FIRST TRUST
First Trust Exchange-Traded Fund IV
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First Trust North American
Energy Infrastructure Fund (EMLP)
First Trust EIP Carbon Impact ETF (ECLN)
Semi-Annual Report
For the Six Months Ended
April 30, 2022
Energy Income Partners, LLC
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TABLE OF CONTENTS
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FIRST TRUST EXCHANGE-TRADED FUND IV
SEMI-ANNUAL REPORT
APRIL 30, 2022
Shareholder Letter........................................................... 1
Fund Performance Overview
First Trust North American Energy Infrastructure Fund (EMLP).............. 2
First Trust EIP Carbon Impact ETF (ECLN).................................. 4
Notes to Fund Performance Overview........................................... 6
Portfolio Management......................................................... 7
Understanding Your Fund Expenses............................................. 8
Portfolio of Investments
First Trust North American Energy Infrastructure Fund (EMLP).............. 9
First Trust EIP Carbon Impact ETF (ECLN).................................. 11
Statements of Assets and Liabilities......................................... 13
Statements of Operations..................................................... 14
Statements of Changes in Net Assets.......................................... 15
Financial Highlights......................................................... 16
Notes to Financial Statements................................................ 17
Additional Information....................................................... 24
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and/or Energy Income Partners, LLC ("EIP" or the
"Sub-Advisor") and their respective representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
any series of First Trust Exchange-Traded Fund IV (the "Trust") described in
this report (each such series is referred to as a "Fund" and collectively, as
the "Funds") to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. When
evaluating the information included in this report, you are cautioned not to
place undue reliance on these forward-looking statements, which reflect the
judgment of the Advisor and/or Sub-Advisor and their respective representatives
only as of the date hereof. We undertake no obligation to publicly revise or
update these forward-looking statements to reflect events and circumstances that
arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that any Fund described in this report will achieve its
investment objective. Each Fund is subject to market risk, which is the
possibility that the market values of securities owned by the Fund will decline
and that the value of the Fund's shares may therefore be less than what you paid
for them. Accordingly, you can lose money investing in a Fund. See "Risk
Considerations" in the Additional Information section of this report for a
discussion of certain other risks of investing in the Funds.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.ftportfolios.com or speak with your financial advisor. Investment returns,
net asset value and share price will fluctuate and Fund shares, when sold, may
be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on each Fund's webpage at www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment. It
includes details about each Fund and presents data and analysis that provide
insight into each Fund's performance and investment approach.
The statistical information that follows may help you understand each Fund's
performance compared to that of relevant market benchmarks.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor and/or Sub-Advisor are just that: informed opinions. They should not be
considered to be promises or advice. The opinions, like the statistics, cover
the period through the date on the cover of this report. The material risks of
investing in each Fund are spelled out in the prospectus, the statement of
additional information, and other Fund regulatory filings.
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SHAREHOLDER LETTER
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FIRST TRUST EXCHANGE-TRADED FUND IV
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
APRIL 30, 2022
Dear Shareholders:
First Trust is pleased to provide you with the semi-annual report for First
Trust North American Energy Infrastructure Fund and the First Trust EIP Carbon
Impact ETF (the "Funds"), which contains detailed information about the Funds
for the six months ended April 30, 2022.
A couple of famous financial industry quotes came to mind recently as I was
sizing up the current business climate: "There's no such thing as a free lunch"
and "Don't fight the Fed!" It seems that for some, the trillions of dollars of
financial stimulus funneled into U.S. households and businesses by the Federal
government and its agencies to help mitigate the fallout stemming from the
coronavirus ("COVID-19") pandemic, which commenced sometime around February
2020, was for all intents and purposes "free money." It was not free. From the
close of February 2020 through March 2022, the Federal Reserve (the "Fed")
expanded the U.S. money supply, known as M2, by 41% to $21.81 trillion to boost
liquidity in the financial system. Normally, M2 grows around 6.0% on a
year-over-year basis. When you factor in that all this new capital was
accompanied by a breakdown of the global supply chain, there is little wonder
why inflation is rampant.
One of the more common definitions of inflation is too many dollars chasing too
few goods. The biggest downside to the supply chain bottlenecks, such as the
severe backup of container ships at some U.S. ports, is that they have markedly
reduced the flow of imported goods to retailers. The Fed has been signaling to
Americans and the rest of the globe that, after many years of artificially low
interest rates, tighter monetary policy will likely rule the day for the
foreseeable future. Higher interest rates make borrowing capital more expensive
and that should slow consumption over time, which, in turn, should bring down
inflation. Don't fight the Fed is code for don't bet against the Fed, in my
opinion. Stay tuned!
The primary job of the Fed is price stability. Its standard inflation target
rate is 2.0%. The most recent Consumer Price Index release showed that prices
were up 8.3% on a year-over-year basis as of April 30, 2022, according to data
from the U.S. Bureau of Labor Statistics. While down from 8.5% the prior month,
it is clearly elevated and that means the Fed has some work to do to with
respect to mitigating inflation. The war between Russia and Ukraine is making
the Fed's job even tougher, particularly in the areas of food and energy. Rising
costs and potential shortages could become even bigger if the COVID-19 outbreak
in China grows. These are important events to monitor. Fed Chairman Jerome
Powell has stated that the Fed is poised to raise the Federal Funds target rate
(upper bound) by 50 basis points at each of its next two meetings (set for June
and July), which would take the rate up to 2.00%. Data from CME Group indicates
that current market pricing has the rate rising to 2.75% or 3.00% by year-end.
Securities markets do not go up in a straight line and they do not just go up
year in and year out. In fact, what we have witnessed over the past couple of
decades are often referred to as boom and bust cycles. Thankfully, it has ended
up more boom than bust. Simply put, investors, not traders of the market, need
to be willing to take the bad with the good. As the various stages of an
economic cycle come and go (expansion to contraction), the markets tend to
reprice securities to reflect the current narrative. In other words, we believe
the markets essentially heal themselves - if you let them. That is an accurate
depiction of how the markets have behaved so far in 2022, in my opinion. In
response to a softening economy, the stock and bond markets have experienced
some serious downside through the first four months of this year, as measured by
the broader market indices. As of today, Brian Wesbury, Chief Economist at First
Trust, is not forecasting a recession for the U.S. in 2022 or 2023. Whether he
is proven right or wrong, 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
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FUND PERFORMANCE OVERVIEW (UNAUDITED)
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FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
The First Trust North American Energy Infrastructure Fund (the "Fund") is an
actively managed exchange-traded fund. The Fund's investment objective is to
seek total return. The Fund will invest, under normal market conditions, at
least 80% of its net assets (including investment borrowings) in equity
securities of companies deemed by Energy Income Partners, LLC ("EIP" or the
"Sub-Advisor") to be engaged in the energy infrastructure sector, which
principally include publicly-traded master limited partnerships or limited
liability companies taxed as partnerships ("MLPs"), MLP affiliates, pipeline
companies, utilities, and other companies that derive the majority of their
revenues from operating or providing services in support of infrastructure
assets such as pipelines, power transmission and petroleum and natural gas
storage in the petroleum, natural gas and power generation industries
(collectively, "Energy Infrastructure Companies"). In addition, under normal
market conditions, the Fund will invest at least 80% of its net assets
(including investment borrowings) in equity securities of companies
headquartered or incorporated in the United States and Canada.
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PERFORMANCE
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AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months Ended 1 Year Ended 5 Years Ended Inception (6/20/12) 5 Years Ended Inception (6/20/12)
4/30/22 4/30/22 4/30/22 to 4/30/22 4/30/22 to 4/30/22
FUND PERFORMANCE
NAV 8.17% 14.76% 5.27% 6.87% 29.26% 92.53%
Market Price 8.17% 14.80% 5.27% 6.88% 29.25% 92.65%
INDEX PERFORMANCE
Blended Benchmark(1) 10.88% 19.39% 7.38% 7.37% 42.75% 101.68%
S&P 500(R) Index -9.65% 0.21% 13.66% 14.19% 89.68% 269.89%
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(See Notes to Fund Performance Overview on page 6.)
