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Performance | ||||||
Average Annual Total Returns | Cumulative Total Returns | |||||
1
Year Ended 10/31/21 |
5
Years Ended 10/31/21 |
Inception (11/3/15) to 10/31/21 |
5
Years Ended 10/31/21 |
Inception (11/3/15) to 10/31/21 | ||
Fund Performance | ||||||
NAV | 32.74% | 17.90% | 15.24% | 127.83% | 133.93% | |
Market Price | 31.30% | 17.73% | 15.17% | 126.17% | 133.14% | |
Index Performance | ||||||
ICE BofA All US Convertible Index | 32.95% | 18.59% | 15.74% | 134.57% | 140.12% |
• | Fiscal and monetary stimulus, strong corporate earnings and margins and improved medical treatments/vaccine progress provided fuel for the economy and capital markets. |
• | Inflation fears, China growth worries, rising interest rates and the return of the retail investor sparked rotations among asset classes, equity sectors and styles. |
• | U.S. economic activity, which experienced an unprecedented drop and rebound, is expected to grow at 5.7% in 2021 and 4% in 2022, according to Bloomberg. |
• | Corporate earnings remain strong with 44% expected growth in 2021 and 9% in 2022, according to FactSet. |
• | Credit spreads declined to pre-coronavirus (“COVID-19”) pandemic levels on Federal Reserve (the “Fed”) buying and economic recovery. |
• | Ten-year Treasury yields rose 71 basis points to 1.56% on rising inflation. |
• | Within the convertible universe, the Materials, Energy and Consumer Discretionary sectors generated significant gains, while the Telecommunications, Consumer Staples and Utilities sectors lagged. |
• | Small cap and equity alternatives convertibles outperformed. |
• | The convertible market remains healthy, in our view, as evidenced by $93 billion in new issuance for the year, a strong encore to last year’s $103 billion. |
• | Convertible performance was driven by strong returns in both equities and high yield markets for the 12-month period ended October 31, 2021. The S&P 500® Index advanced 42.91% and the Bloomberg High Yield Index rose 10.53% for the same period. |
• | Fixed income posted a small loss with the Bloomberg US Aggregate Bond Index down -0.48% for the same period. |
• | On a one-year trailing basis, as of October 31, 2021, the Fund generated a net gain of 32.74% based on net asset value, while the ICE BofA All US Convertible Index (VXA0) gained 32.95%. |
• | The Consumer Discretionary sector made the largest contribution to portfolio returns on a relative basis as retailers like RH benefited from a strong housing market and restaurant owner, Bloomin’ Brands, Inc. benefitted from loosening COVID-19 restrictions. The Communications Services sector also helped on a relative basis as Sea Ltd. benefitted from strength in its mobile gaming e-commerce segments. |
• | The Information Technology sector detracted from relative performance due to the Fund’s underweight in software convertibles such as Atlassian, Inc. and Cloudflare, Inc. An overweight in the Industrials sector also detracted from relative performance as a number of companies experienced supply chain constraints and wage inflation which adversely impacted profitability. |
• | In our opinion, the outlook for the Fund remains favorable. |
• | Although growth rates are decelerating, we believe that the economic and corporate earnings backdrop remains strong. |
• | In our opinion, China growth is likely to disappoint due to a slowdown in property markets and government regulation. |
• | Global COVID-19 daily cases have started to modestly increase due to a spike in cases in Europe. |
• | Inflation has risen and could become more of a headwind if it persists or continues to accelerate. |
• | The Fed is likely to remain accommodative, in our opinion, and is moving cautiously to reduce unprecedented stimulus. |
• | Supply chain disruptions have caused a deferment of some production into next year, supporting 2022 growth rates. |
• | In spite of the political environment, we believe the economy and corporate earnings are likely to receive a boost from additional increases in fiscal spending. |
• | We believe convertibles offer significant participation if the markets continue their upward trend but can also offer downside protection if the market experiences a downturn. |
Beginning Account Value May 1, 2021 |
Ending Account Value October 31, 2021 |
Annualized Expense Ratio Based on the Six-Month Period |
Expenses
Paid During the Six-Month Period (a) | |
First Trust SSI Strategic Convertible Securities ETF (FCVT) | ||||
Actual | $1,000.00 | $1,020.90 | 0.95% | $4.84 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,020.42 | 0.95% | $4.84 |
(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, 2021 through October 31, 2021), multiplied by 184/365 (to reflect the six-month period). |
Principal Value |
Description | Stated Coupon |
Stated Maturity |
Value | ||||
CONVERTIBLE CORPORATE BONDS – 82.0% | ||||||||
Aerospace & Defense – 0.5% | ||||||||
$957,835 |
Safran S.A., Series SAF (EUR) (a)
|
0.88% | 05/15/27 | $1,558,510 | ||||
Airlines – 3.2% | ||||||||
875,000 |
Air Canada
|
4.00% | 07/01/25 | 1,237,976 | ||||
1,161,000 |
American Airlines Group, Inc.
