FIRST TRUST
First Trust Exchange-Traded Fund IV
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First Trust Low Duration Opportunities ETF (LMBS)
Annual Report
For the Year Ended
October 31, 2022
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TABLE OF CONTENTS
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FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
ANNUAL REPORT
OCTOBER 31, 2022
Shareholder Letter........................................................... 1
Fund Performance Overview.................................................... 2
Portfolio Commentary......................................................... 5
Understanding Your Fund Expenses............................................. 7
Portfolio of Investments..................................................... 8
Statement of Assets and Liabilities.......................................... 41
Statement of Operations...................................................... 42
Statements of Changes in Net Assets.......................................... 43
Financial Highlights......................................................... 44
Notes to Financial Statements................................................ 45
Report of Independent Registered Public Accounting Firm...................... 55
Additional Information....................................................... 56
Board of Trustees and Officers............................................... 63
Privacy Policy............................................................... 65
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and its representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the series of First Trust Exchange-Traded Fund IV (the "Trust") described in
this report (First Trust Low Duration Opportunities ETF; hereinafter referred to
as the "Fund") to be materially different from any future results, performance
or achievements expressed or implied by the forward-looking statements. When
evaluating the information included in this report, you are cautioned not to
place undue reliance on these forward-looking statements, which reflect the
judgment of the Advisor and its representatives only as of the date hereof. We
undertake no obligation to publicly revise or update these forward-looking
statements to reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that the Fund will achieve its investment objectives. The
Fund is subject to market risk, which is the possibility that the market values
of securities owned by the Fund will decline and that the value of the Fund's
shares may therefore be less than what you paid for them. Accordingly, you can
lose money investing in the Fund. See "Risk Considerations" in the Additional
Information section of this report for a discussion of certain other risks of
investing in the Fund.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.ftportfolios.com or speak with your financial advisor. Investment returns,
net asset value and share price will fluctuate and Fund shares, when sold, may
be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on the Fund's webpage at www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment in
the Fund. It includes details about the Fund and presents data and analysis that
provide insight into the Fund's performance and investment approach.
By reading the portfolio commentary from the portfolio management team of the
Fund, you may obtain an understanding of how the market environment affected the
Fund's performance. The statistical information that follows may help you
understand the Fund's performance compared to that of a relevant market
benchmark.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor are just that: informed opinions. They should not be considered to be
promises or advice. The opinions, like the statistics, cover the period through
the date on the cover of this report. The material risks of investing in the
Fund are spelled out in the prospectus, the statement of additional information,
and other Fund regulatory filings.
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SHAREHOLDER LETTER
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FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
OCTOBER 31, 2022
Dear Shareholders:
First Trust is pleased to provide you with the annual report for the First Trust
Low Duration Opportunities ETF (the "Fund"), which contains detailed information
about the Fund for the twelve months ended October 31, 2022.
As I'm writing this letter in mid-November, it strikes me that things appear to
be a little more chaotic in the current climate than normal. One of the things
that may have contributed to the chaotic nature of the news flow of late was the
November mid-term election. For the most part, except for a few seats in
Congress, the election is behind us. We learned there would be no "red wave"
(Republicans gaining a strong majority in Congress) but likely gridlock ahead.
Gridlock has been good for stock market investors in the past few decades,
particularly when there's been a Democratic president and the Republicans have
control of at least one house of Congress, according to Brian Wesbury, Chief
Economist at First Trust.
The Federal Reserve (the "Fed") has kept its promise to aggressively hike
interest rates to combat robust inflation. As of November 13, 2022, the Fed has
increased the Federal Funds target rate (upper bound) six times, from 0.25% to
4.00%. The Fed's actions have some investors and pundits looking for evidence
linking the interest rate hikes to a downturn in the economy. In short, the hope
is that a pullback in economic activity might deter the Fed from executing
further interest rate hikes. Fed Chairman Jerome Powell, however, recently said
that the terminal rate (the ultimate rate the Fed is targeting) will likely need
to be higher than previously estimated in order to curb stubbornly high
inflation. The Consumer Price Index ("CPI") is a commonly used measure of
inflation. The CPI stood at 7.7% on a trailing 12-month basis as of October 31,
2022, according to the U.S. Bureau of Labor Statistics. That is down from its
recent high of 9.1% in June 2022. Prior to this year, the last time the CPI was
higher than 7.0% was over 40 years ago. While monetary policy is an ongoing
process subject to change, the Fed does appear to be steadfast in its mission to
bring the rate of inflation back to its preferred level of 2.0%, and that will
take some time, in my opinion. Stay tuned!