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(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
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP) (CONTINUED)
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% OF TOTAL LONG-TERM
INDUSTRY CLASSIFICATION INVESTMENTS
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Electric Power & Transmission 31.5%
Natural Gas Transmission 28.8
Petroleum Product Transmission 16.6
Crude Oil Transmission 11.0
Nat. Gas Gathering & Processing 8.2
Oil & Gas Production 0.6
Propane 0.4
Marine 0.2
Other 2.7
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Total 100.0%
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% OF TOTAL LONG-TERM
TOP TEN HOLDINGS INVESTMENTS
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Enterprise Products Partners, L.P. 7.5%
Magellan Midstream Partners, L.P. 6.3
Energy Transfer, L.P. 5.4
TC Energy Corp. 5.2
NextEra Energy Partners, L.P. 4.6
Cheniere Energy, Inc. 3.8
DT Midstream, Inc. 3.6
Quanta Services, Inc. 3.6
Plains GP Holdings, L.P., Class A 3.1
AltaGas Ltd. 2.7
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Total 45.8%
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PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JUNE 20, 2012 - APRIL 30, 2022
First Trust North American Blended S&P 500(R)
Energy Infrastructure Fund Benchmark Index
6/20/12 $10,000 $10,000 $10,000
10/31/12 10,690 10,582 10,495
4/30/13 12,379 12,241 12,008
10/31/13 12,138 12,064 13,347
4/30/14 13,341 13,381 14,463
10/31/14 14,861 14,383 15,652
4/30/15 15,005 13,803 16,341
10/31/15 12,793 12,040 16,467
4/30/16 13,004 12,531 16,538
10/31/16 14,330 13,087 17,209
4/30/17 14,896 14,126 19,501
10/31/17 14,768 13,897 21,276
4/30/18 13,914 13,586 22,089
10/31/18 14,171 14,142 22,840
4/30/19 15,869 15,242 25,068
10/31/19 16,188 15,288 26,111
4/30/20 13,590 12,513 25,286
10/31/20 13,487 12,493 28,645
4/30/21 16,776 16,893 36,909
10/31/21 17,798 18,190 40,938
4/30/22 19,253 20,168 36,989
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 3
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST EIP CARBON IMPACT ETF (ECLN)
The First Trust EIP Carbon Impact ETF (the "Fund") seeks to achieve a
competitive risk-adjusted total return balanced between dividends and capital
appreciation. Under normal market conditions, the Fund will invest at least 80%
of its net assets (including investment borrowings) in the equity securities of
companies identified by the Fund's investment sub-advisor, Energy Income
Partners, LLC ("EIP" or the "Sub Advisor"), as having or seeking to have a
positive carbon impact.
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PERFORMANCE
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AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months Ended 1 Year Ended Inception (8/19/19) Inception (8/19/19)
4/30/22 4/30/22 to 4/30/22 to 4/30/22
FUND PERFORMANCE
NAV 4.77% 8.41% 10.76% 31.77%
Market Price 4.48% 7.69% 10.66% 31.45%
INDEX PERFORMANCE
The PHLX Utility Sector Index 7.04% 9.71% 9.62% 28.11%
S&P 500(R) Index -9.65% 0.21% 15.56% 47.68%
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(See Notes to Fund Performance Overview on page 6.)
Page 4
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST EIP CARBON IMPACT ETF (ECLN) (CONTINUED)
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% OF TOTAL LONG-TERM
INDUSTRY CLASSIFICATION INVESTMENTS
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Electric Power & Transmission 56.3%
Natural Gas Transmission 32.8
Nat. Gas Gathering & Processing 5.6
Petroleum Product Transmission 0.9
Propane 0.2
Marine 0.0*
Other 4.2
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Total 100.0%
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* Amount is less than 0.1%.
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% OF TOTAL LONG-TERM
TOP TEN HOLDINGS INVESTMENTS
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Cheniere Energy, Inc. 5.6%
DT Midstream, Inc. 5.6
Quanta Services, Inc. 5.3
Cheniere Energy Partners, L.P. 5.3
NextEra Energy Partners, L.P. 4.7
NextEra Energy, Inc. 4.4
Atmos Energy Corp. 4.1
Xcel Energy, Inc. 3.8
American Electric Power Co., Inc. 3.4
AltaGas Ltd. 3.4
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Total 45.6%
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PERFORMANCE OF A $10,000 INITIAL INVESTMENT
AUGUST 19, 2019 - APRIL 30, 2022
First Trust EIP PHLX Utility S&P 500(R)
Carbon Impact ETF Sector Index Index
8/19/19 $10,000 $10,000 $10,000
10/31/19 10,304 10,489 10,424
4/30/20 9,818 9,586 10,095
10/31/20 10,890 10,771 11,436
4/31/21 12,155 11,677 14,736
10/31/21 12,577 11,968 16,344
4/30/22 13,177 12,811 14,768
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 5
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NOTES TO FUND PERFORMANCE OVERVIEW (UNAUDITED)
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Total returns for the periods since inception are calculated from the inception
date of each Fund. "Average Annual Total Returns" represent the average annual
change in value of an investment over the periods indicated. "Cumulative Total
Returns" represent the total change in value of an investment over the periods
indicated.
Each Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint of the national best bid and offer price ("NBBO") as of
the time that the Fund's NAV is calculated. Under SEC rules, the NBBO consists
of the highest displayed buy and lowest sell prices among the various exchanges
trading the Fund at the time the Fund's NAV is calculated. Prior to January 1,
2019, the price used was the midpoint between the highest bid and the lowest
offer on the stock exchange on which shares of the Fund were listed for trading
as of the time that the Fund's NAV was calculated. Since shares of each Fund did
not trade in the secondary market until after the Fund's inception, for the
period from inception to the first day of secondary market trading in shares of
the Fund, the NAV of each Fund is used as a proxy for the secondary market
trading price to calculate market returns. NAV and market returns assume that
all distributions have been reinvested in each Fund at NAV and Market Price,
respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike each Fund, the indices do not actually hold a portfolio of
securities and therefore do not incur the expenses incurred by each Fund. These
expenses negatively impact the performance of each Fund. Also, market returns do
not include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The total returns presented reflect the reinvestment of dividends on
securities in the indices. The returns presented do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund shares. The investment return and principal value of shares of each
Fund will vary with changes in market conditions. Shares of each Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. Each Fund's past performance is no guarantee of future performance.
Page 6
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PORTFOLIO MANAGEMENT
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FIRST TRUST EXCHANGE-TRADED FUND IV
SEMI-ANNUAL REPORT
APRIL 30, 2022 (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 includes C-corporations, partnerships and energy
infrastructure real estate investment trusts. EIP mainly focuses on investments
in assets that receive steady fee-based or regulated income from their corporate
and individual customers. EIP manages or supervises approximately $5.1 billion
of assets as of April 30, 2022. EIP advises two privately offered partnerships
for U.S. high net worth individuals and an open-end mutual fund. EIP also
manages separately managed accounts and provides its model portfolio to unified
managed accounts. Finally, in addition to the Funds, EIP serves as a sub-advisor
to four closed-end management investment companies and a sleeve of a series of
variable insurance trust. EIP is a registered investment advisor with the
Securities and Exchange Commission.
PORTFOLIO MANAGEMENT TEAM
JAMES J. MURCHIE, CO-FOUNDER, CHIEF EXECUTIVE OFFICER, CO-PORTFOLIO MANAGER AND
PRINCIPAL OF ENERGY INCOME PARTNERS, LLC
EVA PAO, CO-FOUNDER, CO-PORTFOLIO MANAGER AND PRINCIPAL OF ENERGY INCOME
PARTNERS, LLC
JOHN K. TYSSELAND, CO-PORTFOLIO MANAGER AND PRINCIPAL OF ENERGY INCOME
PARTNERS, LLC
The portfolio managers are primarily and jointly responsible for the day-to-day
management of the Funds.