|
6.50% | 07/01/25 | 1,699,307 | ||||
1,650,000 |
JetBlue Airways Corp. (b)
|
0.50% | 04/01/26 | 1,592,607 | ||||
3,740,000 |
Southwest Airlines Co.
|
1.25% | 05/01/25 | 5,264,050 | ||||
9,793,940 | ||||||||
Auto Components – 0.3% | ||||||||
945,000 |
LCI Industries
|
1.13% | 05/15/26 | 998,215 | ||||
Automobiles – 2.6% | ||||||||
3,185,000 |
Ford Motor Co. (b)
|
(c) | 03/15/26 | 3,783,420 | ||||
228,000 |
Tesla, Inc.
|
2.00% | 05/15/24 | 4,091,460 | ||||
7,874,880 | ||||||||
Banks – 0.6% | ||||||||
1,275,000 |
Deutsche Bank AG, Series GMTN
|
1.00% | 05/01/23 | 1,790,527 | ||||
Biotechnology – 1.7% | ||||||||
555,000 |
Apellis Pharmaceuticals, Inc.
|
3.50% | 09/15/26 | 666,000 | ||||
570,000 |
Bridgebio Pharma, Inc.
|
2.50% | 03/15/27 | 813,467 | ||||
1,525,000 |
Exact Sciences Corp.
|
0.38% | 03/15/27 | 1,731,828 | ||||
920,000 |
Insmed, Inc.
|
0.75% | 06/01/28 | 1,076,033 | ||||
755,000 |
Novavax, Inc.
|
3.75% | 02/01/23 | 1,030,728 | ||||
5,318,056 | ||||||||
Capital Markets – 1.1% | ||||||||
1,375,000 |
Coinbase Global, Inc. (b)
|
0.50% | 06/01/26 | 1,637,691 | ||||
1,400,000 |
WisdomTree Investments, Inc.
|
4.25% | 06/15/23 | 1,737,597 | ||||
3,375,288 | ||||||||
Construction & Engineering – 1.0% | ||||||||
870,000 |
Granite Construction, Inc.
|
2.75% | 11/01/24 | 1,157,538 | ||||
1,800,000 |
Vinci S.A., Series DGFP (a)
|
0.38% | 02/16/22 | 2,003,238 | ||||
3,160,776 | ||||||||
Consumer Finance – 0.8% | ||||||||
1,180,000 |
SoFi Technologies, Inc. (b)
|
(c) | 10/15/26 | 1,385,319 | ||||
778,000 |
Upstart Holdings, Inc. (b)
|
0.25% | 08/15/26 | 1,090,147 | ||||
2,475,466 | ||||||||
Diversified Financial Services – 0.4% | ||||||||
1,165,000 |
JPMorgan Chase Financial Co. LLC (b)
|
0.25% | 05/01/23 | 1,325,634 | ||||
Electronic Equipment, Instruments & Components – 0.3% | ||||||||
849,000 |
PAR Technology Corp.
|
1.50% | 10/15/27 | 933,066 | ||||
Entertainment – 4.5% | ||||||||
985,000 |
Bilibili, Inc.
|
1.25% | 06/15/27 | 1,932,447 | ||||
1,008,000 |
IMAX Corp. (b)
|
0.50% | 04/01/26 | 1,000,178 | ||||
1,140,000 |
Liberty Media Corp. - Liberty Formula One
|
1.00% | 01/30/23 | 1,741,154 | ||||
2,269,000 |
Live Nation Entertainment, Inc.
|
2.50% | 03/15/23 | 3,549,623 | ||||
458,000 |
Sea Ltd.
|
2.38% | 12/01/25 | 1,750,419 | ||||
3,670,000 |
Sea Ltd.
|
0.25% | 09/15/26 | 3,872,676 | ||||
13,846,497 |
Principal Value |
Description | Stated Coupon |
Stated Maturity |
Value | ||||
CONVERTIBLE CORPORATE BONDS (Continued) | ||||||||
Equity Real Estate Investment Trusts – 1.2% | ||||||||
$900,000 |
Kite Realty Group L.P. (b)
|
0.75% | 04/01/27 | $893,292 | ||||
1,390,000 |
Pebblebrook Hotel Trust
|
1.75% | 12/15/26 | 1,554,162 | ||||
1,045,000 |
Summit Hotel Properties, Inc.
|
1.50% | 02/15/26 | 1,122,569 | ||||
3,570,023 | ||||||||
Health Care Equipment & Supplies – 6.0% | ||||||||
1,150,000 |
CONMED Corp.
|
2.63% | 02/01/24 | 1,975,182 | ||||
843,000 |
Cutera, Inc. (b)
|
2.25% | 03/15/26 | 1,262,642 | ||||
260,000 |
DexCom, Inc.
