid investments, the Fund has not adopted a highly liquid investment minimum.
As stated in the written
report, during the review period, no fund breached the 15% limitation on illiquid investments, no fund with a highly liquid investment minimum breached that minimum and no fund filed a Form N-LIQUID. The Advisor
concluded that each fund’s investment strategy is appropriate for an open-end fund; that the Program operated effectively in all material respects during the review period; and that the Program is reasonably
designed to assess and manage the liquidity risk of each fund and to maintain compliance with Rule 22e-4.
Page 28
Board of Trustees and Officers
First Trust SSI
Strategic Convertible Securities ETF (FCVT)
October 31, 2020
(Unaudited)
The following tables
identify the Trustees and Officers of the Trust. Unless otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite 400, Wheaton, IL 60187.
The Trust’s
statement of additional information includes additional information about the Trustees and is available, without charge, upon request, by calling (800) 988-5891.
| Name, Year of Birth and Position with the Trust | Term of Office and Year First Elected or Appointed |
Principal Occupations
During Past 5 Years |
Number of Portfolios in the First Trust Fund Complex Overseen by Trustee | Other Trusteeships or Directorships Held by Trustee During Past 5 Years |
| INDEPENDENT TRUSTEES | ||||
|
Richard E. Erickson, Trustee
(1951) |
• Indefinite Term
• Since Inception |
Physician; Officer, Wheaton Orthopedics; Limited Partner, Gundersen Real Estate Limited Partnership (June 1992 to December 2016); Member, Sportsmed LLC (April 2007 to November 2015) | 189 | None |
|
Thomas R. Kadlec, Trustee
(1957) |
• Indefinite Term
• Since Inception |
President, ADM Investor Services, Inc. (Futures Commission Merchant) | 189 | Director of ADM Investor Services, Inc., ADM Investor Services International, Futures Industry Association, and National Futures Association |
|
Robert F. Keith, Trustee
(1956) |
• Indefinite Term
• Since Inception |
President, Hibs Enterprises (Financial and Management Consulting) | 189 | Director of Trust Company of Illinois |
|
Niel B. Nielson, Trustee
(1954) |
• Indefinite Term
• Since Inception |
Senior Advisor (August 2018 to Present), Managing Director and Chief Operating Officer (January 2015 to August 2018), Pelita Harapan Educational Foundation (Educational Products and Services) | 189 | None |
| INTERESTED TRUSTEE | ||||
|
James A. Bowen(1), Trustee and
Chairman of the Board (1955) |
• Indefinite Term
• Since Inception |
Chief Executive Officer, First Trust Advisors L.P. and First Trust Portfolios L.P.; Chairman of the Board of Directors, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) | 189 | None |
| (1) | Mr. Bowen is deemed an “interested person” of the Trust due to his position as CEO of First Trust Advisors L.P., investment advisor of the Trust. |
Page 29
Board of Trustees and Officers (Continued)
First Trust SSI
Strategic Convertible Securities ETF (FCVT)
October 31, 2020
(Unaudited)
|
Roger F. Testin
(1966) |
Vice President |
• Indefinite Term
• Since Inception |
Senior Vice President, First Trust Advisors L.P. and First Trust Portfolios L.P. |
|
Stan Ueland
(1970) |
Vice President |
• Indefinite Term
• Since Inception |
Senior Vice President, First Trust Advisors L.P. and First Trust Portfolios L.P |
| (2) | The term “officer” means the president, vice president, secretary, treasurer, controller or any other officer who performs a policy making function. |
Page 30
Privacy Policy
First Trust SSI
Strategic Convertible Securities ETF (FCVT)
October 31, 2020
(Unaudited)
Privacy Policy
First Trust values our
relationship with you and considers your privacy an important priority in maintaining that relationship. We are committed to protecting the security and confidentiality of your personal information.
Sources of Information
We collect nonpublic
personal information about you from the following sources:
| • | Information we receive from you and your broker-dealer, investment advisor or financial representative through interviews, applications, agreements or other forms; |
| • | Information about your transactions with us, our affiliates or others; |
| • | Information we receive from your inquiries by mail, e-mail or telephone; and |
| • | Information we collect on our website through the use of “cookies”. For example, we may identify the pages on our website that your browser requests or visits. |
Information Collected
The type of data we
collect may include your name, address, social security number, age, financial status, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history,
investment objectives, marital status, family relationships and other personal information.
Disclosure of
Information
We do not disclose any
nonpublic personal information about our customers or former customers to anyone, except as permitted by law. In addition to using this information to verify your identity (as required under law), the permitted uses
may also include the disclosure of such information to unaffiliated companies for the following reasons:
| • | In order to provide you with products and services and to effect transactions that you request or authorize, we may disclose your personal information as described above to unaffiliated financial service providers and other companies that perform administrative or other services on our behalf, such as transfer agents, custodians and trustees, or that assist us in the distribution of investor materials such as trustees, banks, financial representatives, proxy services, solicitors and printers. |
| • | We may release information we have about you if you direct us to do so, if we are compelled by law to do so, or in other legally limited circumstances (for example to protect your account from fraud). |
In addition, in order to
alert you to our other financial products and services, we may share your personal information within First Trust.
Use of Website
Analytics
We currently use third
party analytics tools, Google Analytics and AddThis, to gather information for purposes of improving First Trust’s website and marketing our products and services to you. These tools employ cookies, which are
small pieces of text stored in a file by your web browser and sent to websites that you visit, to collect information, track website usage and viewing trends such as the number of hits, pages visited, videos and PDFs
viewed and the length of user sessions in order to evaluate website performance and enhance navigation of the website. We may also collect other anonymous information, which is generally limited to technical and web
navigation information such as the IP address of your device, internet browser type and operating system for purposes of analyzing the data to make First Trust’s website better and more useful to our users. The
information collected does not include any personal identifiable information such as your name, address, phone number or email address unless you provide that information through the website for us to contact you in
order to answer your questions or respond to your requests. To find out how to opt-out of these services click on: Google Analytics and AddThis.
Confidentiality and
Security
With regard to our
internal security procedures, First Trust restricts access to your nonpublic personal information to those First Trust employees who need to know that information to provide products or services to you. We maintain
physical, electronic and procedural safeguards to protect your nonpublic personal information.
Policy Updates and
Inquiries
As required by federal
law, we will notify you of our privacy policy annually. We reserve the right to modify this policy at any time, however, if we do change it, we will tell you promptly. For questions about our policy, or for additional
copies of this notice, please go to www.ftportfolios.com, or contact us at 1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust Advisors).
March 2019
Page 31
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite
400
Wheaton, IL 60187
INVESTMENT SUB-ADVISOR
SSI Investment Management LLC
9440 Santa Monica Blvd, 8th
Floor
Beverly Hills, CA 90210
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
FUND ACCOUNTANT &
TRANSFER AGENT
Brown Brothers Harriman &
Co.
50 Post Office Square
Boston, MA 02110
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
FIRST TRUST First Trust Exchange-Traded Fund IV -------------------------------------------------------------------------------- First Trust Long Duration Opportunities ETF (LGOV) ------------------ Annual Report For the Year Ended October 31, 2020 ------------------ <PAGE> --------------------------------------------------------------------------------TABLE OF CONTENTS -------------------------------------------------------------------------------- FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) ANNUAL REPORT OCTOBER 31, 2020 Shareholder Letter........................................................... 1 Fund Performance Overview.................................................... 2 Portfolio Commentary......................................................... 5 Understanding Your Fund Expenses............................................. 7 Portfolio of Investments..................................................... 8 Statement of Assets and Liabilities.......................................... 11 Statement of Operations...................................................... 12 Statement of Changes in Net Assets........................................... 13 Financial Highlights......................................................... 14 Notes to Financial Statements................................................ 15 Report of Independent Registered Public Accounting Firm...................... 24 Additional Information....................................................... 25 Board of Trustees and Officers............................................... 30 Privacy Policy............................................................... 32 CAUTION REGARDING FORWARD-LOOKING STATEMENTS This report contains certain forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding the goals, beliefs, plans or current expectations of First Trust Advisors L.P. ("First Trust" or the "Advisor") and its representatives, taking into account the information currently available to them. Forward-looking statements include all statements that do not relate solely to current or historical fact. For example, forward-looking statements include the use of words such as "anticipate," "estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or other words that convey uncertainty of future events or outcomes. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the series of First Trust Exchange-Traded Fund IV (the "Trust") described in this report (First Trust Long Duration Opportunities ETF; hereinafter referred to as the "Fund") to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. When evaluating the information included in this report, you are cautioned not to place undue reliance on these forward-looking statements, which reflect the judgment of the Advisor and its representatives only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events and circumstances that arise after the date hereof. PERFORMANCE AND RISK DISCLOSURE There is no assurance that the Fund will achieve its investment objective. The Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the Fund's shares may therefore be less than what you paid for them. Accordingly, you can lose money investing in the Fund. See "Risk Considerations" in the Additional Information section of this report for a discussion of other risks of investing in the Fund. Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. For the most recent month-end performance figures, please visit www.ftportfolios.com or speak with your financial advisor. Investment returns, net asset value and share price will fluctuate and Fund shares, when sold, may be worth more or less than their original cost. The Advisor may also periodically provide additional information on Fund performance on the Fund's webpage at www.ftportfolios.com. HOW TO READ THIS REPORT This report contains information that may help you evaluate your investment in the Fund. It includes details about the Fund and presents data and analysis that provide insight into the Fund's performance and investment approach. By reading the portfolio commentary from the portfolio management team of the Fund, you may obtain an understanding of how the market environment affected the Fund's performance. The statistical information that follows may help you understand the Fund's performance compared to that of relevant market benchmark. It is important to keep in mind that the opinions expressed by personnel of the Advisor are just that: informed opinions. They should not be considered to be promises or advice. The opinions, like the statistics, cover the period through the date on the cover of this report. The material risks of investing in the Fund are spelled out in the prospectus, the statement of additional information, and other Fund regulatory filings. <PAGE> -------------------------------------------------------------------------------- SHAREHOLDER LETTER -------------------------------------------------------------------------------- FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) ANNUAL LETTER FROM THE CHAIRMAN AND CEO OCTOBER 31, 2020 Dear Shareholders: First Trust is pleased to provide you with the annual report for the First Trust Long Duration Opportunities ETF (the "Fund"), which contains detailed information about the Fund for the twelve months ended October 31, 2020. As I was collecting my thoughts for this annual roundup it occurred to me that my message this year should touch on the tone of the markets and the investing climate rather than belabor all the news and events that brought us to this juncture. We all know how tumultuous our lives have become over the past eight or so months. The phrase "shelter-at-home" says it all. I would rather talk about why I believe investors should be optimistic about where we could be headed. Having said that, allow me to at least acknowledge the two elephants in the room: the coronavirus ("COVID-19") and the election. In the first 12 days of November, we learned the following: that we likely have a new president-elect (Joe Biden), though it may not be official for some time because it is being contested by President Donald Trump and some of his loyal backers in the Republican Party citing voter fraud in certain states; that we still do not know which political party will have control of the Senate due to a couple of run-offs in Georgia to be held on January 5, 2021; and, that it looks as though we may be fortunate enough to have an FDA-approved COVID-19 vaccine by either the end of 2020 or the start of 2021, though that too is not yet official. It could be a game-changer in the COVID-19 battle. And, we may gain access to additional vaccines as well. The key to getting the economy back to running on all cylinders is to fully reopen, and a vaccine is "what the doctor ordered." With respect to the tone of the markets and investment climate, to say that I am encouraged about what has transpired in 2020 would be an understatement. Despite the extraordinary challenges so far this year, the S&P 500(R) Index posted a total return of 2.77% over the first 10 months of 2020, this despite plunging 33.8% into bear market territory from February 19, 2020 through March 23, 2020, according to Bloomberg. As impressive as that feat is, the future looks even brighter. While Bloomberg's consensus earnings growth rate estimate for the S&P 500(R) Index for 2020 was -16.51%, as of November 13, 2020, its 2021 