Equity and fixed income markets have contended with numerous headwinds this
year, such as the war between Russia and Ukraine. Since setting its all-time
high of 4,796.56 on January 3, 2022, the S&P 500(R) Index has been in a bear
market (a price decline of 20% or more from the most recent high) for the better
part of 310 days. Suffice it to say, we are all looking forward to the end of
this bear market. With respect to corrections and bear markets, the silver
lining is that the S&P 500(R) Index has never failed to fully recover the losses
sustained in any previous downturn. Where might we see demand for stocks moving
forward? One such source could be stock buybacks. As of the last week of October
2022, U.S. companies had announced stock buybacks totaling $1 trillion so far
this year, according to Birinyi Associates. The fixed income market has not been
immune to selling pressure either. Year-to-date through November 10, 2022,
yields on the 10-Year Treasury Note increased by 258 basis points. As you may be
aware, bond yields and bond prices are inversely related, particularly with
respect to investment-grade bonds. As yields rise, prices fall and vice versa.
As noted above, the Fed has more work to do, so bond investors should not be
surprised to see interest rates and bond yields trend at least a bit higher in
the months ahead.
Thank you for giving First Trust the opportunity to play a role in your
financial future. We value our relationship with you and will report on the Fund
again in six months.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 1
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FUND PERFORMANCE OVERVIEW (UNAUDITED)
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The First Trust Low Duration Opportunities ETF's (the "Fund") primary investment
objective is to generate current income. The Fund's secondary investment
objective is to provide capital appreciation. The Fund is an actively managed
exchange-traded fund. First Trust Advisors L.P. ("First Trust" or the "Advisor")
serves as the advisor. James Snyder and Jeremiah Charles are the Fund's
portfolio managers and are jointly and primarily responsible for the day-to-day
management of the Fund's investment portfolio.
Under normal market conditions, the Fund will seek to achieve its investment
objectives by investing at least 60% of its net assets (including investment
borrowings) in mortgage-related debt securities and other mortgage-related
instruments (collectively, "Mortgage-Related Investments"). The Fund normally
expects to invest in Mortgage-Related Investments tied to residential and
commercial mortgages. Mortgage-Related Investments consist of: (1) residential
mortgage-backed securities (RMBS); (2) commercial mortgage-backed securities
(CMBS); (3) stripped mortgage-backed securities (SMBS), which are
mortgage-backed securities where mortgage payments are divided up between paying
the loan's principal and paying the loan's interest; and (4) collateralized
mortgage obligations (CMOs) and real estate mortgage investment conduits
(REMICs) where they are divided into multiple classes with each class being
entitled to a different share of the principal and/or interest payments received
from the pool of underlying assets. The Fund will limit its investment in
Mortgage-Related Investments that are neither issued nor guaranteed by the U.S.
government, or its agencies or instrumentalities to 20% of its net assets
(including investment borrowings). The Fund may invest up to 40% of its net
assets (including investment borrowings), in the aggregate, in (i) cash, cash
equivalents and short-term investments and (ii) non-mortgage direct obligations
of the U.S. government and other non-mortgage securities issued and/or
guaranteed by Government Entities. The Fund may also invest up to 5% of its net
assets (including investment borrowings) in asset-backed securities ("ABS")
(other than Mortgage-Related Investments) that are not issued and/or guaranteed
by Government Entities, or U.S. government-sponsored entities (collectively,
"Government Entities"). However, the Fund's investments in (a) Mortgage-Related
Investments that are not issued and/or guaranteed by Government Entities and (b)
ABS may not, in the aggregate, exceed 20% of the Fund's net assets (including
investment borrowings). Although the Fund intends to invest primarily in
investment grade securities, the Fund may invest up to 20% of its net assets
(including investment borrowings) in securities of any credit quality, including
securities that are below investment grade, which are also known as high yield
securities, or commonly referred to as "junk" bonds, or unrated securities that
have not been judged by the advisor to be of comparable quality to rated
investment grade securities.