|
0.75% | 12/01/23 | 986,213 | ||||
4,385,000 |
DexCom, Inc.
|
0.25% | 11/15/25 | 5,619,604 | ||||
605,000 |
Envista Holdings Corp.
|
2.38% | 06/01/25 | 1,185,923 | ||||
1,700,000 |
Insulet Corp.
|
0.38% | 09/01/26 | 2,530,130 | ||||
1,105,000 |
Integra LifeSciences Holdings Corp.
|
0.50% | 08/15/25 | 1,203,676 | ||||
1,090,000 |
Novocure, Ltd.
|
(c) | 11/01/25 | 1,115,564 | ||||
900,000 |
NuVasive, Inc.
|
0.38% | 03/15/25 | 852,750 | ||||
1,087,000 |
Tandem Diabetes Care, Inc. (b)
|
1.50% | 05/01/25 | 1,519,735 | ||||
18,251,419 | ||||||||
Health Care Providers & Services – 1.0% | ||||||||
293,000 |
Anthem, Inc.
|
2.75% | 10/15/42 | 1,806,186 | ||||
1,150,000 |
Guardant Health, Inc. (b)
|
(c) | 11/15/27 | 1,272,233 | ||||
3,078,419 | ||||||||
Hotels, Restaurants & Leisure – 5.3% | ||||||||
1,500,000 |
Airbnb, Inc. (b)
|
(c) | 03/15/26 | 1,472,266 | ||||
1,775,000 |
Booking Holdings, Inc.
|
0.75% | 05/01/25 | 2,642,075 | ||||
1,195,000 |
MakeMyTrip Ltd. (b)
|
(c) | 02/15/28 | 1,266,445 | ||||
825,000 |
Marriott Vacations Worldwide Corp. (b)
|
(c) | 01/15/26 | 929,403 | ||||
2,715,000 |
NCL Corp., Ltd.
|
5.38% | 08/01/25 | 4,535,889 | ||||
295,000 |
Penn National Gaming, Inc.
|
2.75% | 05/15/26 | 931,735 | ||||
2,190,000 |
Royal Caribbean Cruises Ltd.
|
4.25% | 06/15/23 | 2,964,882 | ||||
1,410,000 |
Vail Resorts, Inc. (b)
|
(c) | 01/01/26 | 1,559,103 | ||||
16,301,798 | ||||||||
Independent Power & Renewable Electricity Producers – 0.6% | ||||||||
1,230,000 |
Sunnova Energy International, Inc. (b)
|
0.25% | 12/01/26 | 1,751,687 | ||||
Interactive Media & Services – 3.6% | ||||||||
1,801,000 |
Match Group Financeco 2, Inc. (b)
|
0.88% | 06/15/26 | 3,280,670 | ||||
1,120,000 |
Snap, Inc.
|
0.75% | 08/01/26 | 2,681,538 | ||||
1,850,000 |
Snap, Inc. (b)
|
(c) | 05/01/27 | 1,882,576 | ||||
1,300,000 |
Twitter, Inc.
|
0.25% | 06/15/24 | 1,537,250 | ||||
1,120,000 |
Ziff Davis, Inc. (b)
|
1.75% | 11/01/26 | 1,531,800 | ||||
10,913,834 | ||||||||
Internet & Direct Marketing Retail – 3.1% | ||||||||
3,305,000 |
Etsy, Inc.
|
0.13% | 09/01/27 | 4,902,388 | ||||
307,000 |
MercadoLibre, Inc.
|
2.00% | 08/15/28 | 1,040,399 | ||||
700,000 |
Wayfair, Inc.
|
1.13% | 11/01/24 | 1,540,300 | ||||
2,000,000 |
Wayfair, Inc.
|
0.63% | 10/01/25 | 1,980,180 | ||||
9,463,267 | ||||||||
IT Services – 6.7% | ||||||||
1,160,000 |
Akamai Technologies, Inc.
|
0.13% | 05/01/25 | 1,426,264 | ||||
3,085,000 |
Cloudflare, Inc. (b)
|
(c) | 08/15/26 | 3,898,385 | ||||
691,000 |
MongoDB, Inc.
|
0.25% | 01/15/26 | 1,738,883 |
Principal Value |
Description | Stated Coupon |
Stated Maturity |
Value | ||||
CONVERTIBLE CORPORATE BONDS (Continued) | ||||||||
IT Services (Continued) | ||||||||
$2,050,000 |
Okta, Inc.
|
0.13% | 09/01/25 | $2,981,441 | ||||
1,130,000 |
Shift4Payments, Inc. (b)
|
(c) | 12/15/25 | 1,231,022 | ||||
1,190,000 |
Shopify, Inc.
|
0.13% | 11/01/25 | 1,515,762 | ||||
930,000 |
Square, Inc.