and 2022 estimates were 21.74% and 16.95%, respectively. That is a strong take on the prospects for a rebound in Corporate America over the next 24 months. One of the tailwinds that is providing a good deal of support to the economy and markets is the decision by the Federal Reserve (the "Fed") to keep interest rates artificially low for as long as need be to meet both its employment and inflation targets. By keeping rates lower for longer, the Fed is essentially inviting investors to assume more risk to generate higher returns. Brian Wesbury, Chief Economist at First Trust, believes that the Fed could need until 2024 to accomplish its goals. That is a lot of runway for investors to reposition their portfolios, if needed, and a very generous, and perhaps unprecedented, amount of guidance from the Fed, in our opinion. Those investors with cash on the sidelines earning next to nothing have options if they choose to act. We are encouraged about the prospects for the economy and the markets, but investors should be prepared to weather some volatility until the COVID-19 pandemic is better contained. As always, we encourage investors to stay the course! Thank you for giving First Trust the opportunity to play a role in your financial future. We value our relationship with you and will report on the Fund again in six months. Sincerely, /s/ James A. Bowen James A. Bowen Chairman of the Board of Trustees Chief Executive Officer of First Trust Advisors L.P. Page 1 <PAGE> -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) -------------------------------------------------------------------------------- FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) The First Trust Long Duration Opportunities ETF's (the "Fund") primary investment objective is to generate current income with a focus on preservation of capital. Under normal market conditions, the Fund will invest at least 80% of its net assets (including investment borrowings) in a portfolio of investment-grade debt securities issued or guaranteed by the U.S. government, its agencies or government-sponsored entities, including publicly-issued U.S. Treasury securities and mortgage-related securities. The Fund may also invest in exchange-traded funds ("ETFs") that principally invest in such securities. The Fund may purchase mortgage-related securities in "to-be-announced" transactions ("TBA Transactions"), including mortgage dollar rolls.<TABLE> <CAPTION> ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL CUMULATIVE TOTAL RETURNS TOTAL RETURNS 1 Year Ended Inception (1/22/19) Inception (1/22/19) 10/31/20 to 10/31/20 to 10/31/20 <S> <C> <C> <C> FUND PERFORMANCE NAV 7.46% 12.17% 22.59% Market Price 9.37% 12.64% 23.48% INDEX PERFORMANCE ICE BofA 5+ Year US Treasury Index 10.73% 13.60% 25.36% ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> Total returns for the periods since inception are calculated from the inception date of the Fund. "Average Annual Total Returns" represent the average annual change in value of an investment over the period indicated. "Cumulative Total Returns" represent the total change in value of an investment over the periods indicated. The Fund's per share net asset value ("NAV") is the value of one share of the Fund and is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of outstanding shares. The price used to calculate market return ("Market Price") is determined by using the midpoint of the national best bid and offer price ("NBBO") as of the time that the Fund's NAV is calculated. Under SEC rules, the NBBO consists of the highest displayed buy and lowest sell prices among the various exchanges trading the Fund a the time the Fund's NAV is calculated. Prior to January 1, 2019, the price used was the midpoint between the highest bid and the lowest offer on the stock exchange on which shares of the Fund were listed for trading as of the time that the Fund's NAV was calculated. Since shares of the Fund did not trade in the secondary market until after its inception, for the period from inception to the first day of secondary market trading in shares of the Fund, the NAV of the Fund is used as a proxy for the secondary market trading price to calculate market returns. NAV and market returns assume that all distributions have been reinvested in the Fund at NAV and Market Price, respectively. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The total returns presented reflect the reinvestment of dividends on securities in the index. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future performance. Page 2 <PAGE> --------------------------------------------------------------------------------FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) --------------------------------------------------------------- % OF FUND ALLOCATION NET ASSETS --------------------------------------------------------------- U.S. Government Agency Mortgage-Backed Securities 80.0% U.S. Government Bonds and Notes 8.5 Exchange Traded Funds 0.6 Money Market Funds 36.9 Call Options Purchased 0.0* Put Options Written (0.0)* Net Other Assets and Liabilities(1) (26.0) ------- Total 100.0% ======= * Amount is less than 0.05%.--------------------------------------------------------------- % OF TOTAL LONG FIXED-INCOME CREDIT QUALITY(3) INVESTMENTS & CASH --------------------------------------------------------------- Government and Agency 70.53% Cash & Cash Equivalents 29.47 ------- Total 100.00% ======= --------------------------------------------------------------- % OF LONG-TERM TOP TEN HOLDINGS INVESTMENTS(2) --------------------------------------------------------------- Federal National Mortgage Association, Pool TBA, 2.00%, 12/15/50 10.64% Government National Mortgage Association, Series 2010-61, Class KE, 5.00%, 05/16/40 8.81 U.S. Treasury Bond, 1.25%, 05/15/50 7.05 Federal National Mortgage Association, Series 2015-66, Class CL, 3.50%, 07/25/41 5.62 Federal National Mortgage Association, Pool TBA, 1.50%, 12/15/50 5.19 Government National Mortgage Association, Series 2020-159, Class Z, 2.50%, 10/16/62 3.81 Government National Mortgage Association, Series 2020-145, Class BD, 2.30%, 03/16/63 3.74 Federal National Mortgage Association, Series 2020-17, Class L, 2.50%, 03/25/50 3.71 Federal Home Loan Mortgage Corporation, Pool U99176, 4.00%, 12/01/47 3.42 Federal National Mortgage Association, Series 2005-74, Class NZ, 6.00%, 09/25/35 2.91 ------- Total 54.90% ======= --------------------------------------------------------------- WEIGHTED AVERAGE EFFECTIVE NET DURATION --------------------------------------------------------------- October 31, 2020 11.55 Years High - December 31, 2019 12.47 Years Low - April 30, 2020 9.14 Years ----------------------------- (1) Includes variation margin on futures. (2) Percentages are based on the long positions only. Money market funds are excluded. (3) The ratings are by Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc. A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO), of the creditworthiness of an issuer with respect to debt obligations. Ratings are measured highest to lowest on a scale that generally ranges from AAA to D for long-term ratings and A-1+ to C for short-term ratings. Investment grade is defined as those issuers that have a long-term credit rating of BBB- or higher or a short-term credit rating of A-3 or higher. The credit ratings shown relate to the credit worthiness of the issuers of the underlying securities in the Fund, and not to the Fund or its shares. U.S. Treasury and U.S. Agency mortgage-backed securities appear under "Government and Agency". Credit ratings are subject to change. Page 3 <PAGE> --------------------------------------------------------------------------------FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) <TABLE> <CAPTION> PERFORMANCE OF A $10,000 INITIAL INVESTMENT JANUARY 22, 2019 - OCTOBER 31, 2020 First Trust Long Duration ICE BofA 5+ Year Opportunities ETF US Treasury Index <S> <C> <C> 1/22/19 $10,000 $10,000 4/30/19 10,425 10,273 10/31/19 11,408 11,321 4/30/20 12,436 12,839 10/31/20 12,259 12,536 </TABLE> Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS Information showing the number of days the market price of the Fund's shares was greater (at a premium) and less (at a discount) than the Fund's net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx. Page 4 <PAGE> -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY -------------------------------------------------------------------------------- FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) ANNUAL REPORT OCTOBER 31, 2020 (UNAUDITED) ADVISOR First Trust Advisors L.P. ("First Trust" or the "Advisor") is the investment advisor to the First Trust Long Duration Opportunities ETF (the "Fund" or "LGOV"). First Trust is responsible for the selection and ongoing monitoring of the securities in the Fund's portfolio and certain other services necessary for the management of the portfolio. PORTFOLIO MANAGEMENT TEAM JEREMIAH CHARLES - SENIOR VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER, FIRST TRUST SECURITIZED PRODUCTS GROUP JAMES SNYDER - SENIOR VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER, FIRST TRUST SECURITIZED PRODUCTS GROUP COMMENTARY The Fund's 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. MARKET RECAP The 12-month period ended October 31, 2020 began relatively calmly, being driven primarily by policy decisions related to the trade war. The onset of the coronavirus ("COVID-19") pandemic triggered an unprecedented liquidity crisis across global markets, with its effects rippling through the domestic and global economies and causing profound changes in both bond and equity market fundamentals, risk factors and valuations. Due to the nature of this pandemic, the reversal in monetary policy driven by the trade war was put into overdrive. In response, the Federal Reserve (the "Fed") began a new phase of seemingly limitless quantitative easing, and reinstated programs that were last relied upon during the Great Recession of 2008. It also began to roll out new programs, expanding the range of covered asset classes, providing a backstop to the significant dislocations and severe illiquidity that occurred. The Fed further aided markets with emergency rate cuts totaling 150 basis points ("bps") in March 2020 and setting the lower bound of the Fed Funds rate at 0%. The Fed was not alone in providing aid, as Congress stepped in with a large stimulus package to help Americans weather COVID-19 and its effects. Treasury issuance as a result has soared to buoy government spending, however, with the aid of quantitative easing ("QE") programs and a continued demand for safe haven assets, Treasury yields plunged to record lows. For example, over the last year, the 2-Year Treasury yield has declined precipitously by -137 bps to close on October 31, 2020 at 15 bps, while the 10-Year Treasury fell -82 bps to close the year at 87.4 bps, with the curve bull steepening. The COVID-19 panic did not discriminate, affecting nearly every aspect of the broader spread markets, including Agency Mortgage-Backed Securities ("MBS"), which initially saw large spread widening moves as Agency MBS spreads widened dramatically from the low 40s Treasury Option-Adjusted Spread ("OAS"), to a wide of 136 OAS. Agency MBS spreads tightened to close the fiscal year at 64 OAS, as the impact of Fed programs and legislative support helped improve liquidity and greatly improved market participants risk appetite. PERFORMANCE ANALYSIS For the 12-month period ended October 31, 2020, the Fund returned 7.46% on a net asset value ("NAV") basis, net of fees. Since the Fund's inception on January 22, 2019, the Fund has returned 22.59% on a cumulative NAV basis, net of fees. During 12-month period ended October 31, 2020, the ICE BofA 5+ Year US Treasury Index (the "Index") returned 10.73%. Since the Fund's inception on January 22, 2019, the Index has returned 25.36% on a cumulative basis. During the 12-month period ended October 31, 2020, the Fund underperformed the Index by -327 bps, net of fees. The Fund is structured to own a significant percentage of the fund in Agency MBS securities, whereas the benchmark is a pure treasury and agency index. Agency MBS experienced substantial widening during the severe illiquidity that gripped the fixed income markets during the early stages of the COVID-19 pandemic unfolding in America. As markets digested the rapid pace of lockdowns, uncertainties on future economic health, and the Fed's rapidly evolving market support, Treasury yields plunged in an outright flight to quality. The negative convexity associated with mortgage securities coupled with spread widening was also detrimental to the Fund in terms of keeping up with the violent Treasury market rally. As the year progressed and the Fed continued to unveil the ever-broadening scope of its market support, coupled with legislative initiatives, risk assets staged a dramatic comeback that has persisted into the close of the fiscal year. As such, valuations on Agency MBS have improved, which helped the fund to recover from the illiquid markets Page 5 <PAGE> -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) ANNUAL REPORT OCTOBER 31, 2020 (UNAUDITED) exhibited in March 2020. Since March 25, 2020, the Fund has outperformed its 5+year treasury benchmark in excess of 200 bps. A benefit to performance was attributable to pricing performance of select odd lot Agency MBS positions at the time of purchase. The Fund's portfolio managers reasonably expect that such investments in odd lot positions could continue to impact the Fund's performance to the extent the Fund continues to grow. Additionally, given the significant rally in treasury yields in the first quarter of 2020, followed by a modest selloff in treasury yields later in the year, the Fund's usage of derivatives to manage overall interest rate risk, volatility, and convexity was mildly detrimental to the Fund's performance over the 12-month period ended October 31, 2020. MARKET OUTLOOK The Fed has deployed emergency rate cuts, large scale QE, unprecedented lending programs and has signaled it plans to be highly accommodative for some time to come. We believe this will keep the front end of the yield curve anchored in place in the near term, with any rate volatility centralized in the longer maturity segments of the yield curve. We do expect consumer and overall economic data to continue to recover, with the recovery likely to accelerate on the back of any potential additional stimulus package, as well as any positive developments in COVID-19 treatment and vaccines to combat the pandemic. On the other side of that, a rapid acceleration of the pandemic, and corresponding enhanced large-scale restrictions or lockdowns could be quite detrimental to our growth forecast. Over the near term, we expect no rise in inflation, but given the surge in the money supply and dollar weakness, we could see inflationary pressure build over the medium term. We remain positive on MBS spread valuations over the longer term and believe there is additional capacity for spread tightening to occur. Lastly, while we do generally expect interest rate volatility to remain somewhat muted due to ongoing fiscal and monetary programs deployed to assist in fighting the virus, chiefly quantitative easing and the potential for a yield curve control type program by the Fed, we are mindful that volatility could spike around the U.S. elections in November 2020. Given our outlook on the broader bond markets, we plan to continue to actively manage the Fund versus the Index from a duration standpoint, especially after the dramatic declines in Treasury yields to such uneconomic levels. To the extent the curve sees a large bear steepening, likely due to inflation, supply or volatility, we will look to take advantage of higher, longer maturity yields. Across the mortgage sector, prepayments remain extremely elevated due to low interest rates and mortgage buybacks. As such, we continue to favor select, call protected locked out collateralized mortgage obligation ("CMO") structures, Agency Multifamily Commercial Mortgage-Backed Securities, and select TBA securities. Our goal is simple. Lock in longer, more certain mortgage cashflow in government guaranteed sectors, with little to no credit loss risk, protecting for a strategic period the yield, income, dividend and spread for the Fund's shareholders. Over time, we expect others will need those same characteristics and those bonds will become dearer and outperform. We continue to maintain exceptional liquidity within a difficult environment allowing us the ability to take advantage of opportunities. Page 6 <PAGE> FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) UNDERSTANDING YOUR FUND EXPENSES OCTOBER 31, 2020 (UNAUDITED) As a shareholder of First Trust Long Duration Opportunities ETF (the "Fund"), you incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, if any, and other Fund expenses. This Example is intended to help you understand your ongoing costs of investing in the Fund and to compare these costs with the ongoing costs of investing in other funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held through the six-month period ended October 31, 2020. ACTUAL EXPENSES The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Six-Month Period" to estimate the expenses you paid on your account during this six-month period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the following table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as brokerage commissions. Therefore, the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.