Page 7
FIRST TRUST EXCHANGE-TRADED FUND IV
UNDERSTANDING YOUR FUND EXPENSES
APRIL 30, 2022 (UNAUDITED)
As a shareholder of First Trust North American Energy Infrastructure Fund or
First Trust EIP Carbon Impact ETF (each a "Fund" and collectively, the "Funds"),
you incur two types of costs: (1) transaction costs; and (2) ongoing costs,
including management fees, distribution and/or service (12b-1) fees, if any, and
other Fund expenses. This Example is intended to help you understand your
ongoing costs of investing in the Funds and to compare these costs with the
ongoing costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended April 30, 2022.
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.
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ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
NOVEMBER 1, 2021 APRIL 30, 2022 PERIOD PERIOD (a)
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FIRST TRUST NORTH AMERICAN ENERGY
INFRASTRUCTURE FUND (EMLP)
Actual $1,000.00 $1,081.70 0.95% $4.90
Hypothetical (5% return before expenses) $1,000.00 $1,020.08 0.95% $4.76
FIRST TRUST EIP CARBON IMPACT ETF (ECLN)
Actual $1,000.00 $1,047.70 0.95% $4.82
Hypothetical (5% return before expenses) $1,000.00 $1,020.08 0.95% $4.76
(a) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (November 1,
2021 through April 30, 2022), multiplied by 181/365 (to reflect the
six-month period).
Page 8
FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2022 (UNAUDITED)
SHARES DESCRIPTION VALUE
------------------------------------------------------------
COMMON STOCKS -- 61.6%
CONSTRUCTION & ENGINEERING
-- 3.4%
712,817 Quanta Services, Inc. $ 82,672,516
--------------
ELECTRIC UTILITIES -- 15.9%
739,153 Alliant Energy Corp. 43,469,588
458,850 American Electric Power Co.,
Inc. 45,476,624
181,038 Constellation Energy Corp. 10,719,260
14,128 Duke Energy Corp. 1,556,340
40,051 Emera, Inc. (CAD) 1,933,884
4,338,138 Enel S.p.A., ADR 27,937,609
180,216 Eversource Energy 15,750,878
390,849 Exelon Corp. 18,283,916
47,844 Fortis, Inc. (CAD) 2,328,049
521,259 Iberdrola S.A., ADR 24,097,804
399,345 IDACORP, Inc. 42,003,107
880,910 NextEra Energy, Inc. 62,562,228
40,252 Orsted A/S, ADR 1,496,972
1,266,453 PPL Corp. 35,853,284
432,204 Southern (The) Co. 31,719,452
329,113 Xcel Energy, Inc. 24,110,818
--------------
389,299,813
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GAS UTILITIES -- 8.1%
2,754,716 AltaGas Ltd. (CAD) 63,000,472
315,336 Atmos Energy Corp. 35,759,102
11,491 Chesapeake Utilities Corp. 1,438,329
340,855 National Fuel Gas Co. 23,904,161
469,096 New Jersey Resources Corp. 20,246,183
402,092 ONE Gas, Inc. 33,924,502
67,054 Southwest Gas Holdings, Inc. 5,908,128
406,564 UGI Corp. 13,945,145
--------------
198,126,022
--------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS -- 0.6%
221,203 AES (The) Corp. 4,516,965
224,031 Clearway Energy, Inc.,
Class A 6,366,961
100,052 Northland Power, Inc. (CAD) 3,019,512
--------------
13,903,438
--------------
MULTI-UTILITIES -- 11.5%
1,048,743 ATCO Ltd., Class I (CAD) 37,365,016
76,520 Canadian Utilities Ltd.,
Class A (CAD) 2,300,395
1,258,171 CenterPoint Energy, Inc. 38,512,614
366,109 CMS Energy Corp. 25,148,027
70,060 Dominion Energy, Inc. 5,719,698
258,384 DTE Energy Co. 33,858,639
851,677 Public Service Enterprise
Group, Inc. 59,327,820
377,013 Sempra Energy 60,834,818
168,753 WEC Energy Group, Inc. 16,883,738
--------------
279,950,765
--------------
SHARES/
UNITS DESCRIPTION VALUE
------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS
-- 21.8%
122,055 Archaea Energy, Inc. (a) $ 2,685,210
644,187 Cheniere Energy, Inc. 87,487,036
1,546,512 DT Midstream, Inc. 83,125,020
919,953 Enbridge, Inc. 40,146,749
1,957,301 Keyera Corp. (CAD) 48,557,337
2,399,793 Kinder Morgan, Inc. 43,556,243
748,158 ONEOK, Inc. 47,380,846
2,256,162 TC Energy Corp. 119,350,970
1,795,144 Williams (The) Cos., Inc. 61,555,488
--------------
533,844,899
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 0.2%
27,550 Enphase Energy, Inc. (a) 4,446,570
--------------
WATER UTILITIES -- 0.1%
15,633 American Water Works Co.,
Inc. 2,408,733
--------------
TOTAL COMMON STOCKS
-- 61.6% 1,504,652,756
(Cost $1,136,703,160) --------------
MASTER LIMITED PARTNERSHIPS
-- 32.4%
CHEMICALS -- 0.8%
677,837 Westlake Chemical Partners,
L.P. 18,471,058
--------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS -- 4.3%
1,579,398 NextEra Energy Partners,
L.P. (b) 105,282,671
--------------
OIL, GAS & CONSUMABLE FUELS
-- 27.3%
881,077 Cheniere Energy Partners, L.P. 47,366,699
356,131 DCP Midstream, L.P. 12,179,680
11,166,419 Energy Transfer, L.P. 123,723,923
6,666,947 Enterprise Products Partners,
L.P. 172,740,597
793,611 Hess Midstream, L.P.,
Class A (b) 23,340,099
1,665,774 Holly Energy Partners, L.P. 28,534,709
3,001,453 Magellan Midstream Partners,
L.P. 145,420,398
916,344 MPLX, L.P. 29,652,892
6,343,255 Plains GP Holdings, L.P.,
Class A (b) 70,854,158
911,559 Shell Midstream Partners, L.P. 12,880,329
--------------
666,693,484
--------------
TOTAL MASTER LIMITED
PARTNERSHIPS -- 32.4% 790,447,213
(Cost $608,340,397) --------------
See Notes to Financial Statements Page 9
FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2022 (UNAUDITED)
SHARES DESCRIPTION VALUE
------------------------------------------------------------
MONEY MARKET FUNDS -- 5.7%
139,555,915 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class - 0.23% (c) $ 139,555,915
(Cost $139,555,915) --------------
TOTAL INVESTMENTS -- 99.7% 2,434,655,884
(Cost $1,884,599,472)
NET OTHER ASSETS AND
LIABILITIES -- 0.3% 8,156,349
--------------
NET ASSETS -- 100.0% $2,442,812,233
==============
(a) Non-income producing security.
(b) This security is taxed as a "C" corporation for federal income tax
purposes.
(c) Rate shown reflects yield as of April 30, 2022.
ADR - American Depositary Receipt
Currency Abbreviations:
CAD - Canadian Dollar
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2022 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
4/30/2022 PRICES INPUTS INPUTS
----------------------------------------------------------------------
Common Stocks*.................................. $ 1,504,652,756 $ 1,504,652,756 $ -- $ --
Master Limited Partnerships*.................... 790,447,213 790,447,213 -- --
Money Market Funds.............................. 139,555,915 139,555,915 -- --
----------------------------------------------------------------------
Total Investments............................... $ 2,434,655,884 $ 2,434,655,884 $ -- $ --
======================================================================
* See Portfolio of Investments for industry breakout.