|
0.50% | 05/15/23 | 3,041,681 | ||||
3,800,000 |
Square, Inc. (b)
|
0.25% | 11/01/27 | 4,609,974 | ||||
20,443,412 | ||||||||
Leisure Products – 0.3% | ||||||||
570,000 |
Callaway Golf Co.
|
2.75% | 05/01/26 | 983,333 | ||||
Life Sciences Tools & Services – 1.0% | ||||||||
558,000 |
Illumina, Inc.
|
(c) | 08/15/23 | 656,224 | ||||
1,260,000 |
NeoGenomics, Inc.
|
0.25% | 01/15/28 | 1,278,902 | ||||
410,000 |
Repligen Corp.
|
0.38% | 07/15/24 | 1,039,596 | ||||
2,974,722 | ||||||||
Machinery – 2.1% | ||||||||
885,000 |
Chart Industries, Inc. (b)
|
1.00% | 11/15/24 | 2,688,869 | ||||
960,000 |
Greenbrier Cos., Inc (The) (b)
|
2.88% | 04/15/28 | 1,001,420 | ||||
1,345,000 |
John Bean Technologies Corp. (b)
|
0.25% | 05/15/26 | 1,459,742 | ||||
760,000 |
Middleby Corp. (The)
|
1.00% | 09/01/25 | 1,146,297 | ||||
6,296,328 | ||||||||
Marine – 0.4% | ||||||||
890,000 |
Seaspan Corp. (b)
|
3.75% | 12/15/25 | 1,087,946 | ||||
Media – 2.4% | ||||||||
2,645,000 |
DISH Network Corp. (b)
|
(c) | 12/15/25 | 3,048,442 | ||||
424,000 |
Liberty Interactive LLC (b)
|
1.75% | 09/30/46 | 843,693 | ||||
1,280,000 |
Liberty Media Corp.
|
1.38% | 10/15/23 | 1,856,831 | ||||
1,085,000 |
TechTarget, Inc. (b)
|
0.13% | 12/15/25 | 1,596,360 | ||||
7,345,326 | ||||||||
Metals & Mining – 1.6% | ||||||||
420,000 |
Allegheny Technologies, Inc.
|
3.50% | 06/15/25 | 548,663 | ||||
680,000 |
Cleveland-Cliffs, Inc.
|
1.50% | 01/15/25 | 2,119,302 | ||||
848,000 |
Ivanhoe Mines Ltd. (b)
|
2.50% | 04/15/26 | 1,105,622 | ||||
1,150,000 |
MP Materials Corp. (b)
|
0.25% | 04/01/26 | 1,208,098 | ||||
4,981,685 | ||||||||
Mortgage Real Estate Investment Trusts – 0.3% | ||||||||
800,000 |
Hannon Armstrong Sustainable Infrastructure
Capital, Inc.
|
(c) | 08/15/23 | 1,047,040 | ||||
Oil, Gas & Consumable Fuels – 3.6% | ||||||||
313,000 |
Antero Resources Corp.
|
4.25% | 09/01/26 | 1,469,334 | ||||
1,016,000 |
Centennial Resource Production LLC
|
3.25% | 04/01/28 | 1,412,158 | ||||
575,000 |
CNX Resources Corp.
|
2.25% | 05/01/26 | 781,472 | ||||
790,000 |
EQT Corp.
|
1.75% | 05/01/26 | 1,238,573 | ||||
615,000 |
Green Plains, Inc. (b)
|
4.00% | 07/01/24 | 1,550,309 | ||||
2,585,000 |
Pioneer Natural Resources Co.
|
0.25% | 05/15/25 | 4,581,313 | ||||
11,033,159 | ||||||||
Personal Products – 0.6% | ||||||||
1,505,000 |
Beauty Health Co. (The) (b)
|
1.25% | 10/01/26 | 1,715,741 | ||||
Professional Services – 1.2% | ||||||||
725,000 |
FTI Consulting, Inc.
|
2.00% | 08/15/23 | 1,072,761 |
Principal Value |
Description | Stated Coupon |
Stated Maturity |
Value | ||||
CONVERTIBLE CORPORATE BONDS (Continued) | ||||||||
Professional Services (Continued) | ||||||||
$675,000 |
KBR, Inc.
|
2.50% | 11/01/23 | $1,154,585 | ||||
1,465,000 |
Upwork, Inc. (b)
|
0.25% | 08/15/26 | 1,575,471 | ||||
3,802,817 | ||||||||
Real Estate Management & Development – 1.3% | ||||||||
1,425,000 |
Realogy Group LLC/Realogy Co-Issuer Corp.