<TABLE> <CAPTION> ----------------------------------------------------------------------------------------------------------------------- ANNUALIZED EXPENSE RATIO EXPENSES PAID BEGINNING ENDING BASED ON THE DURING THE ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH MAY 1, 2020 OCTOBER 31, 2020 PERIOD (a) PERIOD (a) (b) ----------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) Actual $1,000.00 $ 985.70 0.65% $3.24 Hypothetical (5% return before expenses) $1,000.00 $1,021.87 0.65% $3.30 </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 (May 1, 2020 through October 31, 2020), multiplied by 184/366 (to reflect the six-month period). Page 7 <PAGE>FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) PORTFOLIO OF INVESTMENTS OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------ ------------ ---------------- <S> <C> <C> <C> <C> U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 80.0% COLLATERALIZED MORTGAGE OBLIGATIONS -- 44.5% Federal Home Loan Mortgage Corporation $ 212,405 Series 2003-2649, Class IM, IO............................... 7.00% 07/15/33 $ 40,813 264,000 Series 2010-3653, Class UJ................................... 5.00% 04/15/40 347,674 540,219 Series 2013-4239, Class OU, PO............................... (a) 07/15/43 474,416 137,194 Series 2013-4255, Class SN, 1 Mo. LIBOR (x) -2.67 + 12.27% (b)........................ 11.87% 05/15/35 189,566 303,769 Series 2020-4980, Class ZU................................... 3.00% 06/25/50 313,923 Federal National Mortgage Association 153,296 Series 2005-69, Class JI, IO................................. 6.00% 08/25/35 34,903 402,825 Series 2005-74, Class NZ..................................... 6.00% 09/25/35 562,855 1,094,103 Series 2005-113, Class AI, IO, 1 Mo. LIBOR (x) -1 + 7.23% (b)............................ 7.08% 01/25/36 243,475 146,221 Series 2008-94, Class JS, 1 Mo. LIBOR (x) -6 + 30.00% (b).... 29.10% 04/25/36 273,230 433,000 Series 2012-93, Class LY..................................... 2.50% 09/25/42 453,902 173,000 Series 2013-3, Class BC...................................... 2.50% 12/25/42 169,728 165,982 Series 2015-34, Class OK, PO................................. (a) 03/25/44 162,247 944,376 Series 2015-66, Class CL..................................... 3.50% 07/25/41 1,086,509 298,685 Series 2016-23, Class PL..................................... 3.00% 11/25/45 325,071 351,012 Series 2016-101, Class ZP.................................... 3.50% 01/25/47 390,601 395,045 Series 2018-9, Class PL...................................... 3.50% 02/25/48 443,076 166,132 Series 2018-94, Class KZ..................................... 4.50% 01/25/49 220,939 87,952 Series 2018-94, Class LZ..................................... 4.50% 01/25/49 116,459 710,669 Series 2020-17, Class L...................................... 2.50% 03/25/50 718,085 Government National Mortgage Association 270,630 Series 2009-32, Class ZA..................................... 5.50% 05/20/39 336,658 1,292,000 Series 2010-61, Class KE..................................... 5.00% 05/16/40 1,703,568 665,228 Series 2015-168, Class GI, IO................................ 5.50% 02/16/33 112,866 82,163 Series 2016-63, Class NZ..................................... 3.00% 05/20/46 82,591 403,000 Series 2018-112, Class CG.................................... 3.50% 08/20/48 426,779 423,220 Series 2018-125, Class KZ.................................... 3.50% 09/20/48 442,515 ---------------- 9,672,449 ---------------- COMMERCIAL MORTGAGE-BACKED SECURITIES -- 18.3% Federal Home Loan Mortgage Corporation Multifamily Structured Pass Through Certificates 7,808,598 Series 2014-K036, Class X1, IO (c)........................... 0.72% 10/25/23 147,992 39,879,125 Series 2018-K156, Class X1, IO (c)........................... 0.07% 06/25/33 423,213 4,645,000 Series 2019-K093, Class XAM, IO (c).......................... 1.19% 05/25/29 427,665 1,696,406 Series 2019-K095, Class X1, IO (c)........................... 0.95% 06/25/29 120,280 1,200,000 Series 2019-K095, Class XAM, IO (c).......................... 1.24% 06/25/29 118,296 1,999,516 Series 2020-1515, Class X1, IO (c)........................... 1.51% 02/25/35 318,419 2,648,379 Series 2020-1516, Class X1, IO (c)........................... 1.51% 05/25/35 445,577 3,499,712 Series 2020-1517, Class X1, IO (c)........................... 1.33% 07/25/35 509,899 Government National Mortgage Association 768,760 Series 2020-145, Class BD (d)................................ 2.30% 03/16/63 723,463 830,408 Series 2020-159, Class Z (d)................................. 2.50% 10/16/62 737,846 ---------------- 3,972,650 ---------------- PASS-THROUGH SECURITIES -- 17.2% Federal Home Loan Mortgage Corporation 601,918 Pool U99176.................................................. 4.00% 12/01/47 661,854 Federal National Mortgage Association 1,000,000 Pool TBA..................................................... 1.50% 12/15/50 1,004,765 2,000,000 Pool TBA (e)................................................. 2.00% 12/15/50 2,058,594 ---------------- 3,725,213 ---------------- TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES..................................... 17,370,312 (Cost $16,546,161) ---------------- </TABLE> Page 8 See Notes to Financial Statements <PAGE> FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 <TABLE> <CAPTION> PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- ---------------------------------------------------------------- ------------ ------------ ---------------- <S> <C> <C> <C> <C> U.S. GOVERNMENT BONDS AND NOTES -- 8.5% $ 500,000 U.S. Treasury Bond.............................................. 1.13% 05/15/40 $ 477,187 1,500,000 U.S. Treasury Bond.............................................. 1.25% 05/15/50 1,363,125 ---------------- TOTAL U.S. GOVERNMENT BONDS AND NOTES....................................................... 1,840,312 (Cost $1,883,906) ---------------- </TABLE> <TABLE> <CAPTION> SHARES DESCRIPTION VALUE ---------------- -------------------------------------------------------------------------------------------- ---------------- <S> <C> <C> EXCHANGE-TRADED FUNDS -- 0.6% CAPITAL MARKETS -- 0.6% 850 iShares 20+ Year Treasury Bond ETF.......................................................... 133,935 ---------------- TOTAL EXCHANGE-TRADED FUNDS................................................................. 133,935 (Cost $115,923) ---------------- MONEY MARKET FUNDS -- 36.9% 8,025,633 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 0.01% (f).......................................................... 8,025,633 (Cost $8,025,633) ---------------- TOTAL INVESTMENTS -- 126.0%................................................................. 27,370,192 (Cost $26,571,623) (g) ---------------- </TABLE> <TABLE> <CAPTION> NUMBER OF NOTIONAL EXERCISE EXPIRATION CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE ---------------- -------------------------------------------------- ------------ ------------ ------------ ---------------- <S> <C> <C> <C> <C> <C> CALL OPTIONS PURCHASED -- 0.0% 6 U.S. Treasury Long Bond Futures Call.............. $ 1,034,813 $ 175.00 Nov-2020 6,656 (Cost $7,901) ---------------- PUT OPTIONS WRITTEN -- (0.0)% (3) U.S. Treasury Long Bond Futures Put............... (517,406) 171.00 Nov-2020 (4,594) (Premiums received $3,503) ---------------- NET OTHER ASSETS AND LIABILITIES -- (26.0)%................................................. (5,647,318) ---------------- NET ASSETS -- 100.0%........................................................................ $ 21,724,936 ================ </TABLE> FUTURES CONTRACTS AT OCTOBER 31, 2020 (See Note 2D - Futures Contracts in the Notes to Financial Statements): <TABLE> <CAPTION> UNREALIZED APPRECIATION NUMBER OF EXPIRATION NOTIONAL (DEPRECIATION)/ FUTURES CONTRACTS POSITION CONTRACTS DATE VALUE VALUE ------------------------------------------------------- ----------- ----------- ----------- -------------- ---------------- <S> <C> <C> <C> <C> <C> U.S. Treasury Ultra Bond Futures Long 8 Dec-2020 $ 1,720,000 $ (18,910) U.S. 5-Year Treasury Notes Short 5 Dec-2020 (628,008) 291 -------------- ---------------- $ 1,091,992 $ (18,619) ============== ================ </TABLE> (a) Zero coupon security. (b) Inverse floating rate security. (c) Collateral Strip Rate security. Coupon is based on the weighted net interest rate of the investment's underlying collateral. The interest rate resets periodically. (d) Weighted Average Coupon security. Coupon is based on the blended interest rate of the underlying holdings, which may have different coupons. The coupon may change in any period. (e) All or a portion of this security is part of a mortgage dollar roll agreement (see Note 2I - Mortgage Dollar Rolls and TBA Transactions in the Notes to Financial Statements). See Notes to Financial Statements Page 9 <PAGE>FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 2020 (f) Rate shown reflects yield as of October 31, 2020. (g) Aggregate cost for federal income tax purposes is $26,583,694. As of October 31, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $1,015,235 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $245,294. The net unrealized appreciation was $769,941. The amounts presented are inclusive of derivative contracts. IO - Interest-Only Security - Principal amount shown represents par value on which interest payments are based.LIBOR - London Interbank Offered Rate PO - Principal-Only Security TBA - To-Be-Announced Security ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of October 31, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): <TABLE> <CAPTION> ASSETS TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 10/31/2020 PRICES INPUTS INPUTS --------------- --------------- --------------- --------------- <S> <C> <C> <C> <C> U.S. Government Agency Mortgage-Backed Securities $ 17,370,312 $ -- $ 17,370,312 $ -- U.S. Government Bonds and Notes.................... 1,840,312 -- 1,840,312 -- Exchange-Traded Funds*............................. 133,935 133,935 -- -- Money Market Funds................................. 8,025,633 8,025,633 -- -- --------------- --------------- --------------- --------------- Total Investments.................................. 27,370,192 8,159,568 19,210,624 -- Call Options Purchased............................. 6,656 6,656 -- -- Futures Contracts**................................ 291 291 -- -- --------------- --------------- --------------- --------------- Total.............................................. $ 27,377,139 $ 8,166,515 $ 19,210,624 $ -- =============== =============== =============== =============== LIABILITIES TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 10/31/2020 PRICES INPUTS INPUTS --------------- --------------- --------------- --------------- Put Options Written................................ $ (4,594) $ (4,594) $ -- $ -- Futures Contracts**................................ (18,910) (18,910) -- -- --------------- --------------- --------------- --------------- Total.............................................. $ (23,504) $ (23,504) $ -- $ -- =============== =============== =============== =============== </TABLE> * See Portfolio of Investments for industry breakout. ** Includes cumulative appreciation/depreciation on futures contracts as reported in the Futures Contracts table. Only the current day's variation margin is presented on the Statement of Assets and Liabilities.Page 10 See Notes to Financial Statements <PAGE> FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 2020 <TABLE> <CAPTION> ASSETS: <S> <C> Investments, at value.................................................. $ 27,370,192 Options contracts purchased, at value ................................. 6,656 Cash segregated as collateral for open futures contracts............... 161,774 Receivables: Investment securities sold.......................................... 2,064,347 Interest............................................................ 64,199 Dividends........................................................... 69 -------------- Total Assets..................................................... 29,667,237 -------------- LIABILITIES: Options contracts written, at value.................................... 4,594 Payables: Investment securities purchased..................................... 7,922,248 Investment advisory fees............................................ 11,501 Variation margin.................................................... 3,958 -------------- Total Liabilities................................................ 7,942,301 -------------- NET ASSETS............................................................. $ 21,724,936 ============== NET ASSETS CONSIST OF: Paid-in capital........................................................ 20,376,343 Par value.............................................................. 7,500 Accumulated distributable earnings (loss).............................. 1,341,093 -------------- NET ASSETS............................................................. $ 21,724,936 ============== NET ASSET VALUE, per share............................................. $ 28.97 ============== Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share).......................................... 750,002 ============== Investments, at cost................................................... $ 26,571,623 ============== Premiums paid on options contracts purchased........................... $ 7,901 ============== Premiums received on options contracts written......................... $ 3,503 ============== </TABLE> See Notes to Financial Statements Page 11 <PAGE>FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 2020 <TABLE> <CAPTION> INVESTMENT INCOME: <S> <C> Interest............................................................... $ 335,815 Dividends.............................................................. 12,518 -------------- Total investment income............................................. 