Page 10 See Notes to Financial Statements
FIRST TRUST EIP CARBON IMPACT ETF (ECLN)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2022 (UNAUDITED)
SHARES DESCRIPTION VALUE
------------------------------------------------------------
COMMON STOCKS -- 78.7%
CONSTRUCTION & ENGINEERING
-- 4.8%
7,773 Quanta Services, Inc. $ 901,513
--------------
ELECTRIC UTILITIES -- 23.7%
8,707 Alliant Energy Corp. 512,058
5,934 American Electric Power Co.,
Inc. 588,119
418 Edison International 28,754
1,874 Emera, Inc. (CAD) 90,487
35,752 Enel S.p.A., ADR 230,243
527 Eversource Energy 46,060
2,012 Fortis, Inc. (CAD) 97,902
3,644 Hydro One Ltd. (CAD) (a) (b) 98,514
6,099 Iberdrola S.A., ADR 281,957
4,815 IDACORP, Inc. 506,442
10,493 NextEra Energy, Inc. 745,213
197 Orsted A/S (DKK) (a) (b) (c) 21,794
14,699 PPL Corp. 416,129
2,596 Southern (The) Co. 190,520
8,788 Xcel Energy, Inc. 643,809
--------------
4,498,001
--------------
GAS UTILITIES -- 10.9%
25,356 AltaGas Ltd. (CAD) 579,893
6,197 Atmos Energy Corp. 702,740
1,415 Chesapeake Utilities Corp. 177,115
3,205 New Jersey Resources Corp. 138,328
4,414 ONE Gas, Inc. 372,409
990 Southwest Gas Holdings, Inc. 87,229
--------------
2,057,714
--------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS -- 6.4%
7,407 AES (The) Corp. 151,251
2,228 Brookfield Renewable Corp.,
Class A (CAD) 80,004
14,168 Clearway Energy, Inc., Class A 402,655
16,062 EDP Renovaveis S.A.
(EUR) (c) 380,143
1,712 Encavis AG (EUR) (c) 37,374
5,700 Northland Power, Inc. (CAD) 172,023
--------------
1,223,450
--------------
MORTGAGE REAL ESTATE INVESTMENT
TRUSTS -- 1.1%
5,173 Hannon Armstrong Sustainable
Infrastructure Capital, Inc. 206,868
--------------
MULTI-UTILITIES -- 16.8%
6,878 Atco Ltd., Class I (CAD) 245,052
14,742 CenterPoint Energy, Inc. 451,253
5,173 CMS Energy Corp. 355,333
2,265 Dominion Energy, Inc. 184,915
3,765 DTE Energy Co. 493,366
7,433 Public Service Enterprise
Group, Inc. 517,783
2,697 Sempra Energy 435,188
SHARES/
UNITS DESCRIPTION VALUE
------------------------------------------------------------
MULTI-UTILITIES (CONTINUED)
4,971 WEC Energy Group, Inc. $ 497,348
--------------
3,180,238
--------------
OIL, GAS & CONSUMABLE FUELS
-- 13.7%
12,536 Archaea Energy, Inc. (d) 275,792
7,097 Cheniere Energy, Inc. 963,843
17,929 DT Midstream, Inc. 963,684
11,702 Williams (The) Cos., Inc. 401,262
--------------
2,604,581
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 0.9%
1,043 Enphase Energy, Inc. (d) 168,340
--------------
WATER UTILITIES -- 0.4%
530 American Water Works Co.,
Inc. 81,662
--------------
TOTAL COMMON STOCKS
-- 78.7% 14,922,367
(Cost $13,272,193) --------------
MASTER LIMITED PARTNERSHIPS
-- 11.3%
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS -- 6.1%
10,269 Brookfield Renewable
Partners, L.P. (CAD) 361,551
11,957 NextEra Energy Partners,
L.P. (e) 797,054
--------------
1,158,605
--------------
OIL, GAS & CONSUMABLE FUELS
-- 5.2%
16,719 Cheniere Energy Partners, L.P. 898,813
2,750 DCP Midstream, L.P. 94,050
--------------
992,863
--------------
TOTAL MASTER LIMITED
PARTNERSHIPS -- 11.3% 2,151,468
(Cost $1,985,742) --------------
MONEY MARKET FUNDS -- 9.5%
1,796,960 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class - 0.23% (f) 1,796,960
(Cost $1,796,960) --------------
TOTAL INVESTMENTS -- 99.5% 18,870,795
(Cost $17,054,895)
NET OTHER ASSETS AND
LIABILITIES -- 0.5% 89,685
--------------
NET ASSETS -- 100.0% $ 18,960,480
==============
(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
See Notes to Financial Statements Page 11
FIRST TRUST EIP CARBON IMPACT ETF (ECLN)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2022 (UNAUDITED)
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 April 30, 2022, securities noted as such are valued at
$439,311 or 2.3% 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.
(e) This security is taxed as a "C" corporation for federal income tax
purposes.
(f) Rate shown reflects yield as of April 30, 2022.
ADR - American Depositary Receipt
Currency Abbreviations:
CAD - Canadian Dollar
DKK - Danish Krone
EUR - Euro
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2022 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
4/30/2022 PRICES INPUTS INPUTS
----------------------------------------------------------------------
Common Stocks:
Electric Utilities............................ $ 4,498,001 $ 4,476,207 $ 21,794 $ --
Independent Power and Renewable Electricity
Producers................................... 1,223,450 805,933 417,517 --
Other Industry Categories*.................... 9,200,916 9,200,916 -- --
Master Limited Partnerships*.................... 2,151,468 2,151,468 -- --
Money Market Funds.............................. 1,796,960 1,796,960 -- --
----------------------------------------------------------------------
Total Investments............................... $ 18,870,795 $ 18,431,484 $ 439,311 $ --
======================================================================
* See Portfolio of Investments for industry breakout.
Page 12 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND IV
STATEMENTS OF ASSETS AND LIABILITIES
APRIL 30, 2022 (UNAUDITED)
FIRST TRUST NORTH FIRST TRUST
AMERICAN ENERGY EIP CARBON
INFRASTRUCTURE FUND IMPACT ETF
(EMLP) (ECLN)
--------------------- ---------------------
ASSETS:
Investments, at value.................................................. $ 2,434,655,884 $ 18,870,795
Foreign currency, at value............................................. -- 1,235
Receivables:
Capital shares sold................................................. 14,514,560 --
Dividends........................................................... 10,235,461 7,795
Investment securities sold.......................................... 1,686,258 96,403
Reclaims............................................................ 26,106 1,075
----------------- -----------------
Total Assets..................................................... 2,461,118,269 18,977,303
----------------- -----------------
LIABILITIES:
Payables:
Investment securities purchased..................................... 16,342,695 1,235
Investment advisory fees............................................ 1,963,341 15,588
----------------- -----------------
Total Liabilities................................................ 18,306,036 16,823
----------------- -----------------
NET ASSETS............................................................. $ 2,442,812,233 $ 18,960,480
================= =================
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $ 2,361,865,238 $ 16,893,140
Par value.............................................................. 915,550 7,500
Accumulated distributable earnings (loss).............................. 80,031,445 2,059,840
----------------- -----------------
NET ASSETS............................................................. $ 2,442,812,233 $ 18,960,480
================= =================
NET ASSET VALUE, per share............................................. $ 26.68 $ 25.28
================= =================
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share).............................. 91,555,000 750,002
================= =================
Investments, at cost................................................... $ 1,884,599,472 $ 17,054,895
================= =================
Foreign currency, at cost (proceeds)................................... $ -- $ 1,235
================= =================
See Notes to Financial Statements Page 13
FIRST TRUST EXCHANGE-TRADED FUND IV
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2022 (UNAUDITED)
FIRST TRUST NORTH FIRST TRUST
AMERICAN ENERGY EIP CARBON
INFRASTRUCTURE FUND IMPACT ETF
(EMLP) (ECLN)
--------------------- ---------------------
INVESTMENT INCOME:
Dividends.............................................................. $ 31,309,741 $ 259,338
Foreign withholding tax................................................ (1,117,038) (9,330)
----------------- -----------------
Total investment income............................................. 30,192,703 250,008
----------------- -----------------
EXPENSES:
Investment advisory fees............................................... 10,581,266 93,562
----------------- -----------------
Total expenses...................................................... 10,581,266 93,562
----------------- -----------------
NET INVESTMENT INCOME (LOSS)........................................... 19,611,437 156,446
----------------- -----------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments......................................................... 39,621,559 (85,870)
In-kind redemptions................................................. 18,587,600 531,524
Foreign currency transactions....................................... (169,085) (519)
----------------- -----------------
Net realized gain (loss)............................................... 58,040,074 445,135
----------------- -----------------
Net change in unrealized appreciation (depreciation) on:
Investments......................................................... 96,681,054 286,476
Foreign currency translation........................................ (1,924) (450)