(b)
|
0.25% | 06/15/26 | 1,455,621 | ||||
1,350,000 |
Zillow Group, Inc.
|
2.75% | 05/15/25 | 2,357,505 | ||||
3,813,126 | ||||||||
Road & Rail – 1.3% | ||||||||
1,410,000 |
Lyft, Inc.
|
1.50% | 05/15/25 | 1,965,973 | ||||
1,955,000 |
Uber Technologies, Inc. (b)
|
(c) | 12/15/25 | 1,890,536 | ||||
3,856,509 | ||||||||
Semiconductors & Semiconductor Equipment – 4.8% | ||||||||
405,000 |
Enphase Energy, Inc. (b)
|
0.25% | 03/01/25 | 1,175,411 | ||||
1,875,000 |
Enphase Energy, Inc. (b)
|
(c) | 03/01/28 | 2,110,990 | ||||
720,000 |
MACOM Technology Solutions Holdings, Inc.
(b)
|
0.25% | 03/15/26 | 792,540 | ||||
1,185,000 |
Microchip Technology, Inc.
|
1.63% | 02/15/27 | 2,605,595 | ||||
740,000 |
Nova Ltd.
|
(c) | 10/15/25 | 1,116,438 | ||||
995,000 |
ON Semiconductor Corp.
|
1.63% | 10/15/23 | 2,343,109 | ||||
1,540,000 |
ON Semiconductor Corp. (b)
|
(c) | 05/01/27 | 1,858,626 | ||||
640,000 |
SMART Global Holdings, Inc.
|
2.25% | 02/15/26 | 955,200 | ||||
387,000 |
Teradyne, Inc.
|
1.25% | 12/15/23 | 1,664,003 | ||||
14,621,912 | ||||||||
Software – 13.9% | ||||||||
1,625,000 |
Avalara, Inc. (b)
|
0.25% | 08/01/26 | 1,705,085 | ||||
1,446,000 |
Bentley Systems, Inc. (b)
|
0.13% | 01/15/26 | 1,648,440 | ||||
915,000 |
Bill.com Holdings, Inc. (b)
|
(c) | 12/01/25 | 1,771,120 | ||||
1,735,000 |
Bill.com Holdings, Inc. (b)
|
(c) | 04/01/27 | 1,863,353 | ||||
450,000 |
Blackline, Inc.
|
0.13% | 08/01/24 | 801,723 | ||||
962,000 |
Box, Inc. (b)
|
(c) | 01/15/26 | 1,149,590 | ||||
366,000 |
Cerence, Inc.
|
3.00% | 06/01/25 | 1,061,482 | ||||
1,500,000 |
Coupa Software, Inc.
|
0.38% | 06/15/26 | 1,649,140 | ||||
925,000 |
Datadog, Inc.
|
0.13% | 06/15/25 | 1,756,371 | ||||
1,260,000 |
DocuSign, Inc. (b)
|
(c) | 01/15/24 | 1,332,948 | ||||
1,524,000 |
Dropbox, Inc. (b)
|
(c) | 03/01/28 | 1,666,710 | ||||
950,000 |
HubSpot, Inc.
|
0.38% | 06/01/25 | 2,740,280 | ||||
975,000 |
LivePerson, Inc. (b)
|
(c) | 12/15/26 | 957,188 | ||||
975,000 |
Mitek Systems, Inc. (b)
|
0.75% | 02/01/26 | 1,103,382 | ||||
1,475,000 |
Nutanix, Inc. (b)
|
0.25% | 10/01/27 | 1,401,090 | ||||
4,040,000 |
Palo Alto Networks, Inc.
|
0.75% | 07/01/23 | 7,780,608 | ||||
1,056,000 |
Rapid7, Inc. (b)
|
0.25% | 03/15/27 | 1,455,274 | ||||
235,000 |
ServiceNow, Inc.
|
(c) | 06/01/22 | 1,216,024 | ||||
2,770,000 |
Splunk, Inc.
|
0.50% | 09/15/23 | 3,469,741 | ||||
1,360,000 |
Workday, Inc.
|
0.25% | 10/01/22 | 2,687,768 | ||||
955,000 |
Zendesk, Inc.
|
0.63% | 06/15/25 | 1,128,695 | ||||
990,000 |
Zscaler, Inc.
|
0.13% | 07/01/25 | 2,140,545 | ||||
42,486,557 | ||||||||
Specialty Retail – 2.4% | ||||||||
818,000 |
Burlington Stores, Inc.
|
2.25% | 04/15/25 | 1,176,218 | ||||
740,000 |
Dick’s Sporting Goods, Inc.
|
3.25% | 04/15/25 | 2,822,014 | ||||
1,400,000 |
Dufry One BV (CHF) (a)
|
0.75% | 03/30/26 | 1,490,963 |
Principal Value |
Description | Stated Coupon |
Stated Maturity |
Value | ||||
CONVERTIBLE CORPORATE BONDS (Continued) | ||||||||
Specialty Retail (Continued) | ||||||||
$585,000 |
RH
|
(c) | 06/15/23 | $1,987,538 | ||||
7,476,733 | ||||||||
Technology Hardware, Storage & Peripherals – 0.3% | ||||||||
690,000 |
Pure Storage, Inc.