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PERFORMANCE
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AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year Ended 5 Years Ended Inception (11/4/14) 5 Years Ended Inception (11/4/14)
10/31/22 10/31/22 to 10/31/22 10/31/22 to 10/31/22
FUND PERFORMANCE
NAV -4.96% 0.40% 1.76% 2.00% 14.99%
Market Price -5.23% 0.33% 1.73% 1.68% 14.73%
INDEX PERFORMANCE
ICE BofA 1-5 Year US Treasury &
Agency Index -6.52% 0.37% 0.61% 1.87% 4.99%
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Total returns for the period since inception are calculated from the inception
date of the Fund. "Average Annual Total Returns" represent the average annual
change in value of an investment over the period indicated. "Cumulative Total
Returns" represent the total change in value of an investment over the periods
indicated.
The Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint of the national best bid and offer price ("NBBO") as of
the time that the Fund's NAV is calculated. Under SEC rules, the NBBO consists
of the highest displayed buy and lowest sell prices among the various exchanges
trading the Fund at the time the Fund's NAV is calculated. Prior to January 1,
2019, the price used was the midpoint between the highest bid and the lowest
offer on the stock exchange on which shares of the Fund were listed for trading
as of the time that the Fund's NAV was calculated. Since shares of the Fund did
not trade in the secondary market until after its inception, for the period from
inception to the first day of secondary market trading in shares of the Fund,
the NAV of the Fund is used as a proxy for the secondary market trading price to
calculate market returns. NAV and market returns assume that all distributions
have been reinvested in the Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike the Fund, the index does not actually hold a portfolio of
securities and therefore does not incur the expenses incurred by the Fund. These
expenses negatively impact the performance of the Fund. Also, market returns do
not include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The total returns presented reflect the reinvestment of dividends on
securities in the index. The returns presented do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund shares. The investment return and principal value of shares of the
Fund will vary with changes in market conditions. Shares of the Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. The Fund's past performance is no guarantee of future performance.
Page 2
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
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% OF
FUND ALLOCATION NET ASSETS
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U.S. Government Agency Mortgage-
Backed Securities 82.3%
Mortgage-Backed Securities 12.2
Asset-Backed Securities 4.8
U.S. Government Bonds and Notes 5.9
U.S. Treasury Bills 4.6
Exchange-Traded Funds 0.0*
Purchased Options 0.0*
U.S. Government Agency Mortgage-
Backed Securities Sold Short (11.6)
Written Options (0.1)
Net Other Assets and Liabilities(1) 1.9
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Total 100.0%
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% OF TOTAL LONG
FIXED-INCOME
INVESTMENTS, CASH
CREDIT QUALITY(3) & CASH EQUIVALENTS
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Government and Agency 79.7%
AAA 3.4
AA+ 0.1
AA 0.3
AA- 0.2
A 0.2
A- 0.0*
BBB+ 0.3
BBB 0.2
BBB- 0.3
BB 0.0*
BB- 0.2
B- 0.0*
Not Rated 9.5
Cash and Cash Equivalents 5.6
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Total 100.0%
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* Amount is less than 0.1%.