----------------- -----------------
Net change in unrealized appreciation (depreciation)................... 96,679,130 286,026
----------------- -----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ 154,719,204 731,161
----------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ 174,330,641 $ 887,607
================= =================
Page 14 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND IV
STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST FIRST TRUST
NORTH AMERICAN ENERGY EIP CARBON
INFRASTRUCTURE FUND IMPACT ETF
(EMLP) (ECLN)
-------------------------------- --------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR
4/30/2022 ENDED 4/30/2022 ENDED
(UNAUDITED) 10/31/2021 (UNAUDITED) 10/31/2021
--------------- --------------- --------------- ---------------
OPERATIONS:
Net investment income (loss)............................ $ 19,611,437 $ 13,687,851 $ 156,446 $ 132,419
Net realized gain (loss)................................ 58,040,074 10,915,859 445,135 (141,467)
Net change in unrealized appreciation (depreciation).... 96,679,130 488,248,200 286,026 1,380,219
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from operations...................................... 174,330,641 512,851,910 887,607 1,371,171
--------------- --------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations................................... (32,950,548) (71,059,859) (172,631) (173,970)
--------------- --------------- --------------- ---------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold............................... 225,684,295 122,958,569 -- 17,345,173
Cost of shares redeemed................................. (53,387,149) (123,512,268) (2,436,473) --
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from shareholder transactions........................ 172,297,146 (553,699) (2,436,473) 17,345,173
--------------- --------------- --------------- ---------------
Total increase (decrease) in net assets................. 313,677,239 441,238,352 (1,721,497) 18,542,374
NET ASSETS:
Beginning of period..................................... 2,129,134,994 1,687,896,642 20,681,977 2,139,603
--------------- --------------- --------------- ---------------
End of period........................................... $ 2,442,812,233 $ 2,129,134,994 $ 18,960,480 $ 20,681,977
=============== =============== =============== ===============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................. 85,105,000 85,755,000 850,002 100,002
Shares sold............................................. 8,500,000 5,200,000 -- 750,000
Shares redeemed......................................... (2,050,000) (5,850,000) (100,000) --
--------------- --------------- --------------- ---------------
Shares outstanding, end of period....................... 91,555,000 85,105,000 750,002 850,002
=============== =============== =============== ===============
See Notes to Financial Statements Page 15
FIRST TRUST EXCHANGE-TRADED FUND IV
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
4/30/2022 --------------------------------------------------------------
(UNAUDITED) 2021 2020 2019 2018 2017
----------- ---------- ---------- ---------- ---------- ----------
Net asset value, beginning of period $ 25.02 $ 19.68 $ 24.83 $ 22.64 $ 24.55 $ 24.76
----------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.29 0.19 0.20 0.36 0.35 0.44
Net realized and unrealized gain (loss) 1.75 6.01 (4.33) 2.81 (1.33) 0.32
----------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 2.04 6.20 (4.13) 3.17 (0.98) 0.76
----------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.38) (0.86) (0.70) (0.29) (0.45) (0.48)
Return of capital -- -- (0.32) (0.69) (0.48) (0.49)
----------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.38) (0.86) (1.02) (0.98) (0.93) (0.97)
----------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 26.68 $ 25.02 $ 19.68 $ 24.83 $ 22.64 $ 24.55
=========== ========== ========== ========== ========== ==========
TOTAL RETURN (a) 8.17% 31.97% (16.69)% 14.22% (4.03)% 3.06%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 2,442,812 $2,129,135 $1,687,897 $2,565,360 $2,117,805 $1,910,977
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average
net assets 0.95% (b) 0.95% 0.95% 0.95% 0.95% 0.95%
Ratio of net investment income (loss) to
average net assets 1.76% (b) 0.71% 1.13% 1.52% 1.40% 1.59%
Portfolio turnover rate (c) 17% 52% 46% 33% 35% 24%
FIRST TRUST EIP CARBON IMPACT ETF (ECLN)
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31, PERIOD
4/30/2022 ----------------------- ENDED
(UNAUDITED) 2021 2020 10/31/2019 (d)
----------- ---------- ---------- --------------
Net asset value, beginning of period $ 24.33 $ 21.40 $ 20.70 $ 20.09
----------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.19 0.31 0.30 0.05
Net realized and unrealized gain (loss) 0.97 2.98 0.85 0.56
----------- ---------- ---------- ----------
Total from investment operations 1.16 3.29 1.15 0.61
----------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.21) (0.36) (0.33) --
Return of capital -- -- (0.12) --
----------- ---------- ---------- ----------
Total distributions (0.21) (0.36) (0.45) --
----------- ---------- ---------- ----------
Net asset value, end of period $ 25.28 $ 24.33 $ 21.40 $ 20.70
=========== ========== ========== ==========
TOTAL RETURN (a) 4.77% 15.49% 5.69% 3.04%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 18,960 $ 20,682 $ 2,140 $ 2,070
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average
net assets 0.95% (b) 0.95% 0.95% 0.95% (b)
Ratio of net investment income (loss) to
average net assets 1.59% (b) 1.24% 1.45% 1.18% (b)
Portfolio turnover rate (c) 14% 56% 23% 3%
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year.
(b) Annualized.
(c) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
(d) Inception date is August 19, 2019, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
Page 16 See Notes to Financial Statements
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2022 (UNAUDITED)
1. ORGANIZATION
First Trust Exchange-Traded Fund IV (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on September 15,
2010, and is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of eleven funds that are offering shares. This
report covers the two funds (each a "Fund" and collectively, the "Funds") listed
below. The shares of each Fund are listed and traded on the NYSE Arca, Inc.
("NYSE Arca").
First Trust North American Energy Infrastructure Fund -- (ticker
"EMLP")
First Trust EIP Carbon Impact ETF -- (ticker "ECLN")
Each Fund represents a separate series of shares of beneficial interest in the
Trust. Unlike conventional mutual funds, each Fund issues and redeems shares on
a continuous basis, at net asset value ("NAV"), only in large blocks of shares
known as "Creation Units."
Each Fund is an actively managed exchange-traded fund. EMLP's investment
objective is to seek total return. EMLP will invest, under normal market
conditions, at least 80% of its net assets (including investment borrowings) in
equity securities of companies deemed by Energy Income Partners, LLC ("EIP" or
the "Sub-Advisor") to be engaged in the energy infrastructure sector, which
principally include publicly-traded master limited partnerships and limited
liability companies taxed as partnerships ("MLPs"), MLP affiliates, pipeline
companies, utilities, and other companies that derive the majority of their
revenues from operating or providing services in support of infrastructure
assets such as pipelines, power transmission and petroleum and natural gas
storage in the petroleum, natural gas and power generation industries
(collectively, "Energy Infrastructure Companies"). In addition, under normal
market conditions, the Fund will invest at least 80% of its net assets
(including investment borrowings) in equity securities of companies
headquartered or incorporated in the United States and Canada. ECLN's investment
objective is to seek to achieve a competitive risk-adjusted total return
balanced between dividends and capital appreciation. ECLN will invest, under
normal market conditions, at least 80% of its net assets (including investment
borrowings) in equity securities of companies identified by EIP as having or
seeking to have a positive carbon impact, defined as companies that reduce, have
a publicly available plan to reduce, or enable the reduction of carbon and other
greenhouse gas emissions from the production, transportation, conversion,
storage and use of energy. ECLN's investments will be concentrated in the
industries constituting the energy infrastructure sector, which principally
include utilities, natural gas pipeline companies, manufacturers, contracted
developers and/or owners of renewable energy, and other companies that derive
the majority of their earnings from manufacturing, operating or providing
services in support of infrastructure assets and/or infrastructure activities
such as renewable energy equipment, energy storage, carbon capture and
sequestration, fugitive methane abatement and energy transmission and
distribution equipment.