348,333 -------------- EXPENSES: Investment advisory fees............................................... 88,022 Excise tax............................................................. 5,004 -------------- Total expenses...................................................... 93,026 -------------- NET INVESTMENT INCOME (LOSS)........................................... 255,307 -------------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments......................................................... 686,122 Futures contracts................................................... (10,216) Purchased options contracts......................................... (40,288) Written options contracts........................................... (2,678) -------------- Net realized gain (loss)............................................... 632,940 -------------- Net change in unrealized appreciation (depreciation) on: Investments......................................................... (176,119) Futures contracts................................................... (28,322) Purchased options contracts......................................... (1,245) Written options contracts........................................... (1,091) -------------- Net change in unrealized appreciation (depreciation)................... (206,777) -------------- NET REALIZED AND UNREALIZED GAIN (LOSS)................................ 426,163 -------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS..................................................... $ 681,470 ============== </TABLE> Page 12 See Notes to Financial Statements <PAGE> FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) STATEMENT OF CHANGES IN NET ASSETS <TABLE> <CAPTION> YEAR ENDED PERIOD ENDED 10/31/2020 10/31/2019 (a) -------------- --------------- <S> <C> <C> OPERATIONS: Net investment income (loss)........................................... $ 255,307 $ 218,064 Net realized gain (loss)............................................... 632,940 188,680 Net change in unrealized appreciation (depreciation)................... (206,777) 984,391 -------------- --------------- Net increase (decrease) in net assets resulting from operations........ 681,470 1,391,135 -------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations.................................................. (478,522) (183,881) -------------- --------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold.............................................. 11,691,878 11,437,545 Cost of shares redeemed................................................ (1,384,694) (1,429,995) -------------- --------------- Net increase (decrease) in net assets resulting from shareholder transactions............................................ 10,307,184 10,007,550 -------------- --------------- Total increase (decrease) in net assets................................ 10,510,132 11,214,804 NET ASSETS: Beginning of period.................................................... 11,214,804 -- -------------- --------------- End of period.......................................................... $ 21,724,936 $ 11,214,804 ============== =============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period................................ 400,002 -- Shares sold............................................................ 400,000 450,002 Shares redeemed........................................................ (50,000) (50,000) -------------- --------------- Shares outstanding, end of period...................................... 750,002 400,002 ============== =============== </TABLE> (a) Inception date is January 22, 2019, which is consistent with the commencement of investment operations and is the date the initial creation units were established. See Notes to Financial Statements Page 13 <PAGE>FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD <TABLE> <CAPTION> YEAR PERIOD ENDED ENDED 10/31/2020 10/31/2019 (a) -------------- -------------- <S> <C> <C> Net asset value, beginning of period $ 28.04 $ 25.00 ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.82 0.55 Net realized and unrealized gain (loss) 1.24 2.95 ---------- ---------- Total from investment operations 2.06 3.50 ---------- ---------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (1.13) (0.46) ---------- ---------- Net asset value, end of period $ 28.97 $ 28.04 ========== ========== TOTAL RETURN (b) 7.46% 14.08% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 21,725 $ 11,215 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets (c) 0.69% (d) 0.65% (e) Ratio of net investment income (loss) to average net assets 1.89% 2.64% (e) Portfolio turnover rate (f) 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) Includes excise tax. If this excise tax expense was not included, the expense ratio would have been 0.65%. (e) Annualized. (f) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. (g) The portfolio turnover rate not including mortgage dollar rolls was 118% and 104% for the periods ended October 31, 2020 and October 31, 2019, respectively.Page 14 See Notes to Financial Statements <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) OCTOBER 31, 2020 1. ORGANIZATION First Trust Exchange-Traded Fund IV (the "Trust") is an open-end management investment company organized as a Massachusetts business trust on September 15, 2010, and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust currently consists of nine funds that are offering shares. This report covers the First Trust Long Duration Opportunities ETF (the "Fund"), a non-diversified series of the Trust, which trades under the ticker "LGOV" on the NYSE Arca, Inc. ("NYSE Arca"). Unlike conventional mutual funds, the Fund issues and redeems shares on a continuous basis, at net asset value ("NAV"), only in large specified blocks consisting of 50,000 shares called a "Creation Unit." Creation Units are generally issued and redeemed for cash and, in certain circumstances, in-kind for securities in which the Fund invests, and only to and from broker-dealers and large institutional investors that have entered into participation agreements. Except when aggregated in Creation Units, the Fund's shares are not redeemable securities. The Fund is an actively managed exchange-traded fund ("ETF"). The Fund's primary investment objective is to generate current income with a focus on preservation of capital. The Fund seeks to achieve its investment objectives by investing, under normal market conditions, at least 80% of its net assets (including investment borrowings) in a portfolio of investment-grade debt securities issued or guaranteed by the U.S. government, its agencies or government-sponsored entities, including publicly-issued U.S. Treasury securities and mortgage-related securities. The Fund may also invest in exchange-traded funds ("ETFs") that principally invest in such securities. The Fund's investments in mortgage-related securities may include investments in fixed or adjustable-rate securities structured as "pass-through" securities and collateralized mortgage obligations, including residential and commercial mortgage-backed securities, stripped mortgage-backed securities and real estate mortgage investment conduits. The Fund will invest in mortgage-related securities issued or guaranteed by the U.S. government, its agencies (such as Ginnie Mae), and U.S. government-sponsored entities (such as Fannie Mae and Freddie Mac). The Fund may purchase government-sponsored mortgage-related securities in "to-be-announced" transactions ("TBA Transactions"), including mortgage dollar rolls. The Fund intends to enter into mortgage dollar rolls only with high quality securities dealers and banks, as determined by the Fund's investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"). In addition to its investment in securities issued or guaranteed by the U.S. government, its agencies and government-sponsored entities, the Fund may invest up to 20% of its net assets in other types of debt securities, including privately-issued, non-agency sponsored asset-backed and mortgage-related securities, futures contracts, options, swap agreements, cash and cash equivalents, and ETFs that invest principally in fixed income securities. Further, the Fund may enter into short sales as part of its overall portfolio management strategy, or to offset a potential decline in the value of a security; however, the Fund does not expect, under normal market conditions, to engage in short sales with respect to more than 30% of the value of its net assets. Although the Fund intends to invest primarily in investment grade securities, the Fund may invest up to 20% of its net assets in securities of any credit quality, including securities that are below investment grade, which are also known as high yield securities, or commonly referred to as "junk" bonds, or unrated securities that have not been judged by the Advisor to be of comparable quality to rated investment grade securities. In the case of a split rating between one or more of the nationally recognized statistical rating organizations, the Fund will consider the highest rating. The Fund targets a weighted average effective duration of eight or more years. 2. SIGNIFICANT ACCOUNTING POLICIES The Fund is considered an investment company and follows accounting and reporting guidance under Financial Accounting Standards Board Accounting Standards Codification Topic 946, "Financial Services-Investment Companies." The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of the financial statements. The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. PORTFOLIO VALUATION The Fund's NAV is determined daily as of the close of regular trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV is determined as of that time. Domestic debt securities and foreign securities are priced using data reflecting the earlier closing of the principal markets for those securities. The Fund's NAV is calculated by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding. The Fund's investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Advisor's Pricing Committee, in Page 15 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) OCTOBER 31, 2020 accordance with valuation procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act. Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. The Fund's investments are valued as follows: U.S. government securities, mortgage-backed securities, asset-backed securities and other debt securities are fair valued on the basis of valuations provided by dealers who make markets in such securities or by a third-party pricing service approved by the Trust's Board of Trustees, which may use the following valuation inputs when available: 1) benchmark yields; 2) reported trades; 3) broker/dealer quotes; 4) issuer spreads; 5) benchmark securities; 6) bids and offers; and 7) reference data including market research publications. Securities traded in an over-the-counter market are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price. Common stocks and other equity securities listed on any national or foreign exchange (excluding The Nasdaq Stock Market LLC ("Nasdaq") and the London Stock Exchange Alternative Investment Market ("AIM")) are valued at the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price. Securities traded on more than one securities exchange are valued at the last sale price or official closing price, as applicable, at the close of the securities exchange representing the principal market for such securities. Shares of open-end funds are valued at fair value which is based on NAV per share. Exchange-traded futures contracts are valued at the closing price in the market where such contracts are principally traded. If no closing price is available, exchange-traded futures contracts are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price. Exchange-traded options contracts are valued at the closing price in the market where such contracts are principally traded. If no closing price is available, exchange-traded options contracts are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price. Fixed income and other debt securities having a remaining maturity of sixty days or less when purchased are fair valued at cost adjusted for amortization of premiums and accretion of discounts (amortized cost), provided the Advisor's Pricing Committee has determined that the use of amortized cost is an appropriate reflection of fair value given market and issuer-specific conditions existing at the time of the determination. Factors that may be considered in determining the appropriateness of the use of amortized cost include, but are not limited to, the following: 1) the credit conditions in the relevant market and changes thereto; 2) the liquidity conditions in the relevant market and changes thereto; 3) the interest rate conditions in the relevant market and changes thereto (such as significant changes in interest rates); 4) issuer-specific conditions (such as significant credit deterioration); and 5) any other market-based data the Advisor's Pricing Committee considers relevant. In this regard, the Advisor's Pricing Committee may use last-obtained market-based data to assist it when valuing portfolio securities using amortized cost. Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Trust's Board of Trustees or its delegate, the Advisor's Pricing Committee, at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of the Fund's NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security's fair value. As a general principle, the current fair value of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities, including, but not limited to, the following: Page 16 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) OCTOBER 31, 2020 1) the fundamental business data relating to the issuer; 2) an evaluation of the forces which influence the market in which these securities are purchased and sold; 3) the type, size and cost of a security; 4) the financial statements of the issuer; 5) the credit quality and cash flow of the issuer, based on the Advisor's or external analysis; 6) the information as to any transactions in or offers for the security; 7) the price and extent of public trading in similar securities of the issuer/borrower, or comparable companies; 8) the coupon payments; 9) the quality, value and salability of collateral, if any, securing the security; 10) the business prospects of the issuer, including any ability to obtain money or resources from a parent or affiliate and an assessment of the issuer's management (for corporate debt only); 11) the prospects for the issuer's industry, and multiples (of earnings and/or cash flows) being paid for similar businesses in that industry (for corporate debt only); and 12) other relevant factors. The Fund is subject to fair value accounting standards that define fair value, establish the framework for measuring fair value and provide a three-level hierarchy for fair valuation based upon the inputs to the valuation as of the measurement date. The three levels of the fair value hierarchy are as follows: o Level 1 - Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis. o Level 2 - Level 2 inputs are observable inputs, either directly or indirectly, and include the following: o Quoted prices for similar investments in active markets. o Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly. o Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). o Inputs that are derived principally from or corroborated by observable market data by correlation or other means. o Level 3 - Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the investment. The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A summary of the inputs used to value the Fund's investments as of October 31, 2020, is included with the Fund's Portfolio of Investments. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income is recorded daily on the accrual basis. Amortization of premiums and accretion of discounts are recorded using the effective interest method. In July 2017, the Financial Conduct Authority ("FCA") announced that it will no longer persuade or compel banks to submit rates for the calculations of the London Interbank Offered Rates ("LIBOR") after 2021. Further, the FCA has subsequently stated, as recently as March 2020, that the central assumption continues to be that firms should not rely on LIBOR being published after the end of 2021. In the United States, the Alternative Reference Rates Committee (the "ARRC"), a group of market participants convened by the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of New York in cooperation with other federal and state government agencies, has since 2014 undertaken efforts to identify U.S. dollar reference interest rates as alternatives to LIBOR and to facilitate the mitigation of LIBOR-related risks. In June 2017, the ARRC identified the Secured Overnight Financing Rate ("SOFR"), a broad measure of the cost of cash overnight borrowing collateralized by U.S. Treasury securities, as the preferred alternative for U.S. dollar LIBOR. The Federal Reserve Bank of New York began daily publishing of SOFR in April 2018. At this time, it is not possible to predict the full impact of the elimination of LIBOR and the establishment of an alternative reference rate on the Fund or its investments. The Fund invests in interest-only securities. For these securities, if there is a change in the estimated cash flows, based on an evaluation of current information, then the estimated yield is adjusted. Additionally, if the evaluation of current information indicates a permanent impairment of the security, the cost basis of the security is written down and a loss is recognized. Debt obligations may be placed on non-accrual status and the related interest income may be reduced by ceasing current accruals and writing off Page 17 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) OCTOBER 31, 2020 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 October 31, 2020, the Fund had no when-issued, delayed-delivery securities. At October 31, 2020, the Fund held $2,058,594 of forward purchase commitments. C. SHORT SALES Short sales are utilized to manage interest rate and spread risk, and are transactions in which securities or other instruments (such as options, forwards, futures or other derivative contracts) are sold that are not currently owned in the Fund's portfolio. When the Fund engages in a short sale, the Fund must borrow the security sold short and deliver the security to the counterparty. Short selling allows the Fund to profit from a decline in a market price to the extent such decline exceeds the transaction costs and the costs of borrowing the securities. The Fund is charged a fee or premium to borrow the securities sold short and is obligated to repay the lenders of the securities. Any dividends or interest that accrues on the securities during the period of the loan are due to the lenders. A gain, limited to the price at which the security was sold short, or a loss, unlimited in size, will be recognized upon the termination of the short sale; which is effected by the Fund purchasing the security sold short and delivering the security to the lender. Any such gain or loss may be offset, completely or in part, by the change in the value of the long portion of the Fund's portfolio. The Fund is subject to the risk it may be unable to reacquire a security to terminate a short position except at a price substantially in excess of the last quoted price. Also, there is the risk that the counterparty to a short sale may fail to honor its contractual terms, causing a loss to the Fund. D. FUTURES CONTRACTS The Fund may purchase or sell (i.e., is long or short) exchange-listed futures contracts to hedge against changes in interest rates (interest rate risk). Futures contracts are agreements between the Fund and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the contract, futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date. Open futures contracts can also be closed out prior to settlement by entering into an offsetting transaction in a matching futures contract. If the Fund is not able to enter into an offsetting transaction, the Fund will continue to be required to maintain margin deposits on the futures contract. When the contract is closed or expires, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed or expired. This gain or loss is included in "Net realized gain (loss) on futures contracts" on the Statement of Operations. Upon entering into a futures contract, the Fund must deposit funds, called margin, with its custodian in the name of the clearing broker equal to a specified percentage of the current value of the contract. Open futures contracts are marked-to-market daily with the change in value recognized as a component of "Net change in unrealized appreciation (depreciation) on futures contracts" on the Statement of Operations. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are included in "Variation margin" receivable or payable on the Statement of Assets and Liabilities. If market conditions change unexpectedly, the Fund may not achieve the anticipated benefits of the futures contract and may realize a loss. The use of futures contracts involves the risk of imperfect correlation in movements in the price of the futures contracts, interest rates and the underlying instruments. E. OPTIONS CONTRACTS In the normal course of pursuing its investment objectives, the Fund may invest up to 20% of its net assets in derivative instruments in connection with hedging strategies. The Fund may invest in exchange-listed options on U.S. Treasury securities, exchange-listed options on U.S. Treasury futures contracts and exchange-listed U.S. Treasury futures contracts. The Fund uses derivative instruments primarily to hedge interest rate risk and actively manage interest rate exposure. The primary risk exposure is interest rate risk. The Fund may purchase (buy) or write (sell) put and call options on futures contracts and enter into closing transactions with respect to such options to terminate an existing position. A futures option gives the holder the right, in return for the premium paid, to assume a long position (call) or short position (put) in a futures contract at a specified exercise price prior to the expiration of the option. Upon exercise of a call option, the holder acquires a long position in the futures contract and the writer is assigned the opposite short position. In the case of a put option, the opposite is true. Prior to exercise or expiration, a futures option contract may be closed out by an offsetting purchase or sale of a futures option of the same series. When the Fund writes (sells) an option, an amount equal to the premium received by the Fund is included in "Options contracts written, at value" on the Statement of Assets and Liabilities. When the Fund purchases (buys) an option, the premium paid represents the cost of the option, which is included in "Premiums paid on options contracts purchased" on the Statement of Assets and Liabilities. Options Page 18 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) OCTOBER 31, 2020 are marked-to-market daily and their value is affected by changes in the value of the underlying security, changes in interest rates, changes in the actual or perceived volatility of the securities markets and the underlying securities, and the remaining time to the option's expiration. The value of options may also be adversely affected if the market for the options becomes less liquid or the trading volume diminishes. The Fund uses options on futures contracts in connection with hedging strategies. Generally, these strategies are applied under the same market and market sector conditions in which the Fund uses put and call options on securities. The purchase of put options on futures contracts is analogous to the purchase of puts on securities so as to hedge the Fund's securities holdings against the risk of declining market prices. The writing of a call option or the purchasing of a put option on a futures contract constitutes a partial hedge against declining prices of securities which are deliverable upon exercise of the futures contract. If the price at expiration of a written call option is below the exercise price, the Fund will retain the full amount of the option premium which provides a partial hedge against any decline that may have occurred in the Fund's holdings of securities. If the price when the option is exercised is above the exercise price, however, the Fund will incur a loss, which may be offset, in whole or in part, by the increase in the value of the securities held by the Fund that were being hedged. Writing a put option or purchasing a call option on a futures contract serves as a partial hedge against an increase in the value of the securities the Fund intends to acquire. Realized gains and losses on written options are included in "Net realized gain (loss) on written options contracts" on the Statement of Operations. Realized gains and losses on purchased options are included in "Net realized gain (loss) on purchased options contracts" on the Statement of Operations. The Fund is required to deposit and maintain margin with respect to put and call options on futures contracts written by it. Such margin deposits will vary depending on the nature of the underlying futures contract (and the related initial margin requirements), the current market value of the option and other futures positions held by the Fund. The Fund will pledge in a segregated account at the Fund's custodian, liquid assets, such as cash, U.S. government securities or other high-grade liquid debt obligations equal in value to the amount due on the underlying obligation. Such segregated assets will be marked-to-market daily, and additional assets will be pledged in the segregated account whenever the total value of the pledged assets falls below the amount due on the underlying obligation. The risks associated with the use of options on future contracts include the risk that the Fund may close out its position as a writer of an option only if a liquid secondary market exists for such options, which cannot be assured. The Fund's successful use of options on futures contracts depends on the Advisor's ability to correctly predict the movement in prices on futures contracts and the underlying instruments, which may prove to be incorrect. In addition, there may be imperfect correlation between the instruments being hedged and the futures contract subject to option. F. INTEREST-ONLY SECURITIES An interest-only security ("IO Security") is the interest-only portion of a mortgage-backed security that receives some or all of the interest portion of the underlying mortgage-backed security and little or no principal. A reference principal value called a notional value is used to calculate the amount of interest due to the IO Security. IO Securities are sold at a deep discount to their notional principal amount. Generally speaking, when interest rates are falling and prepayment rates are increasing, the value of an IO Security will fall. Conversely, when interest rates are rising and prepayment rates are decreasing, generally the value of an IO Security will rise. These securities, if any, are identified on the Portfolio of Investments. G. PRINCIPAL-ONLY SECURITIES A principal-only security ("PO Security") is the principal-only portion of a mortgage-backed security that does not receive any interest, is priced at a deep discount to its redemption value and ultimately receives the redemption value. Generally speaking, when interest rates are falling and prepayment rates are increasing, the value of a PO Security will rise. Conversely, when interest rates are rising and prepayment rates are decreasing, generally the value of a PO Security will fall. These securities, if any, are identified on the Portfolio of Investments. H. STRIPPED MORTGAGE-BACKED SECURITIES Stripped mortgage-backed securities are created by segregating the cash flows from underlying mortgage loans or mortgage securities to create two or more new securities, each with a specified percentage of the underlying security's principal or interest payments. Mortgage-backed securities may be partially stripped so that each investor class receives some interest and some principal. When securities are completely stripped, however, all of the interest is distributed to holders of one type of security known as an IO Security and all of the principal is distributed to holders of another type of security known as a PO Security. These securities, if any, are identified on the Portfolio of Investments. I. MORTGAGE DOLLAR ROLLS AND TBA TRANSACTIONS The Fund may invest, without limitation, in mortgage dollar rolls. The Fund intends to enter into mortgage dollar rolls only with high quality securities dealers and banks, as determined by the Fund's investment advisor. In a mortgage dollar roll, the Fund will sell (or buy) mortgage-backed securities for delivery on a specified date and simultaneously contract to repurchase (or sell) Page 19 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) OCTOBER 31, 2020 substantially similar (same type, coupon and maturity) securities on a future date. Mortgage dollar rolls are recorded as separate purchase and sale in the Fund. The Fund may also invest in TBA Transactions. A TBA Transaction is a method of trading mortgage-backed securities. TBA Transactions generally are conducted in accordance with widely-accepted guidelines which establish commonly observed terms and conditions for execution, settlement and delivery. In a TBA Transaction, the buyer and the seller agree on general trade parameters such as agency, settlement date, par amount and price. J. DIVIDENDS AND DISTRIBUTION TO SHAREHOLDERS Dividends from net investment income, if any, are declared and paid monthly by the Fund, or as the Board of Trustees may determine from time to time. Distributions of net realized gains earned by the Fund, if any, are distributed at least annually. Distributions in cash may be reinvested automatically in additional whole shares only if the broker through whom the shares were purchased makes such option available. Such shares will generally be reinvested by the broker based upon the market price of those shares and investors may be subject to customary brokerage commissions charged by the broker. Distributions from net investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on portfolio securities held by the Fund and have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will reverse at some time in the future. The tax character of distributions paid during the fiscal years ended October 31, 2020 and 2019 was as follows: Distributions paid from: 2020 2019 Ordinary income................................. $ 478,522 $ 183,881 Capital gains................................... -- -- Return of capital............................... -- -- As of October 31, 2020, the components of distributable earnings on a tax basis for the Fund were as follows:Undistributed ordinary income................... $ 571,152 Accumulated capital and other gain (loss)....... -- Net unrealized appreciation (depreciation)...... 