|
0.13% | 04/15/23 | 825,516 | ||||
Total Convertible Corporate Bonds
|
250,573,164 | |||||||
(Cost $196,220,680) | ||||||||
Shares | Description | Stated Rate |
Stated Maturity (d) |
Value | ||||
CONVERTIBLE PREFERRED SECURITIES – 14.6% | ||||||||
Auto Components – 1.1% | ||||||||
17,180 |
Aptiv PLC, Series A
|
5.50% | 06/15/23 | 3,319,176 | ||||
Capital Markets – 1.5% | ||||||||
610 |
Cowen, Inc., Series A
|
5.63% | (e) | 908,269 | ||||
37,250 |
KKR & Co., Inc., Series C
|
6.00% | 09/15/23 | 3,726,490 | ||||
4,634,759 | ||||||||
Electric Utilities – 1.1% | ||||||||
60,670 |
NextEra Energy, Inc.
|
5.28% | 03/01/23 | 3,304,695 | ||||
Food Products – 0.5% | ||||||||
12,325 |
Bunge Ltd.
|
4.88% | (e) | 1,566,754 | ||||
Health Care Equipment & Supplies – 0.8% | ||||||||
20,750 |
Boston Scientific Corp., Series A
|
5.50% | 06/01/23 | 2,428,580 | ||||
Internet & Direct Marketing Retail – 0.3% | ||||||||
625 |
2020 Mandatory Exchangeable Trust (b)
|
6.50% | 05/16/23 | 1,072,017 | ||||
Life Sciences Tools & Services – 3.3% | ||||||||
34,275 |
Avantor, Inc., Series A
|
6.25% | 05/15/22 | 4,242,559 | ||||
1,550 |
Danaher Corp., Series A
|
4.75% | 04/15/22 | 3,232,138 | ||||
1,645 |
Danaher Corp., Series B
|
5.00% | 04/15/23 | 2,729,055 | ||||
10,203,752 | ||||||||
Machinery – 1.4% | ||||||||
7,150 |
Colfax Corp.
|
5.75% | 01/15/22 | 1,492,205 | ||||
10,065 |
RBC Bearings, Inc., Series A
|
5.00% | 10/15/24 | 1,203,673 | ||||
13,300 |
Stanley Black & Decker, Inc.
|
5.25% | 11/15/22 | 1,435,336 | ||||
4,131,214 | ||||||||
Media – 0.5% | ||||||||
23,025 |
ViacomCBS, Inc., Series A
|
5.75% | 04/01/24 | 1,396,006 | ||||
Metals & Mining – 0.5% | ||||||||
19,850 |
ArcelorMittal S.A.
|
5.50% | 05/18/23 | 1,602,689 | ||||
Pharmaceuticals – 0.4% | ||||||||
21,725 |
Elanco Animal Health, Inc.
|
5.00% | 02/01/23 | 1,101,023 | ||||
Semiconductors & Semiconductor Equipment – 2.4% | ||||||||
4,380 |
Broadcom, Inc., Series A
|
8.00% | 09/30/22 | 7,346,749 |
Shares | Description | Stated Rate |
Stated Maturity (d) |
Value | ||||
CONVERTIBLE PREFERRED SECURITIES (Continued) | ||||||||
Wireless Telecommunication Services – 0.8% | ||||||||
2,215 |
2020 Cash Mandatory Exchangeable Trust (b)
|
5.25% | 06/01/23 | $2,323,551 | ||||
Total Convertible Preferred Securities
|
44,430,965 | |||||||
(Cost $32,687,669) | ||||||||
Total Investments – 96.6%
|
295,004,129 | |||||||
(Cost $228,908,349) (f) |
Net Other Assets and Liabilities – 3.4%
|
10,456,163 | ||
Net Assets – 100.0%
|
$305,460,292 |
| |
(a) | This security may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the Securities Act of 1933, as amended (the “1933 Act”). |
(b) | This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A under 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, 2021, securities noted as such amounted to $87,791,414 or 28.7% of net assets. |
(c) | Zero coupon security. |
(d) | Stated maturity represents the mandatory conversion date. |
(e) | Perpetual maturity. |
(f) | Aggregate cost for federal income tax purposes was $233,675,685. As of October 31, 2021, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $64,152,570 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $2,824,126. The net unrealized appreciation was $61,328,444. |
CHF | Swiss Franc |
EUR | Euro |
Total Value at 10/31/2021 |
Level
1 Quoted Prices |
Level
2 Significant Observable Inputs |
Level
3 Significant Unobservable Inputs | |
Convertible Corporate Bonds*
|
$ 250,573,164 | $ — | $ 250,573,164 | $ — |
Convertible Preferred Securities: | ||||
Capital Markets
|
4,634,759 | 3,726,490 | 908,269 | — |
Food Products
|
1,566,754 | — | 1,566,754 | — |
Internet & Direct Marketing Retail
|
1,072,017 | — | 1,072,017 | — |
Life Sciences Tools & Services
|
10,203,752 | 7,474,697 | 2,729,055 | — |
Wireless Telecommunication Services
|
2,323,551 | — | 2,323,551 | — |
Other industry categories*
|
24,630,132 | 24,630,132 | — | — |
Total Investments
|
$ 295,004,129 | $ 35,831,319 | $ 259,172,810 | $— |
* | See Portfolio of Investments for industry breakout. |
ASSETS: | |
Investments, at value (Cost $228,908,349)
|
$ 295,004,129 |