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% OF LONG-TERM
TOP TEN HOLDINGS INVESTMENTS(2)
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Federal National Mortgage Association,
Pool TBA, 3.00%, 12/01/48 3.9%
U.S. Treasury Note, 1.50%, 3/31/23 3.2
Federal National Mortgage Association,
Pool TBA, 3.50%, 12/15/52 3.1
Federal National Mortgage Association,
Pool FM3003, 4.00%, 5/01/49 1.8
Federal National Mortgage Association,
Pool FM2972, 4.00%, 12/01/44 1.6
Federal National Mortgage Association,
Pool TBA, 2.50%, 12/15/52 1.6
Federal National Mortgage Association,
Pool TBA, 4.00%, 11/15/52 1.1
Federal National Mortgage Association,
Pool CB4688, 5.00%, 9/01/52 1.0
Federal National Mortgage Association,
Pool FS2044, 4.50%, 7/01/44 0.9
Federal National Mortgage Association,
Pool FS0697, 2.50%, 2/01/42 0.9
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Total 19.1%
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WEIGHTED AVERAGE EFFECTIVE NET DURATION
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October 31, 2022 2.3 Years
High - October 31, 2022 2.3 Years
Low - December 31, 2021 0.7 Years
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(1) Includes variation margin on futures contracts.
(2) Percentages are based on the long positions only. Money market funds and
short positions are excluded.
(3) The ratings are by S&P Global Ratings. A credit rating is an assessment
provided by a nationally recognized statistical rating organization
(NRSRO), of the creditworthiness of an issuer with respect to debt
obligations. Ratings are measured highest to lowest on a scale that
generally ranges from AAA to D for long-term ratings and A-1+ to C for
short-term ratings. Investment grade is defined as those issuers that have
a long-term credit rating of BBB- or higher or a short-term credit rating
of A-3 or higher. The credit ratings shown relate to the credit worthiness
of the issuers of the underlying securities in the Fund, and not to the
Fund or its shares. U.S. Treasury and U.S. Agency mortgage-backed
securities appear under "Government and Agency." Credit ratings are
subject to change.
Page 3
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
NOVEMBER 4, 2014 - OCTOBER 31, 2022
First Trust Low Duration ICE BofA 1-5 Year US
Opportunities ETF Treasury & Agency Index
11/4/14 $10,000 $10,000
10/31/15 10,362 10,144
4/30/16 10,725 10,256
10/31/16 11,138 10,301
4/30/17 11,186 10,279
10/31/17 11,274 10,307
4/30/18 11,294 10,205
10/31/18 11,368 10,273
4/30/19 11,635 10,578
10/31/19 11,923 10,867
4/30/20 11,990 11,290
10/31/20 12,101 11,314
4/30/21 12,146 11,290
10/31/21 12,099 11,232
4/30/22 11,813 10,762
10/31/22 11,499 10,499
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the index does
not actually hold a portfolio of securities and therefore does not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
Performance in securitized product investment strategies can be impacted from
the benefits of purchasing odd lot positions. The impact of these investments
can be particularly meaningful when funds have limited assets under management
and may not be a sustainable source of performance as a fund grows in size.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 4
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PORTFOLIO COMMENTARY
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FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
ANNUAL REPORT
OCTOBER 31, 2022 (UNAUDITED)
ADVISOR
First Trust Advisors L.P. ("First Trust" or the "Advisor") is the investment
advisor to the First Trust Low Duration Opportunities ETF ("the Fund" or
"LMBS"). In this capacity, First Trust is responsible for the selection and
ongoing monitoring of the investments in the Fund's portfolio and certain other
services necessary for the management of the portfolio.
PORTFOLIO MANAGEMENT TEAM
JAMES SNYDER - SENIOR VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER
JEREMIAH CHARLES - SENIOR VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER
The portfolio managers are primarily and jointly responsible for the day-to-day
management of the Fund. Each portfolio manager has served as part of the
portfolio management team of the Fund since 2014.