769,941 K. INCOME TAXES The Fund intends to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, which includes distributing substantially all of its net investment income and net realized gains to shareholders. Accordingly, no provision has been made for federal and state income taxes. However, due to the timing and amount of distributions, the Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of the Fund's taxable income exceeds the distributions from such taxable income for the calendar year. The Fund is subject to accounting standards that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. The taxable years ended 2019 and 2020 remain open to federal and state audit. As of October 31, 2020, management has evaluated the application of these standards to the Fund and has determined that no provision for income tax is required in the Fund's financial statements for uncertain tax positions. The Fund intends to utilize provisions of the federal income tax laws, which allow it to carry a realized capital loss forward indefinitely following the year of the loss and offset such loss against any future realized capital gains. The Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. At October 31, 2020, the Fund had no non-expiring capital loss carryforwards for federal income tax purposes. Certain losses realized during the current fiscal year may be deferred and treated as occurring on the first day of the following fiscal year for federal income tax purposes. For the fiscal year ended October 31, 2020, the Fund had no net late year ordinary or capital losses. In order to present paid-in capital and accumulated distributable earnings (loss) (which consists of accumulated net investment income (loss), accumulated net realized gain (loss) on investments and net unrealized appreciation (depreciation) on investments) on the Statement of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to paid-in capital, accumulated net investment income (loss) and accumulated net Page 20 <PAGE> --------------------------------------------------------------------------------NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) OCTOBER 31, 2020 realized gain (loss) on investments. These adjustments are primarily due to the difference between book and tax treatments of income and gains on various investment securities held by the Fund. The results of operations and net assets were not affected by these adjustments. For the fiscal year ended October 31, 2020, the adjustments for the Fund were as follows: ACCUMULATED ACCUMULATED NET REALIZED NET INVESTMENT GAIN (LOSS) INCOME (LOSS) ON INVESTMENTS PAID-IN CAPITAL -------------- -------------- --------------- $ 192,384 $ (249,246) $ 56,862 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. The Fund has agreed to pay First Trust an annual unitary management fee equal to 0.65% of its average daily net assets. The Trust has multiple service agreements with The Bank of New York Mellon ("BNYM"). Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services, and transfer agency services for the Fund. As custodian, BNYM is responsible for custody of the Fund's assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of the Fund's securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for the Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company. Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, a defined-outcome fund or is an index fund. Additionally, the Lead Independent Trustee and the Chairmen of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and Committee Chairmen will rotate every three years. The officers and "Interested" Trustee receive no compensation from the Trust for acting in such capacities. 4. PURCHASES AND SALES OF SECURITIES The cost of purchases of U.S. Government securities and non-U.S. Government securities, excluding short-term investments, for the fiscal year ended October 31, 2020, were $28,789,638 and $156,582, respectively. The proceeds from sales and paydowns of U.S. Government securities and non-U.S. Government securities, excluding short-term investments, for the fiscal year ended October 31, 2020, were $18,830,940 and $41,606, respectively. The cost of purchases to cover investments sold short and the proceeds of investments sold short were $1,026,094 and $1,026,094, respectively. For the fiscal year ended October 31, 2020, the Fund had no in-kind transactions. Page 21 <PAGE> --------------------------------------------------------------------------------NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) OCTOBER 31, 2020 5. DERIVATIVE TRANSACTIONS The following table presents the types of derivatives held by the Fund at October 31, 2020, the primary underlying risk exposure and the location of these instruments as presented on the Statement of Assets and Liabilities. <TABLE> <CAPTION> ASSET DERIVATIVES LIABILITY DERIVATIVES ---------------------------------------- -------------------------------------- DERIVATIVE RISK STATEMENT OF ASSETS AND STATEMENT OF ASSETS AND INSTRUMENTS EXPOSURE LIABILITIES LOCATION VALUE LIABILITIES LOCATION VALUE ----------- --------- ---------------------------- ---------- -------------------------- ---------- <S> <C> <C> <C> <C> <C> Futures Interest Unrealized appreciation Unrealized depreciation rate risk on futures contracts* $ 291 on futures contracts* $ 18,910 Options Interest Options contracts Options contracts rate risk purchased, at value 6,656 written, at value 4,594 </TABLE> * Includes cumulative appreciation/depreciation on futures contracts as reported in the Portfolio of Investments. Only the current day's variation margin is reported within the Statement of Assets and Liabilities. The following table presents the amount of net realized gain (loss) and change in net unrealized appreciation (depreciation) recognized for the fiscal year ended October 31, 2020, on derivative instruments, as well as the primary underlying risk exposure associated with the instruments.<TABLE> <CAPTION> STATEMENT OF OPERATIONS LOCATION INTEREST RATE RISK -------------------------------------------------------------------------------- <S> <C> Net realized gain (loss) on: Futures contracts $ (10,216) Purchased options contracts (40,288) Written options contracts (2,678) Net change in unrealized appreciation (depreciation) on: Futures contracts (28,322) Purchased options contracts (1,245) Written options contracts (1,091) </TABLE> For the fiscal year ended October 31, 2020, the notional value of futures contracts opened and closed were $29,178,043 and $28,785,154, respectively. During the fiscal year ended October 31, 2020, the premiums for purchased options contracts opened were $159,840 and the premiums for purchased options contracts closed, exercised and expired were $151,939. During the fiscal year ended October 31, 2020, the premiums for written options contracts opened were $89,583 and the premiums for written options contracts closed, exercised and expired were $86,080. The Fund does not have the right to offset financial assets and financial liabilities related to futures and options contracts on the Statement of Assets and Liabilities. 6. CREATIONS, REDEMPTIONS AND TRANSACTION FEES Shares are created and redeemed by the Fund only in Creation Unit size aggregations of 50,000 shares in transactions with broker dealers or large institutional investors that have entered into a participation agreement (an "Authorized Participant"). Due to the nature of the Fund's investments, the Fund's Creation Units are generally issued and redeemed for cash, although Creation Units may be issued in-kind for securities in which the Fund invests in limited circumstances. Authorized Participants purchasing Creation Units must pay to BNYM, as transfer agent, a creation transaction fee (the "Creation Transaction Fee") regardless of the number of Creation Units purchased in the transaction. The Creation Transaction Fee may increase or decrease with changes in the Fund's portfolio. The price for each Creation Unit will equal the daily NAV per share times the number of shares in a Creation Unit plus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees or stamp taxes. When Creation Units are issued for cash, the Authorized Participant may also be assessed an amount to cover the cost of purchasing portfolio securities, including operational processing and brokerage costs, transfer fees, stamp taxes, and part or all of the spread between the expected bid and offer side of the market related to such securities. Page 22 <PAGE> -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) OCTOBER 31, 2020 Authorized Participants redeeming Creation Units must pay to BNYM, as transfer agent, a standard redemption transaction fee (the "Redemption Transaction Fee"), regardless of the number of Creation Units redeemed in the transaction. The Redemption Transaction Fee may increase or decrease with changes in the Fund's portfolio. When shares are redeemed for cash, the Authorized Participant may also be assessed an amount to cover other costs, including operational processing and brokerage costs, transfer fees, stamp taxes and part or all of the spread between the expected bid and offer side of the market related to portfolio securities sold in connection with the redemption. 7. DISTRIBUTION PLAN The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Fund is authorized to pay an amount up to 0.25% of its average daily net assets each year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the Fund, for amounts expended to finance activities primarily intended to result in the sale of Creation Units or the provision of investor services. FTP may also use this amount to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and educational and promotional services. No 12b-1 fees are currently paid by the Fund, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before March 31, 2022. 8. INDEMNIFICATION The Trust, on behalf of the Fund, has a variety of indemnification obligations under contracts with its service providers. The Trust's maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 9. SUBSEQUENT EVENTS Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued, and has determined that there were no subsequent events, requiring recognition or disclosure in the financial statements that have not already been disclosed. Page 23 <PAGE> --------------------------------------------------------------------------------REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED FUND IV: OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS We have audited the accompanying statement of assets and liabilities of First Trust Long Duration Opportunities ETF (the "Fund"), a series of the First Trust Exchange-Traded Fund IV, including the portfolio of investments, as of October 31, 2020, the related statement of operations for the year then ended, and the changes in net assets and the financial highlights for the year then ended and for the period from January 22, 2019 (commencement of operations) through October 31, 2019, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2020, and the results of its operations for the year then ended, and changes in its net assets and the financial highlights for the year then ended and for the period from January 22, 2019 (commencement of operations) through October 31, 2019, in conformity with accounting principles generally accepted in the United States of America. BASIS FOR OPINION These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund's financial statements and financial highlights based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2020, by correspondence with the custodian and brokers; when replies were not received from and brokers, we performed other auditing procedures. We believe that our audit provides a reasonable basis for our opinion. /s/ Deloitte & Touche LLP Chicago, Illinois December 22, 2020 We have served as the auditor of one or more First Trust investment companies since 2001. Page 24 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION -------------------------------------------------------------------------------- FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) OCTOBER 31, 2020 (UNAUDITED) PROXY VOTING POLICIES AND PROCEDURES A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how the Fund voted proxies relating to its portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on the Fund's website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov. PORTFOLIO HOLDINGS The Fund files portfolio holdings information for each month in a fiscal quarter within 60 days after the end of the relevant fiscal quarter on Form N-PORT. Portfolio holdings information for the third month of each fiscal quarter will be publicly available on the SEC's website at www.sec.gov. The Fund's complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year is included in the semi-annual and annual reports to shareholders, respectively, and is filed with the SEC on Form N-CSR. The semi-annual and annual report for the Fund is available to investors within 60 days after the period to which it relates. The Fund's Forms N-PORT and Forms N-CSR are available on the SEC's website listed above. FEDERAL TAX INFORMATION Distributions paid to foreign shareholders during the Fund's fiscal year ended October 31, 2020 that were properly designated by the Fund as "interest-related dividends" or "short-term capital gain dividends," may not be subject to federal income tax provided that the income was earned directly by such foreign shareholders. Of the ordinary income (including short-term capital gain) distributions made by the Fund during the fiscal year ended October 31, 2020, none qualify for the corporate dividends received deduction available to corporate shareholders or as qualified dividend income. RISK CONSIDERATIONS RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE, RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND. CONCENTRATION RISK. To the extent that a fund is able to invest a large percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund's investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund's corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is not concentrated. CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer's ability to make such payments. CYBER SECURITY RISK. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. In addition, cyber security breaches of a fund's third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or issuers in which the fund invests, can also subject a fund to many of the same risks associated with direct cyber security breaches. DERIVATIVES RISK. To the extent a fund uses derivative instruments such as futures contracts, options contracts and swaps, the fund may experience losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivative. These risks are heightened when a fund's portfolio managers use derivatives to enhance the fund's return or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the fund. Page 25 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) OCTOBER 31, 2020 (UNAUDITED) 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 CONSTITUENT RISK. Certain funds may be a constituent of one or more indices. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could significantly increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, a fund's net asset value could be negatively impacted and the fund's market price may be significantly below its net asset value during certain periods. INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject to Index Provider Risk. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, maintained, constructed, reconstituted, rebalanced, composed, calculated or disseminated accurately. To correct any such error, the Index Provider may carry out an unscheduled rebalance or other modification of the Index constituents or weightings, which may increase the fund's costs. The Index Provider does not provide any representation or warranty in relation to the quality, accuracy or completeness of data in the Index, and it does not guarantee that the Index will be calculated in accordance with its stated methodology. Losses or costs associated with any Index Provider errors generally will be borne by the fund and its shareholders. INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of other investment vehicles, the fund will incur additional fees and expenses that would not be present in a direct investment in those investment vehicles. Furthermore, the fund's investment performance and risks are directly related to the investment performance and risks of the investment vehicles in which the fund invests. LIBOR RISK. To the extent a fund invests in floating or variable rate obligations that use the London Interbank Offered Rate ("LIBOR") as a reference interest rate, it is subject to LIBOR Risk. In 2017, the United Kingdom's Financial Conduct Authority announced that LIBOR will cease to be available for use after 2021. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition away from LIBOR on the fund or on certain instruments in which the fund invests can be difficult to ascertain, and they may vary depending on a variety of factors. Any such effects of the transition away from LIBOR, as well as other unforeseen effects, could result in losses to the fund. MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund's investment portfolio, the fund's portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective. Page 26 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) OCTOBER 31, 2020 (UNAUDITED) MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than others. The outbreak of the respiratory disease designated as COVID-19 in December 2019 has caused significant volatility and declines in global financial markets, which have caused losses for investors. The COVID-19 pandemic may last for an extended period of time and will continue to impact the economy for the foreseeable future. NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic issuers. Non-U.S. securities are subject to higher volatility than securities of domestic issuers due to: possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries. PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets. NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE ADVISORY AGREEMENT BOARD CONSIDERATIONS REGARDING APPROVAL OF CONTINUATION OF INVESTMENT MANAGEMENT AGREEMENT The Board of Trustees of First Trust Exchange-Traded Fund IV (the "Trust"), including the Independent Trustees, unanimously approved the continuation of the Investment Management Agreement (the "Agreement") with First Trust Advisors L.P. (the "Advisor") on behalf of the First Trust Long Duration Opportunities ETF (the "Fund"). The Board approved the continuation of the Agreement for a one-year period ending June 30, 2021 at a meeting held on June 8, 2020. The Board determined that the continuation of the Agreement is in the best interests of the Fund in light of the nature, extent and quality of the services provided and such other matters as the Board considered to be relevant in the exercise of its reasonable business judgment. To reach this determination, the Board considered its duties under the Investment Company Act of 1940, as amended (the "1940 Act"), as well as under the general principles of state law, in reviewing and approving advisory contracts; the requirements of the 1940 Act in such matters; the fiduciary duty of investment advisors with respect to advisory agreements and compensation; the standards used by courts in determining whether investment company boards have fulfilled their duties; and the factors to be considered by the Board in voting on such agreements. At meetings held on May 11, 2020 and June 8, 2020, the Board, including the Independent Trustees, reviewed materials provided by the Advisor 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 provided by the Advisor to the Fund (including the relevant personnel responsible for these services and their experience); the unitary fee rate payable by the Fund as compared to fees charged to a peer group of funds (the "Expense Group") and a broad peer universe of funds (the "Expense Universe"), each assembled by Broadridge Financial Solutions, Inc. ("Broadridge"), an independent source, and as compared to fees charged to other clients of the Advisor, including other exchange-traded funds ("ETFs") managed by the Advisor; the expense ratio of the Fund as compared to expense ratios of the funds in the Fund's Expense Group and Expense Universe; performance information for the Fund, including comparisons of the Fund's performance to that of one or more relevant benchmark indexes; the nature of expenses incurred in providing services to the Fund and the potential for the Advisor to realize economies of scale, if any; profitability and other financial data for the Advisor; any fall-out benefits to the Advisor and its affiliate, First Trust Portfolios L.P. ("FTP"); and information on the Advisor's compliance program. The Board reviewed initial materials with the Advisor at the meeting held on May 11, 2020, prior to which the Independent Trustees and their counsel met separately to discuss the information provided by the Advisor. Following the May meeting, counsel to the Independent Trustees, on behalf of the Independent Trustees, requested certain clarifications and supplements to the materials provided, and the information provided in response to those requests was considered at an executive session of the Independent Trustees and their counsel held prior to the June 8, 2020 meeting, as well as at the meeting held that day. The Board considered supplemental information provided by the Advisor on the Page 27 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) OCTOBER 31, 2020 (UNAUDITED) operations of the Advisor and the performance of the Fund since the onset of the COVID-19 pandemic. The Board applied its business judgment to determine whether the arrangement between the Trust and the Advisor continues to be a reasonable business arrangement from the Fund's perspective. The Board determined that, given the totality of the information provided with respect to the Agreement, the Board had received sufficient information to renew the Agreement. The Board considered that shareholders chose to invest or remain invested in the Fund knowing that the Advisor manages the Fund and knowing the Fund's unitary fee. In reviewing the Agreement, the Board considered the nature, extent and quality of the services provided by the Advisor under the Agreement. The Board considered that the Advisor is responsible for the overall management and administration of the Trust and the Fund and reviewed all of the services provided by the Advisor to the Fund, as well as the background and experience of the persons responsible for such services. The Board noted that the Fund is an actively-managed ETF and noted that the Advisor's Mortgage Securities Team is responsible for the day-to-day management of the Fund's investments. The Board considered the background and experience of the members of the Mortgage Securities Team and noted the Board's prior meetings with members of the Team. The Board considered the Advisor's statement that it applies the same oversight model internally with its Mortgage Securities Team as it uses for overseeing external sub-advisors, including portfolio risk monitoring and performance review. In reviewing the services provided, the Board noted the compliance program that had been developed by the Advisor and considered that it includes a robust program for monitoring the Advisor's and the Fund's compliance with the 1940 Act, as well as the Fund's compliance with its investment objective, policies and restrictions. The Board also considered a report from the Advisor with respect to its risk management functions related to the operation of the Fund. Finally, as part of the Board's consideration of the Advisor's services, the Advisor, in its written materials and at the May 11, 2020 meeting, described to the Board the scope of its ongoing investment in additional infrastructure and personnel to maintain and improve the quality of services provided to the Fund and the other funds in the First Trust Fund Complex. In light of the information presented and the considerations made, the Board concluded that the nature, extent and quality of the services provided to the Trust and the Fund by the Advisor under the Agreement have been and are expected to remain satisfactory and that the Advisor has managed the Fund consistent with its investment objective, policies and restrictions. The Board considered the unitary fee rate payable by the Fund under the Agreement for the services provided. The Board considered that as part of the unitary fee the Advisor is responsible for the Fund's expenses, including the cost of transfer agency, custody, fund administration, legal, audit and other services and license fees, if any, but excluding the fee payment under the Agreement and interest, taxes, acquired fund fees and expenses, if any, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses, if any. The Board received and reviewed information showing the advisory 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 to other fund (including ETFs) and non-fund clients, as applicable. Because the Fund pays a unitary fee, the Board determined that expense ratios were the most relevant comparative data point. Based on the information provided, the Board noted that the unitary fee rate for the Fund was above the median total (net) expense ratio of the peer funds in the Expense Group. With respect to the Expense Group, the Board, at the May 11, 2020 meeting, discussed with Broadridge its methodology for assembling peer groups and discussed with the Advisor limitations in creating peer groups for actively-managed ETFs, including that there were no other actively-managed ETFs in the Expense Group, and different business models that may affect the pricing of services among ETF sponsors. The Board took these limitations and differences into account in considering the peer data. With respect to fees charged to other non-ETF clients, the Board considered differences between the Fund and other non-ETF clients that limited their comparability. In considering the unitary fee rate overall, the Board also considered the Advisor's statement that it seeks to meet investor needs through innovative and value-added investment solutions and the Advisor's demonstrated long-term commitment to the Fund and the other funds in the First Trust Fund Complex. The Board considered performance information for the Fund. The Board noted the process it has established for monitoring the Fund's performance and portfolio risk on an ongoing basis, which includes quarterly performance reporting from the Advisor for the Fund. The Board determined that this process continues to be effective for reviewing the Fund's performance. Because the Fund commenced operations on January 22, 2019 and therefore has a limited performance history, comparative performance information for the Fund was not considered. On the basis of all the information provided on the unitary fee for the Fund and the ongoing oversight by the Board, the Board concluded that the unitary fee for the Fund continues to be reasonable and appropriate in light of the nature, extent and quality of the services provided by the Advisor to the Fund under the Agreement. The Board considered information and discussed with the Advisor whether there were any economies of scale in connection with providing advisory services to the Fund and noted the Advisor's statement that it believes its expenses will likely increase over the next twelve months as the Advisor continues to hire personnel and build infrastructure, including technology, to improve the services to the Fund. The Board noted that any reduction in fixed costs associated with the management of the Fund would benefit the Advisor, but that Page 28 <PAGE> -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) OCTOBER 31, 2020 (UNAUDITED) the unitary fee structure provides a level of certainty in expenses for the Fund. The Board considered the revenues and allocated costs (including the allocation methodology) of the Advisor in serving as investment advisor to the Fund for the period from inception through December 31, 2019 and the estimated profitability level for the Fund calculated by the Advisor based on such data, as well as complex-wide and product-line profitability data, for the twelve months ended December 31, 2019. The Board noted the inherent limitations in the profitability analysis and concluded that, based on the information provided, the Advisor's profitability level for the Fund was not unreasonable. In addition, the Board considered fall-out benefits described by the Advisor that may be realized from its relationship with the Fund. The Board considered that the Advisor had identified as a fall-out benefit to the Advisor and FTP their exposure to investors and brokers who, absent their exposure to the Fund, may have had no dealings with the Advisor or FTP, and noted that the Advisor does not utilize soft dollars in connection with the Fund. The Board concluded that the character and amount of potential fall-out benefits to the Advisor were not unreasonable. Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, unanimously determined that the terms of the Agreement continue to be fair and reasonable and that the continuation of the Agreement 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. 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 May 11, 2020 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 June 1, 2019 (the initial compliance date for certain requirements of Rule 22e-4) through the Liquidity Committee's annual meeting held on March 20, 2020 and assessed the Program's adequacy and effectiveness of implementation during this period, including the operation of the highly liquid investment minimum for each fund that is required under the Program to have one, and any material changes to the Program. Note that because the Fund primarily holds assets that are highly liquid investments, the Fund has not adopted a highly liquid investment minimum. As stated in the written report, during the review period, no fund breached the 15% limitation on illiquid investments, no fund with a highly liquid investment minimum breached that minimum and no fund filed a Form N-LIQUID. The Advisor concluded that each fund's investment strategy is appropriate for an open-end fund; that the Program operated effectively in all material respects during the review period; and that the Program is reasonably designed to assess and manage the liquidity risk of each fund and to maintain compliance with Rule 22e-4. Page 29 <PAGE> -------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS -------------------------------------------------------------------------------- FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) OCTOBER 31, 2020 (UNAUDITED) The following tables identify the Trustees and Officers of the Trust. Unless otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite 400, Wheaton, IL 60187. The Trust's statement of additional information includes additional information about the Trustees and is available, without charge, upon request, by calling (800) 988-5891. <TABLE> <CAPTION> NUMBER OF OTHER PORTFOLIOS IN TRUSTEESHIPS OR THE FIRST TRUST DIRECTORSHIPS NAME, TERM OF OFFICE AND FUND COMPLEX HELD BY TRUSTEE YEAR OF BIRTH AND YEAR FIRST ELECTED PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST POSITION WITH THE TRUST OR APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ INDEPENDENT TRUSTEES ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 189 None (1951) Limited Partner, Gundersen Real Estate o Since Inception Limited Partnership (June 1992 to December 2016); Member, Sportsmed LLC (April 2007 to November 2015) Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 189 Director of ADM (1957) (Futures Commission Merchant) Investor Services, o Since Inception Inc., ADM Investor Services International, Futures