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds are each considered an investment company and follow accounting and
reporting guidance under Financial Accounting Standards Board Accounting
Standards Codification Topic 946, "Financial Services-Investment Companies." The
following is a summary of significant accounting policies consistently followed
by the Funds in the preparation of the financial statements. The preparation of
the financial statements in accordance with accounting principles generally
accepted in the United States of America ("U.S. GAAP") requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
Each Fund's NAV is determined daily as of the close of regular trading on the
New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day
the NYSE is open for trading. If the NYSE closes early on a valuation day, the
NAV is determined as of that time. Foreign securities are priced using data
reflecting the earlier closing of the principal markets for those securities.
Each Fund's NAV is calculated by dividing the value of all assets of each Fund
(including accrued interest and dividends), less all liabilities (including
accrued expenses and dividends declared but unpaid), by the total number of
shares outstanding.
Each Fund's investments are valued daily at market value or, in the absence of
the market value with respect to any portfolio securities, at fair value. Market
value prices represent last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are primarily obtained from
third-party pricing services. Fair value prices represent any prices not
considered market value prices and are either obtained from a third-party
pricing service or are determined by the Pricing Committee of the Funds'
investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"),
Page 17
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2022 (UNAUDITED)
in accordance with valuation procedures adopted by the Trust's Board of
Trustees, and in accordance with provisions of the 1940 Act. Investments valued
by the Advisor's Pricing Committee, if any, are footnoted as such in the
footnotes to the Portfolio of Investments. Each Fund's investments are valued as
follows:
Common stocks, MLPs and other equity securities listed on any national or
foreign exchange (excluding The Nasdaq Stock Market LLC ("Nasdaq") and the
London Stock Exchange Alternative Investment Market ("AIM")) are valued at
the last sale price on the exchange on which they are principally traded
or, for Nasdaq and AIM securities, the official closing price. Securities
traded on more than one securities exchange are valued at the last sale
price or official closing price, as applicable, at the close of the
securities exchange representing the principal market for such securities.
Securities trading on foreign exchanges or over-the-counter markets that
close prior to the NYSE close may be valued using a systematic fair
valuation model provided by a third-party pricing service. If these
foreign securities meet certain criteria in relation to the valuation
model, their valuation is systematically adjusted to reflect the impact of
movement in the U.S. market after the close of the foreign markets.
Shares of open-end funds are valued at fair value which is based on NAV
per share.
Securities traded in an over-the-counter market are fair valued at the
mean of their most recent bid and asked price, if available, and otherwise
at their closing bid price.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Trust's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities
which may not be publicly sold without registration under the Securities Act of
1933, as amended) for which a third-party pricing service is unable to provide a
market price; securities whose trading has been formally suspended; a security
whose market or fair value price is not available from a pre-established pricing
source; a security with respect to which an event has occurred that is likely to
materially affect the value of the security after the market has closed but
before the calculation of a Fund's NAV or make it difficult or impossible to
obtain a reliable market quotation; and a security whose price, as provided by
the third-party pricing service, does not reflect the security's fair value. As
a general principle, the current fair value of a security would appear to be the
amount which the owner might reasonably expect to receive for the security upon
its current sale. When fair value prices are used, generally they will differ
from market quotations or official closing prices on the applicable exchanges. A
variety of factors may be considered in determining the fair value of such
securities, including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or third-party pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect
the value of the security.
If the securities in question are foreign securities, the following additional
information may be considered:
1) the value of similar foreign securities traded on other foreign
markets;
2) ADR trading of similar securities;
3) closed-end fund or exchange-traded fund trading of similar
securities;
4) foreign currency exchange activity;
5) the trading prices of financial products that are tied to baskets of
foreign securities;
6) factors relating to the event that precipitated the pricing problem;
7) whether the event is likely to recur; and
8) whether the effects of the event are isolated or whether they affect
entire markets, countries or regions.
Because foreign markets may be open on different days than the days during which
investors may transact in the shares of a Fund, the value of the Fund's
securities may change on the days when investors are not able to transact in the
shares of the Fund. The value of securities denominated in foreign currencies is
converted into U.S. dollars using exchange rates determined daily as of the
close of regular trading on the NYSE.
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FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2022 (UNAUDITED)
The Funds are subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets. o
Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investment.
The inputs or methodologies used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value each Fund's investments as of April 30, 2022, is
included with each Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income, if any, is
recorded on the accrual basis.
Distributions received from a Fund's investments in MLPs generally are comprised
of return of capital and investment income. A Fund records estimated return of
capital and investment income based on historical information available from
each MLP. These estimates may subsequently be revised based on information
received from the MLPs after their tax reporting periods are concluded.
Distributions received from a Fund's investments in Real Estate Investment
Trusts ("REITs") may be comprised of return of capital, capital gains, and
income. The actual character of the amounts received during the year are not
known until after the REITs' fiscal year end. A Fund records the character of
distributions received from the REITs during the year based on estimates
available. The characterization of distributions received by a Fund may be
subsequently revised based on information received from the REITs after their
tax reporting periods conclude.
C. FOREIGN CURRENCY
The books and records of the Funds are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated into
U.S. dollars at the exchange rates prevailing at the end of the period.
Purchases and sales of investments and items of income and expense are
translated on the respective dates of such transactions. Unrealized gains and
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
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2022 (UNAUDITED)
treatment of income and gain/loss on significantly modified portfolio securities
held by the Funds and have no impact on net assets or NAV per share. Temporary
differences, which arise from recognizing certain items of income, expense and
gain/loss in different periods for financial statement and tax purposes, will
reverse at some time in the future.
The tax character of distributions paid by each Fund during the fiscal year
ended October 31, 2021 was as follows:
Distributions Distributions Distributions
paid from paid from paid from
Ordinary Income Capital Gains Return of Capital
--------------- ------------- -----------------
First Trust North American Energy Infrastructure Fund $ 71,059,859 $ -- $ --
First Trust EIP Carbon Impact ETF 173,970 -- --
As of October 31, 2021, the components of distributable earnings on a tax basis
for each Fund were as follows:
Accumulated
Undistributed Capital and Net Unrealized
Ordinary Other Appreciation
Income Gain (Loss) (Depreciation)
--------------- ------------- -----------------
First Trust North American Energy Infrastructure Fund $ (42,502,994) $(430,769,976) $ 411,924,322
First Trust EIP Carbon Impact ETF 18,341 (42,033) 1,368,556
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, 2021, EMLP
and ECLN had non-expiring capital loss carryforwards available for federal
income tax purposes of $430,769,976 and $42,033, 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
2018, 2019, 2020, and 2021 remain open to federal and state audit. For ECLN, the
taxable years ended 2019, 2020, and 2021 remain open to federal and state audit.
As of April 30, 2022, management has evaluated the application of these
standards to the Funds and has determined that no provision for income tax is
required in the Funds' financial statements for uncertain tax positions.
During the taxable year ended October 31, 2021, the following Fund utilized
non-expiring capital loss carryforwards in the following amount:
Capital Loss
Carryforward
Utilized
---------------
First Trust North American Energy Infrastructure Fund $ 23,621,213
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, 2021, the following
Fund incurred and elected to defer late year ordinary or capital losses as
follows:
Qualified Late Year Losses
----------------------------------
Ordinary Losses Capital Losses
--------------- --------------
First Trust North American Energy Infrastructure Fund $ 42,502,994 $ --
Page 20
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2022 (UNAUDITED)
As of April 30, 2022, the aggregate cost, gross unrealized appreciation, gross
unrealized depreciation, and net unrealized appreciation/(depreciation) on
investments (including short positions and derivatives, if any) for federal
income tax purposes were as follows:
Gross Gross Net Unrealized
Unrealized Unrealized Appreciation
Tax Cost Appreciation (Depreciation) (Depreciation)
--------------- --------------- --------------- ---------------
First Trust North American Energy
Infrastructure Fund $ 1,884,599,472 $ 563,712,274 $ (13,655,862) $ 550,056,412
First Trust EIP Carbon Impact ETF 17,054,895 2,117,313 (301,413) 1,815,900
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 an index fund.