COMMENTARY
MARKET RECAP
The 12-month period ended October 31, 2022 began with markets coming under
pressure as measures of inflation began to accelerate upward, and market
participants questioning whether inflation was truly transitory, as so
proclaimed by the Federal Reserve (the "Fed"). In a continuation of the yield
curve repricing following the September 2021 Federal Open Market Committee
meeting, bond yields once again resumed their march higher as the calendar year
flipped into 2022, as fears of the COVID-19 variant, Omicron, were pushed aside,
broader economic data remained strong, and incoming inflation data was rapidly
deteriorating. Finally, the Fed relented and abandoned its transitory language,
began to pivot and signaled very hawkish monetary policy to come. This hawkish
pivot included guidance on not only an aggressive path of future interest rate
hikes, but also signaled the use of the balance sheet to finally conclude new
purchases of U.S. Treasuries and Agency mortgage-backed securities ("MBS") and
subsequently, to let the securities mature and roll off via Quantitative
Tightening. Unfortunately for the Fed and the broader U.S. economy, inflationary
readings continued to push higher and the Fed was forced, clearly too late in
its action, in our opinion, to act very aggressively. This started in June 2022
with the first 75 basis point ("bps") hike in nearly 30 years and was followed
by successive 75 bps hikes at the Fed's July and September 2022 meetings. This
abrupt monetary policy change kicked off rather sharp moves higher in interest
rates, volatility, and risk asset pricing, with each coming under duress
throughout the 2022 calendar year. Over the course of the 12-month period ended
October 31, 2022, 2-Year Treasury yields rose 399 bps, the 5-Year Treasury yield
rose 305 bps, and the 10-Year yield rose 243 bps. These dramatic interest rate
increases caused measures of volatility to spike, with the Merrill Lynch Option
Volatility Estimate Index increasing to levels not seen since the Great
Financial Crisis of 2008-09. With upward pressure in rates and sustained
interest rate volatility, overall risk asset pricing and market liquidity have
come under significant pressure. Over the period, securitized spreads widened
with the Agency mortgage basis closing at 175 bps on October 31, 2022, which is
111 bps wider, and the Government Option-Adjusted Spread on Agency MBS widening
45 bps to close the period at 49 bps, with a period high of 64 bps.
PERFORMANCE ANALYSIS
During the 12-month period ended October 31, 2022, the Fund returned -4.96% on a
net asset value ("NAV") basis.
During the same period, the ICE BofA 1-5 Year U.S. Treasury & Agency Index (the
"Index") returned -6.52%.
During the same period, the Fund outperformed the Index by 1.56% net of fees, on
a NAV basis. Given the 2020-2021 historic ascent of home price appreciation and
correspondingly, measures of inflation, the Fund elected to strategically reduce
its overall effective duration. We remained mindful of the perceived logical
response that the Fed would be forced into to counteract such purchasing power
destruction, and as such maintained this very defensive posture on interest
rates throughout the year. Remaining mindful of the team's expectations for the
Fed's expected response function, the Fund ran a defensive spread profile and
aggressively hedged its Agency MBS exposure. Additionally, we believed that
housing would cool on both a nominal as well as real basis, as interest rates
increased and put significant pressure on affordability of housing stock. As
such, the Fund continued to migrate higher in quality, and shorter in tenor as
it related to its Non-Agency allocation. Additionally, there were periods that
the Fund built and held more cash than normal, as we felt there would be better
entry points for select opportunities. We felt that this was a prudent
reallocation of risk as the Fund reduced exposure to assets that we believed
would feel more impact from a slowing housing market and assets we felt were
more exposed to any Fed taper or additional rate increases. We believe this
reallocation provided the Fund a significant pickup in spread, helped maintain a
very short duration and allowed the Fund to more easily achieve its primary
objective. Additionally, throughout the 12-month period ended October 31, 2022,
the Fund maintained a significantly lower, and more stable overall effective
Page 5
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PORTFOLIO COMMENTARY (CONTINUED)
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FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
ANNUAL REPORT
OCTOBER 31, 2022 (UNAUDITED)
duration. Combined, these strategies helped to drive the relative
outperformance, which saw the Fund outperform the Index by over 150 bps on a NAV
basis during the period. Additionally, the Fund's usage of futures positions to
help manage interest rate risk and to structurally position a lower overall
effective duration was beneficial to the Fund's performance as interest rates
rose.
The Fund's monthly distribution of $0.1050 declared on October 21, 2022 and paid
on November 1, 2022 represented an annualized distribution rate of 2.69% based
on the Fund's closing market price of $46.85 as of October 31, 2022. The Fund's
distribution rate is not constant and is subject to change over time based on
the performance of the Fund and general market conditions. For the 12-month
period ended October 31, 2022, 71.73% of the distributions were characterized as
ordinary income and 28.27% were characterized as capital gain. The final
determination of the source and tax status of all 2022 distributions will be
made after the end of 2022 and will be provided on Form 1099-DIV. Not to be
construed as tax advice. Please consult your tax advisor for further information
regarding tax matters.