Industry Association, and National Futures Association Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 189 Director of Trust (1956) and Management Consulting) Company of o Since Inception Illinois Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 189 None (1954) Managing Director and Chief Operating o Since Inception Officer (January 2015 to August 2018), Pelita Harapan Educational Foundation (Educational Product and Services) ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED TRUSTEE ------------------------------------------------------------------------------------------------------------------------------------ James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 189 None Chairman of the Board Advisors L.P. and First Trust Portfolios (1955) o Since Inception L.P., Chairman of the Board of Directors, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) </TABLE> ----------------------------- (1) Mr. Bowen is deemed an "interested person" of the Trust due to his position as Chief Executive Officer of First Trust Advisors L.P., investment advisor of the Trust. Page 30 <PAGE> --------------------------------------------------------------------------------BOARD OF TRUSTEES AND OFFICERS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) OCTOBER 31, 2020 (UNAUDITED) <TABLE> <CAPTION> NAME AND POSITION AND OFFICES TERM OF OFFICE AND PRINCIPAL OCCUPATIONS YEAR OF BIRTH WITH TRUST LENGTH OF SERVICE DURING PAST 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS(2) ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> James M. Dykas President and Chief Executive o Indefinite Term Managing Director and Chief Financial Officer (1966) Officer (January 2016 to Present), Controller (January 2011 o Since January 2016 to January 2016), Senior Vice President (April 2007 to January 2016), First Trust Advisors L.P. and First Trust Portfolios L.P.; Chief Financial Officer (January 2016 to Present), BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President (July 2016 to Present), Vice (1972) Officer and Chief President (April 2012 to July 2016), First Trust Accounting Officer o Since January 2016 Advisors L.P. and First Trust Portfolios L.P. W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and First (1960) Legal Officer Trust Portfolios L.P.; Secretary and General o Since Inception Counsel, BondWave LLC; Secretary, Stonebridge Advisors LLC Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and (1970) First Trust Portfolios L.P. o Since Inception Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P. (1966) and Assistant Secretary and First Trust Portfolios L.P. o Since Inception Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. (1966) and First Trust Portfolios L.P. o Since Inception Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. (1970) and First Trust Portfolios L.P. o Since Inception </TABLE> ----------------------------- (2) The term "officer" means the president, vice president, secretary, treasurer, controller or any other officer who performs a policy making function. Page 31 <PAGE> -------------------------------------------------------------------------------- PRIVACY POLICY -------------------------------------------------------------------------------- FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV) OCTOBER 31, 2020 (UNAUDITED) PRIVACY POLICY First Trust values our relationship with you and considers your privacy an important priority in maintaining that relationship. We are committed to protecting the security and confidentiality of your personal information. SOURCES OF INFORMATION We collect nonpublic personal information about you from the following sources: o Information we receive from you and your broker-dealer, investment advisor or financial representative through interviews, applications, agreements or other forms; o Information about your transactions with us, our affiliates or others; o Information we receive from your inquiries by mail, e-mail or telephone; and o Information we collect on our website through the use of "cookies". For example, we may identify the pages on our website that your browser requests or visits. INFORMATION COLLECTED The type of data we collect may include your name, address, social security number, age, financial status, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, investment objectives, marital status, family relationships and other personal information. DISCLOSURE OF INFORMATION We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. In addition to using this information to verify your identity (as required under law), the permitted uses may also include the disclosure of such information to unaffiliated companies for the following reasons: o In order to provide you with products and services and to effect transactions that you request or authorize, we may disclose your personal information as described above to unaffiliated financial service providers and other companies that perform administrative or other services on our behalf, such as transfer agents, custodians and trustees, or that assist us in the distribution of investor materials such as trustees, banks, financial representatives, proxy services, solicitors and printers. o We may release information we have about you if you direct us to do so, if we are compelled by law to do so, or in other legally limited circumstances (for example to protect your account from fraud). In addition, in order to alert you to our other financial products and services, we may share your personal information within First Trust. USE OF WEBSITE ANALYTICS We currently use third party analytics tools, Google Analytics and AddThis, to gather information for purposes of improving First Trust's website and marketing our products and services to you. These tools employ cookies, which are small pieces of text stored in a file by your web browser and sent to websites that you visit, to collect information, track website usage and viewing trends such as the number of hits, pages visited, videos and PDFs viewed and the length of user sessions in order to evaluate website performance and enhance navigation of the website. We may also collect other anonymous information, which is generally limited to technical and web navigation information such as the IP address of your device, internet browser type and operating system for purposes of analyzing the data to make First Trust's website better and more useful to our users. The information collected does not include any personal identifiable information such as your name, address, phone number or email address unless you provide that information through the website for us to contact you in order to answer your questions or respond to your requests. To find out how to opt-out of these services click on: Google Analytics and AddThis. CONFIDENTIALITY AND SECURITY With regard to our internal security procedures, First Trust restricts access to your nonpublic personal information to those First Trust employees who need to know that information to provide products or services to you. We maintain physical, electronic and procedural safeguards to protect your nonpublic personal information. POLICY UPDATES AND INQUIRIES As required by federal law, we will notify you of our privacy policy annually. We reserve the right to modify this policy at any time, however, if we do change it, we will tell you promptly. For questions about our policy, or for additional copies of this notice, please go to www.ftportfolios.com, or contact us at 1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust Advisors). March 2019 Page 32 <PAGE> FIRST TRUST First Trust Exchange-Traded Fund IV INVESTMENT ADVISOR First Trust Advisors L.P. 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 ADMINISTRATOR, CUSTODIAN, FUND ACCOUNTANT & TRANSFER AGENT The Bank of New York Mellon 240 Greenwich Street New York, NY 10286 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deloitte & Touche LLP 111 S. Wacker Drive Chicago, IL 60606 LEGAL COUNSEL Chapman and Cutler LLP 111 W. Monroe Street Chicago, IL 60603 <PAGE> [BLANK BACK COVER] <PAGE>
Item 2. Code of Ethics.
| (a) | The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. |
| (c) | There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics description. |
| (d) | The registrant, during the period covered by this report, has not granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item’s instructions. |
| (e) | Not applicable. |
Item 3. Audit Committee Financial Expert.
As of the end of the period covered by the report, the registrant’s Board of Trustees has determined that Thomas R. Kadlec and Robert F. Keith are qualified to serve as audit committee financial experts serving on its audit committee and that each of them is “independent,” as defined by Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
| (a) | Audit Fees (Registrant) -- The aggregate fees billed for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements were $306,200 for the fiscal year ended October 31, 2019 and $308,200 for the fiscal year ended October 31, 2020. |
| (b) | Audit-Related Fees (Registrant) -- The aggregate fees billed for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for the fiscal year ended October 31, 2019 and $0 for the fiscal year ended October 31, 2020. |
Audit-Related Fees (Investment Adviser) -- The aggregate fees billed for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the Registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for the fiscal year ended October 31, 2019 and $0 for the fiscal year ended October 31, 2020.
Audit-Related Fees (Distributor) -- The aggregate fees billed for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the Registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for the fiscal year ended October 31, 2019 and $0 for the fiscal year ended October 31, 2020.
| (c) | Tax Fees (Registrant) -- The aggregate fees billed for professional services rendered by the principal accountant for tax return review and debt instrument tax analysis and reporting were $169,630 for the fiscal year ended October 31, 2019 and $199,634 for the fiscal year ended October 31, 2020. |
Tax Fees (Investment Adviser) -- The aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning to the registrant’s adviser and distributor were $0 for the fiscal year ended October 31, 2019 and $0 for the fiscal year ended October 31, 2020.
Tax Fees (Distributor) -- The aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning to the registrant’s distributor were $0 for the fiscal year ended October 31, 2019 and $0 for the fiscal year ended October 31, 2020.
| (d) | All Other Fees (Registrant) -- The aggregate fees billed for products and services provided by the principal accountant to the registrant, other than the services reported in paragraphs (a) through (c) of this Item were $0 for the fiscal year ended October 31, 2019 and $0 for the fiscal year ended October 31, 2020. |
All Other Fees (Investment Adviser) -- The aggregate fees billed for products and services provided by the principal accountant to the registrant’s investment adviser, other than the services reported in paragraphs (a) through (c) of this Item were $0 for the fiscal year ended October 31, 2019 and $0 for the fiscal year ended October 31, 2020.
All Other Fees (Distributor) -- The aggregate fees billed for products and services provided by the principal accountant to the registrant’s distributor, other than the services reported in paragraphs (a) through (c) of this Item were $0 for the fiscal year ended October 31, 2019 and $0 for the fiscal year ended October 31, 2020.
| (e)(1) | Disclose the audit committee’s pre-approval policies and procedures described in paragraph (c) (7) of Rule 2-01 of Regulation S-X. |
Pursuant to its charter and its Audit and Non-Audit Services Pre-Approval Policy, the Audit Committee (the “Committee”) is responsible for the pre-approval of all audit services and permitted non-audit services (including the fees and terms thereof) to be performed for the registrant by its independent auditors. The Chairman of the Committee is authorized to give such pre-approvals on behalf of the Committee up to $25,000 and report any such pre-approval to the full Committee.
The Committee is also responsible for the pre-approval of the independent auditor’s engagements for non-audit services with the registrant’s adviser (not including a sub-adviser whose role is primarily portfolio management and is sub-contracted or overseen by another investment adviser) and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant, if the engagement relates directly to the operations and financial reporting of the registrant, subject to the de minimis exceptions for non-audit services described in Rule 2-01 of Regulation S-X. If the independent auditor has provided non-audit services to the registrant’s adviser (other than any sub-adviser whose role is primarily portfolio management and is sub-contracted with or overseen by another investment adviser) and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to its policies, the Committee will consider whether the provision of such non-audit services is compatible with the auditor’s independence.
| (e)(2) | The percentage of services described in each of paragraphs (b) through (d) for the registrant and the registrant’s investment adviser and distributor of this Item that were approved by the audit committee pursuant to the pre-approval exceptions included in paragraph (c)(7)(i)(C) or paragraph(C)(7)(ii) of Rule 2-01 of Regulation S-X are as follows: |
Registrant: Adviser and Distributor:
(b) 0% (b) 0%
(c) 0% (c) 0%
(d) 0% (d) 0%
| (f) | The percentage of hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was less than fifty percent. |
| (g) | The aggregate non-audit fees billed by the registrant’s accountant for services rendered to the registrant, and rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for the fiscal year ended October 31, 2019 were $169,630 for the registrant, $28,500 for the registrant’s investment adviser and $34,400 for the registrant’s distributor; and for the fiscal year ended October 31, 2020 were $199,634 for the registrant, $70,370 for the registrant’s investment adviser and $99,830 for the registrant’s distributor. |
| (h) | The registrant’s audit committee of its Board of Trustees has determined that the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence. |
Items 5. Audit Committee of Listed Registrants.
The registrant has a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The audit committee of the registrant is comprised of: Richard E. Erickson, Thomas R. Kadlec, Robert F. Keith and Niel B. Nielson.
Item 6. Investments.
| (a) | Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. |
| (b) | Not applicable. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant’s board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407 (c) (2) (iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22 (b) (15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Item 11. Controls and Procedures.
| (a) | The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3 (c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15 (b)). |
| (b) | There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. |
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable.
Item 13. Exhibits.
| (a)(1) | Code of ethics, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto. |
| (a)(2) | 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: | January 11, 2021 |
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: | January 11, 2021 |
| By (Signature and Title)* | /s/ Donald P. Swade | |
|
Donald P. Swade, Treasurer, Chief Financial Officer
and Chief Accounting Officer (principal financial officer) |
| Date: | January 11, 2021 |
* Print the name and title of each signing officer under his or her signature.