Additionally, the Lead Independent Trustee and the Chairs of the Audit
Committee, Nominating and Governance Committee and Valuation Committee are paid
annual fees to serve in such capacities, with such compensation allocated pro
rata among each fund in the First Trust Fund Complex based on net assets.
Independent Trustees are reimbursed for travel and out-of-pocket expenses in
connection with all meetings. The Lead Independent Trustee and Committee Chairs
rotate every three years. The officers and "Interested" Trustee receive no
compensation from the Trust for acting in such capacities.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2022 (UNAUDITED)
4. PURCHASES AND SALES OF SECURITIES
For the six months ended April 30, 2022, the cost of purchases and proceeds from
sales of investments for each Fund, excluding short-term investments and in-kind
transactions, were as follows:
Purchases Sales
--------------- ---------------
First Trust North American Energy Infrastructure Fund $ 375,700,091 $ 485,603,829
First Trust EIP Carbon Impact ETF 2,608,494 4,236,440
For the six months ended April 30, 2022, the cost of in-kind purchases and
proceeds from in-kind sales for each Fund were as follows:
Purchases Sales
--------------- ---------------
First Trust North American Energy Infrastructure Fund $ 203,288,860 $ 47,916,350
First Trust EIP Carbon Impact ETF -- 2,285,344
5. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
Each Fund generally issues and redeems its shares in primary market transactions
through a creation and redemption mechanism and does not sell or redeem
individual shares. Instead, financial entities known as "Authorized
Participants" have contractual arrangements with a Fund or one of the Fund's
service providers to purchase and redeem Fund shares directly with the Fund in
large blocks of shares known as "Creation Units." Prior to the start of trading
on every business day, a Fund publishes through the National Securities Clearing
Corporation ("NSCC") the "basket" of securities, cash or other assets that it
will accept in exchange for a Creation Unit of the Fund's shares. An Authorized
Participant that wishes to effectuate a creation of a Fund's shares deposits
with the Fund the "basket" of securities, cash or other assets identified by the
Fund that day, and then receives the Creation Unit of the Fund's shares in
return for those assets. After purchasing a Creation Unit, the Authorized
Participant may continue to hold a Fund's shares or sell them in the secondary
market. The redemption process is the reverse of the purchase process: the
Authorized Participant redeems a Creation Unit of a Fund's shares for a basket
of securities, cash or other assets. The combination of the creation and
redemption process with secondary market trading in a Fund's shares and
underlying securities provides arbitrage opportunities that are designed to help
keep the market price of a Fund's shares at or close to the NAV per share of the
Fund.
Each Fund imposes fees in connection with the purchase of Creation Units. These
fees may vary based upon various fact-based circumstances, including, but not
limited to, the composition of the securities included in the Creation Unit or
the countries in which the transactions are settled. The price for each Creation
Unit will equal the daily NAV per share of a Fund times the number of shares in
a Creation Unit, plus the fees described above and, if applicable, any
operational processing and brokerage costs, transfer fees, stamp taxes and part
or all of the spread between the expected bid and offer side of the market
related to the securities comprising the creation basket.
Each Fund also imposes fees in connection with the redemption of Creation Units.
These fees may vary based upon various fact-based circumstances, including, but
not limited to, the composition of the securities included in the Creation Unit
or the countries in which the transactions are settled. The price received for
each Creation Unit will equal the daily NAV per share of a Fund times the number
of shares in a Creation Unit, minus the fees described above and, if applicable,
any operational processing and brokerage costs, transfer fees, stamp taxes and
part or all of the spread between the expected bid and offer side of the market
related to the securities comprising the redemption basket. Investors who use
the services of a broker or other such intermediary in addition to an Authorized
Participant to effect a redemption of a Creation Unit may also be assessed an
amount to cover the cost of such services. The redemption fee charged by a Fund
will comply with Rule 22c-2 of the 1940 Act which limits redemption fees to no
more than 2% of the value of the shares redeemed.
6. DISTRIBUTION PLAN
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Funds are
authorized to pay an amount up to 0.25% of their average daily net assets each
year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the
Funds, for amounts expended to finance activities primarily intended to result
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2022 (UNAUDITED)
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, 2023.
7. INDEMNIFICATION
The Trust, on behalf of the Funds, has a variety of indemnification obligations
under contracts with its service providers. The Trust's maximum exposure under
these arrangements is unknown. However, the Trust has not had prior claims or
losses pursuant to these contracts and expects the risk of loss to be remote.
8. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Funds
through the date the financial statements were issued and has determined that
there were no subsequent events requiring recognition or disclosure in the
financial statements that have not already been disclosed.
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2022 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine
how to vote proxies and information on how each Fund voted proxies relating to
its portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
each Fund's website at www.ftportfolios.com; and (3) on the Securities and
Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
Each Fund files portfolio holdings information for each month in a fiscal
quarter within 60 days after the end of the relevant fiscal quarter on Form
N-PORT. Portfolio holdings information for the third month of each fiscal
quarter will be publicly available on the SEC's website at www.sec.gov. Each
Fund's complete schedule of portfolio holdings for the second and fourth
quarters of each fiscal year is included in the semi-annual and annual reports
to shareholders, respectively, and is filed with the SEC on Form N-CSR. The
semi-annual and annual report for each Fund is available to investors within 60
days after the period to which it relates. Each Fund's Forms N-PORT and Forms
N-CSR are available on the SEC's website listed above.
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE
APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS
RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW
APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT
IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY
FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE,
RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT
WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO
REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
CONCENTRATION RISK. To the extent that a fund is able to invest a significant
percentage of its assets in a single asset class or the securities of issuers
within the same country, state, region, industry or sector, an adverse economic,
business or political development may affect the value of the fund's investments
more than if the fund were more broadly diversified. A fund that tracks an index
will be concentrated to the extent the fund's corresponding index is
concentrated. A concentration makes a fund more susceptible to any single
occurrence and may subject the fund to greater market risk than a fund that is
more broadly diversified.
CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable
or unwilling to make dividend, interest and/or principal payments when due and
the related risk that the value of a security may decline because of concerns
about the issuer's ability to make such payments.
CYBER SECURITY RISK. The funds are susceptible to potential operational risks
through breaches in cyber security. A breach in cyber security refers to both
intentional and unintentional events that may cause a fund to lose proprietary
information, suffer data corruption or lose operational capacity. Such events
could cause a fund to incur regulatory penalties, reputational damage,
additional compliance costs associated with corrective measures and/or financial
loss. In addition, cyber security breaches of a fund's third-party service
providers, such as its administrator, transfer agent, custodian, or sub-advisor,
as applicable, or issuers in which the fund invests, can also subject a fund to
many of the same risks associated with direct cyber security breaches.
DEFINED OUTCOME FUNDS RISK. To the extent a fund's investment strategy is
designed to deliver returns tied to the price performance of an underlying ETF,
an investor may not realize the returns the fund seeks to achieve if that
investor does not hold shares for the entire target outcome period. In the event
an investor purchases shares after the first day of the target outcome period or
sells shares prior to the end of the target outcome period, the buffer that the
fund seeks to provide against a decline in the value of the underlying ETF may
not be available, the enhanced returns that the fund seeks to provide (if any)
may not be available and the investor may not participate in a gain in the value
of the underlying ETF up to the cap for the investor's investment period.
Additionally, the fund will not participate in gains of the underlying ETF above
the cap and a shareholder may lose their entire investment. If the fund seeks
enhanced returns, there are certain time periods when the value of the fund may
fall faster than the value of the underlying ETF, and it is very unlikely that,
on any given day during which the underlying ETF share price increases in value,
the fund's share price will increase at the same rate as the enhanced returns
sought by the fund, which is designed for an entire target outcome period.