MARKET OUTLOOK
As expected, on the back of a massive increase in M2 money supply, limited
housing inventory, coupled with historically low interest rates, ongoing supply
chain delays and labor market shortages, inflationary pressure built to levels
not seen in 40 years. We remain mindful of both how hard it can be to tame
inflation once set in, and the impacts this can have on term premium pricing
along the U.S. yield curve. And while we believe that it won't be a straight
line, we expect yields across the curve will continue to move higher, albeit at
a much slower pace than experienced earlier this year. We believe the Fed may be
forced to hike higher than the market expects, and as such believe that the
curve inversion will continue to persist, although we do not expect
significantly deeper inversion. Inflation remains high, however we believe the
aggressive interest rate hikes implemented over the last several months have
just begun to work their way through the broader economy, and already, it
appears the housing market is beginning to cool off as month over month home
price appreciation has turned negative. Currently, we do not believe the Fed
will be an outright seller of its MBS holdings for long as measures of
volatility and illiquidity remain this elevated. We do anticipate that
heightened levels of rate volatility will remain over the shorter term, however,
to expect measures of rate volatility and spread pricing to simply return to
post-GFC/pre-COVID-19 levels in the near term and perhaps even intermediate
term, would be unrealistic, in our view. Heavy-handed Fed intervention appears
to be over; for as long as inflation persists, the Fed appears committed to the
fight. Despite the moderately bearish tone on rates, spreads are quite wide, and
we believe opportunities abound, as we are now very positive on generic Agency
MBS spread valuations, along with AAA shorter duration securitized
opportunities.
We remain committed to finding value across the various sectors of the mortgage
and securitized market, but also along the term spectrum of the U.S. yield
curve. Given the massive increase in interest rates this year, we have begun to
increase the interest rate sensitivity in the Fund as duration risks appear to
be more balanced than earlier in the year, and should yields continue to climb,
we will likely continue to extend duration. We remain committed to actively
managing the convexity component in the portfolio; meaning we do not want to
extend in duration as rates rise, and conversely, we do not want to shorten or
lose duration into a rally. From an asset allocation perspective, we plan to
take advantage of very wide spreads in select securitized opportunities that the
managers find to be attractively priced in the short to intermediate part of the
curve, which we find to be particularly attractive in light of the current curve
inversion. In our view, this approach would provide higher current income, total
return, and spread protection for shareholders. We believe this strategy can be
very effective with proper security selection, particularly when combined with
appropriate yield curve management. We plan to continue to maintain a tradeable
portfolio as that is critical to being able to act should opportunities arise.
Page 6
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
UNDERSTANDING YOUR FUND EXPENSES
OCTOBER 31, 2022 (UNAUDITED)
As a shareholder of First Trust Low Duration Opportunities ETF (the "Fund"), you
incur two types of costs: (1) transaction costs; and (2) ongoing costs,
including management fees, distribution and/or service (12b-1) fees, if any, and
other Fund expenses. This Example is intended to help you understand your
ongoing costs of investing in the Fund and to compare these costs with the
ongoing costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended October 31, 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 the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as brokerage
commissions. Therefore, the second line in the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
--------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX MONTH SIX MONTH
MAY 1, 2022 OCTOBER 31, 2022 PERIOD (a) PERIOD (a) (b)
--------------------------------------------------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
Actual $1,000.00 $ 973.40 0.65% $3.23
Hypothetical (5% return before expenses) $1,000.00 $1,021.93 0.65% $3.31
(a) Annualized expense ratio and expenses paid during the six-month period do
not include fees and expenses of the underlying funds in which the Fund
invests.
(b) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (May 1, 2022
through October 31, 2022), multiplied by 184/365 (to reflect the six-month
period).