Cash
|
10,216,913 |
Foreign currency (Cost $5,628)
|
5,734 |
Receivables: | |
Investment securities sold
|
3,328,364 |
Interest
|
478,757 |
Dividends
|
48,889 |
Total Assets
|
309,082,786 |
LIABILITIES: | |
Payables: | |
Investment securities purchased
|
3,379,719 |
Investment advisory fees
|
242,775 |
Total Liabilities
|
3,622,494 |
NET ASSETS
|
$305,460,292 |
NET ASSETS consist of: | |
Paid-in capital
|
$ 193,393,121 |
Par value
|
58,500 |
Accumulated distributable earnings (loss)
|
112,008,671 |
NET ASSETS
|
$305,460,292 |
NET ASSET VALUE, per share
|
$52.22 |
Number of shares outstanding (unlimited number of
shares authorized, par value $0.01 per share)
|
5,850,002 |
INVESTMENT INCOME: | ||
Dividends
|
$ 1,536,517 | |
Interest
|
(6,422,146) | |
Total investment income
|
(4,885,629) | |
EXPENSES: | ||
Investment advisory fees
|
2,821,244 | |
Total expenses
|
2,821,244 | |
NET INVESTMENT INCOME (LOSS)
|
(7,706,873) | |
NET REALIZED AND UNREALIZED GAIN (LOSS): | ||
Net realized gain (loss) on: | ||
Investments
|
75,472,351 | |
Foreign currency transactions
|
(1,482) | |
Net realized gain (loss)
|
75,470,869 | |
Net change in unrealized appreciation (depreciation) on: | ||
Investments
|
8,568,790 | |
Foreign currency translation
|
4 | |
Net change in unrealized appreciation
(depreciation)
|
8,568,794 | |
NET REALIZED AND UNREALIZED GAIN (LOSS)
|
84,039,663 | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS
|
$ 76,332,790 |
Year Ended 10/31/2021 |
Year Ended 10/31/2020 | ||
OPERATIONS: | |||
Net investment income (loss)
|
$ (7,706,873) | $ (2,981,635) | |
Net realized gain (loss)
|
75,470,869 | 9,201,568 | |
Net change in unrealized appreciation
(depreciation)
|
8,568,794 | 39,005,257 | |
Net increase (decrease) in net assets resulting
from operations
|
76,332,790 | 45,225,190 | |
DISTRIBUTIONS TO SHAREHOLDERS FROM: | |||
Investment operations
|
(5,979,972) | (3,308,156) | |
SHAREHOLDER TRANSACTIONS: | |||
Proceeds from shares sold
|
134,102,148 | 106,145,960 | |
Cost of shares redeemed
|
(135,796,752) | (105,418,747) | |
Net increase (decrease) in net assets resulting
from shareholder transactions
|
(1,694,604) | 727,213 | |
Total increase (decrease) in net assets
|
68,658,214 | 42,644,247 | |
NET ASSETS: | |||
Beginning of period
|
236,802,078 | 194,157,831 | |
End of period
|
$305,460,292 | $236,802,078 | |
CHANGES IN SHARES OUTSTANDING: | |||
Shares outstanding, beginning of period
|
5,900,002 | 6,150,002 | |
Shares sold
|
2,650,000 | 3,050,000 | |
Shares redeemed
|
(2,700,000) | (3,300,000) | |
Shares outstanding, end of period
|
5,850,002 | 5,900,002 |
Year Ended October 31, | |||||||||
2021 | 2020 | 2019 | 2018 | 2017 | |||||
Net asset value, beginning of period
|
$ 40.14 | $ 31.57 | $ 28.72 | $ 29.01 | $ 25.21 | ||||
Income from investment operations: | |||||||||
Net investment income (loss)
|
(1.33) | (0.55) | (0.24) | (0.09) | (0.14) | ||||
Net realized and unrealized gain (loss)
|
14.42 | 9.65 | 3.58 | 0.52 | 4.45 | ||||
Total from investment operations
|
13.09 | 9.10 | 3.34 | 0.43 | 4.31 | ||||
Distributions paid to shareholders from: | |||||||||
Net investment income
|
(0.62) | (0.53) | (0.49) | (0.67) | (0.51) | ||||
Net realized gain
|
(0.39) | — | — | (0.05) | — | ||||
Total distributions
|
(1.01) | (0.53) | (0.49) | (0.72) | (0.51) | ||||
Net asset value, end of period
|
$52.22 | $40.14 | $31.57 | $28.72 | $29.01 | ||||
Total return
(a)
|
32.74% | 29.10% | 11.72% | 1.46% | 17.29% | ||||
Ratios to average net assets/supplemental data: | |||||||||
Net assets, end of period (in 000’s)
|
$ 305,460 | $ 236,802 | $ 194,158 | $ 202,467 | $ 58,016 | ||||
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
|
(2.60)% | (1.36)% | (0.63)% | (2.16)% | (1.86)% | ||||
Portfolio turnover rate (b)
|
135% | 119% | 64% | 71% | 56% |
(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. |
1) | benchmark yields; |
2) | reported trades; |
3) | broker/dealer quotes; |
4) | issuer spreads; |
5) | benchmark securities; |
6) | bids and offers; and |
7) | reference data including market research publications. |