Trading flexible exchange options involves risks different from, or possibly
greater than, the risks associated with investing directly in securities, such
as less liquidity and correlation and valuation risks. A fund may experience
substantial downside from specific flexible exchange option positions and
certain positions may expire worthless.
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2022 (UNAUDITED)
DERIVATIVES RISK. To the extent a fund uses derivative instruments such as
futures contracts, options contracts and swaps, the fund may experience losses
because of adverse movements in the price or value of the underlying asset,
index or rate, which may be magnified by certain features of the derivative.
These risks are heightened when a fund's portfolio managers use derivatives to
enhance the fund's return or as a substitute for a position or security, rather
than solely to hedge (or offset) the risk of a position or security held by the
fund.
EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the
value of the fund's shares will fluctuate with changes in the value of the
equity securities. Equity securities prices fluctuate for several reasons,
including changes in investors' perceptions of the financial condition of an
issuer or the general condition of the relevant stock market, such as market
volatility, or when political or economic events affecting the issuers occur. In
addition, common stock prices may be particularly sensitive to rising interest
rates, as the cost of capital rises and borrowing costs increase. Equity
securities may decline significantly in price over short or extended periods of
time, and such declines may occur in the equity market as a whole, or they may
occur in only a particular country, company, industry or sector of the market.
ETF RISK. The shares of an ETF trade like common stock and represent an interest
in a portfolio of securities. The risks of owning an ETF generally reflect the
risks of owning the underlying securities, although lack of liquidity in an ETF
could result in it being more volatile and ETFs have management fees that
increase their costs. Shares of an ETF trade on an exchange at market prices
rather than net asset value, which may cause the shares to trade at a price
greater than net asset value (premium) or less than net asset value (discount).
In times of market stress, decisions by market makers to reduce or step away
from their role of providing a market for an ETF's shares, or decisions by an
ETF's authorized participants that they are unable or unwilling to proceed with
creation and/or redemption orders of an ETF's shares, could result in shares of
the ETF trading at a discount to net asset value and in greater than normal
intraday bid-ask spreads.
FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income
securities, the fund will be subject to credit risk, income risk, interest rate
risk, liquidity risk and prepayment risk. Income risk is the risk that income
from a fund's fixed income investments could decline during periods of falling
interest rates. Interest rate risk is the risk that the value of a fund's fixed
income securities will decline because of rising interest rates. Liquidity risk
is the risk that a security cannot be purchased or sold at the time desired, or
cannot be purchased or sold without adversely affecting the price. Prepayment
risk is the risk that the securities will be redeemed or prepaid by the issuer,
resulting in lower interest payments received by the fund. In addition to these
risks, high yield securities, or "junk" bonds, are subject to greater market
fluctuations and risk of loss than securities with higher ratings, and the
market for high yield securities is generally smaller and less liquid than that
for investment grade securities.
INDEX OR MODEL CONSTITUENT RISK. Certain funds may be a constituent of one or
more indices or ETF models. As a result, such a fund may be included in one or
more index-tracking exchange-traded funds or mutual funds. Being a component
security of such a vehicle could greatly affect the trading activity involving a
fund, the size of the fund and the market volatility of the fund. Inclusion in
an index could increase demand for the fund and removal from an index could
result in outsized selling activity in a relatively short period of time. As a
result, a fund's net asset value could be negatively impacted and the fund's
market price may be significantly below its net asset value during certain
periods. In addition, index rebalances may potentially result in increased
trading activity in a fund's shares.
INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject
to Index Provider Risk. There is no assurance that the Index Provider will
compile the Index accurately, or that the Index will be determined, maintained,
constructed, reconstituted, rebalanced, composed, calculated or disseminated
accurately. To correct any such error, the Index Provider may carry out an
unscheduled rebalance or other modification of the Index constituents or
weightings, which may increase the fund's costs. The Index Provider does not
provide any representation or warranty in relation to the quality, accuracy or
completeness of data in the Index, and it does not guarantee that the Index will
be calculated in accordance with its stated methodology. Losses or costs
associated with any Index Provider errors generally will be borne by the fund
and its shareholders.
INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of
other investment vehicles, the fund will incur additional fees and expenses that
would not be present in a direct investment in those investment vehicles.
Furthermore, the fund's investment performance and risks are directly related to
the investment performance and risks of the investment vehicles in which the
fund invests.
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FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2022 (UNAUDITED)
LIBOR RISK. To the extent a fund invests in floating or variable rate
obligations that use the London Interbank Offered Rate ("LIBOR") as a reference
interest rate, it is subject to LIBOR Risk. The United Kingdom's Financial
Conduct Authority, which regulates LIBOR, has ceased making LIBOR available as a
reference rate over a phase-out period that began December 31, 2021. There is no
assurance that any alternative reference rate, including the Secured Overnight
Financing Rate ("SOFR") will be similar to or produce the same value or economic
equivalence as LIBOR or that instruments using an alternative rate will have the
same volume or liquidity. The unavailability or replacement of LIBOR may affect
the value, liquidity or return on certain fund investments and may result in
costs incurred in connection with closing out positions and entering into new
trades. Any potential effects of the transition away from LIBOR on the fund or
on certain instruments in which the fund invests can be difficult to ascertain,
and they may vary depending on a variety of factors, and they could result in
losses to the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are
subject to market fluctuations caused by factors such as general economic
conditions, political events, regulatory or market developments, changes in
interest rates and perceived trends in securities prices. Shares of a fund could
decline in value or underperform other investments as a result of the risk of
loss associated with these market fluctuations. In addition, local, regional or
global events such as war, acts of terrorism, spread of infectious diseases or
other public health issues, recessions, or other events could have a significant
negative impact on a fund and its investments. Such events may affect certain
geographic regions, countries, sectors and industries more significantly than
others. In February 2022, Russia invaded Ukraine which has caused and could
continue to cause significant market disruptions and volatility within the
markets in Russia, Europe, and the United States. The hostilities and sanctions
resulting from those hostilities could have a significant impact on certain fund
investments as well as fund performance. The 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.
While the development of vaccines has slowed the spread of the virus and allowed
for the resumption of "reasonably" normal business activity in the United
States, many countries continue to impose lockdown measures in an attempt to
slow the spread. Additionally, there is no guarantee that vaccines will be
effective against emerging variants of the disease.
NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities,
it is subject to additional risks not associated with securities of domestic
issuers. Non-U.S. securities are subject to higher volatility than securities of
domestic issuers due to: possible adverse political, social or economic
developments; restrictions on foreign investment or exchange of securities;
capital controls; lack of liquidity; currency exchange rates; excessive
taxation; government seizure of assets; the imposition of sanctions by foreign
governments; different legal or accounting standards; and less government
supervision and regulation of exchanges in foreign countries. Investments in
non-U.S. securities may involve higher costs than investments in U.S.
securities, including higher transaction and custody costs, as well as
additional taxes imposed by non-U.S. governments. These risks may be heightened
for securities of companies located, or with significant operations, in emerging
market countries.
OPERATIONAL RISK. Each fund is subject to risks arising from various operational
factors, including, but not limited to, human error, processing and
communication errors, errors of a fund's service providers, counterparties or
other third-parties, failed or inadequate processes and technology or systems
failures. Each fund relies on third-parties for a range of services, including
custody. Any delay or failure relating to engaging or maintaining such service
providers may affect a fund's ability to meet its investment objective. Although
the funds and the funds' investment advisor seek to reduce these operational
risks through controls and procedures, there is no way to completely protect
against such risks.
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2022 (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 April 18, 2022 meeting of the Board of Trustees, as required by Rule
22e-4 and the Program, the Advisor provided the Board with a written report
prepared by the Advisor that addressed the operation of the Program during the
period from March 16, 2021 through the Liquidity Committee's annual meeting held
on March 17, 2022 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.
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FIRST TRUST
First Trust Exchange-Traded Fund IV
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
INVESTMENT SUB-ADVISOR
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
320 South Canal Street
Chicago, IL 60606
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