1) | the credit conditions in the relevant market and changes thereto; |
2) | the liquidity conditions in the relevant market and changes thereto; |
3) | the interest rate conditions in the relevant market and changes thereto (such as significant changes in interest rates); |
4) | issuer-specific conditions (such as significant credit deterioration); and |
5) | any other market-based data the Advisor’s Pricing Committee considers relevant. In this regard, the Advisor’s Pricing Committee may use last-obtained market-based data to assist it when valuing portfolio securities using amortized cost. |
1) | the 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. |
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. |
• | Level 1 – Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
• | Level 2 – Level 2 inputs are observable inputs, either directly or indirectly, and include the following: |
o | Quoted prices for similar investments in active markets. |
o | Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly. |
o | Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). |
o | Inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
• | Level 3 – Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the investment. |
Distributions paid from: | 2021 | 2020 |
Ordinary income
|
$3,695,653 | $3,308,156 |
Capital gains
|
2,284,319 | — |
Return of capital
|
— | — |
Undistributed ordinary income
|
$— |
Accumulated capital and other gain (loss)
|
50,680,223 |
Net unrealized appreciation (depreciation)
|
61,328,448 |
Accumulated Net Investment Income (Loss) |
Accumulated Net Realized Gain (Loss) on Investments |
Paid-in Capital | ||
$10,604,283 | $(24,774,567) | $14,170,284 |
Dividends Received Deduction | Qualified Dividend Income | |
5.21% | 5.17% |
NOT FDIC INSURED | NOT BANK GUARANTEED | MAY LOSE VALUE |
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) | 215 | None |
Thomas
R. Kadlec, Trustee (1957) |
• Indefinite
Term • Since Inception |
President, ADM Investor Services, Inc. (Futures Commission Merchant) | 215 | 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) | 215 | 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) | 215 | 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) | 215 | 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. |
Name and Year of Birth | Position and Offices with Trust | Term of Office and Length of Service | Principal
Occupations During Past 5 Years |
OFFICERS(2) | |||
James
M. Dykas (1966) |
President and Chief Executive Officer | • Indefinite
Term • Since January 2016 |
Managing Director and Chief Financial Officer (January 2016 to Present), Controller (January 2011 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 (1972) |
Treasurer, Chief Financial Officer and Chief Accounting Officer | • Indefinite
Term • Since January 2016 |
Senior Vice President (July 2016 to Present), Vice President (April 2012 to July 2016), First Trust Advisors L.P. and First Trust Portfolios L.P. |
W.
Scott Jardine (1960) |
Secretary and Chief Legal Officer | • Indefinite
Term • Since Inception |
General Counsel, First Trust Advisors L.P. and First Trust Portfolios L.P.; Secretary and General Counsel, BondWave LLC; Secretary, Stonebridge Advisors LLC |
Daniel
J. Lindquist (1970) |
Vice President | • Indefinite
Term • Since Inception |
Managing Director, First Trust Advisors L.P. and First Trust Portfolios L.P. |
Kristi
A. Maher (1966) |
Chief Compliance Officer and Assistant Secretary | • Indefinite
Term • Since Inception |
Deputy General Counsel, First Trust Advisors L.P. and First Trust Portfolios L.P. |
Roger
F. Testin (1966) |
Vice President | • Indefinite
Term • Since Inception |
Senior Vice President, First Trust Advisors L.P. and First Trust Portfolios L.P. |
Stan
Ueland (1970) |
Vice President | • Indefinite
Term • Since Inception |
Senior Vice President, First Trust Advisors L.P. and First Trust Portfolios L.P |
(2) | The term “officer” means the president, vice president, secretary, treasurer, controller or any other officer who performs a policy making function. |
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