Page 7
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 2022
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 82.3%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 25.0%
Federal Home Loan Mortgage Corporation
$ 1,014 Series 1993-1498, Class I, 1 Mo. LIBOR + 1.15% (a)........... 4.56% 04/15/23 $ 1,015
1,160 Series 1993-1552, Class I, 10 Yr. Constant Maturity Treasury
Rate - 0.65% (a).......................................... 2.94% 08/15/23 1,155
11,972 Series 1993-1579, Class PM................................... 6.70% 09/15/23 11,982
14,466 Series 1993-1630, Class PK................................... 6.00% 11/15/23 14,489
479 Series 1993-1643, Class PK................................... 6.50% 12/15/23 479
37,269 Series 1994-1710, Class G, 1 Mo. LIBOR + 1.50% (a)........... 4.91% 04/15/24 37,458
973 Series 1998-2089, Class PJ, IO............................... 7.00% 10/15/28 81
3,798 Series 1998-2102, Class Z.................................... 6.00% 12/15/28 3,848
9,594 Series 2002-2405, Class BF................................... 7.00% 03/25/24 9,590
150,747 Series 2002-2410, Class OG................................... 6.38% 02/15/32 156,058
84,858 Series 2002-2427, Class GE................................... 6.00% 03/15/32 87,131
126,989 Series 2002-2437, Class SA, IO,
1 Mo. LIBOR (x) -1 + 7.90% (b)............................ 4.49% 01/15/29 6,199
166,358 Series 2003-2557, Class HL................................... 5.30% 01/15/33 166,738
97,750 Series 2003-2564, Class AC................................... 5.50% 02/15/33 97,694
248,291 Series 2003-2574, Class PE................................... 5.50% 02/15/33 250,873
105,319 Series 2003-2577, Class LI, IO............................... 5.50% 02/15/33 13,870
875,000 Series 2003-2581, Class LL................................... 5.25% 03/15/33 882,650
12,827 Series 2003-2586, Class TG................................... 5.50% 03/15/23 12,796
26,717 Series 2003-2597, Class AE................................... 5.50% 04/15/33 26,747
1,113,000 Series 2003-2613, Class LL................................... 5.00% 05/15/33 1,100,581
262,389 Series 2003-2626, Class ZW................................... 5.00% 06/15/33 219,544
572,008 Series 2003-2626, Class ZX................................... 5.00% 06/15/33 505,808
391,948 Series 2004-2771, Class NL................................... 6.00% 03/15/34 398,790
291,976 Series 2004-2793, Class PE................................... 5.00% 05/15/34 290,282
771,184 Series 2004-2801, Class SE, IO,
1 Mo. LIBOR (x) -1 + 7.05% (b)............................ 3.64% 07/15/32 44,160
123,010 Series 2004-2835, Class QY, IO,
1 Mo. LIBOR (x) -1 + 7.90% (b)............................ 4.49% 12/15/32 9,652
96,213 Series 2004-2890, Class ZA................................... 5.00% 11/15/34 95,106
638,906 Series 2004-2891, Class ZA................................... 6.50% 11/15/34 699,795
359,096 Series 2004-2907, Class DZ................................... 4.00% 12/15/34 339,045
1,025,422 Series 2005-233, Class 12, IO, STRIPS........................ 5.00% 09/15/35 142,626
731,306 Series 2005-234, Class IO, IO, STRIPS........................ 4.50% 10/01/35 106,835
785,000 Series 2005-2973, Class GE................................... 5.50% 05/15/35 796,206
109,881 Series 2005-3031, Class BI, IO,
1 Mo. LIBOR (x) -1 + 6.69% (b)............................ 3.28% 08/15/35 8,976
2,183,510 Series 2005-3054, Class ZW................................... 6.00% 10/15/35 2,193,565
22,771 Series 2005-3074, Class ZH................................... 5.50% 11/15/35 23,208
227,179 Series 2006-238, Class 8, IO, STRIPS......................... 5.00% 04/15/36 38,093
199,278 Series 2006-243, Class 11, IO, STRIPS (c).................... 7.00% 08/15/36 33,099
69,972 Series 2006-3117, Class ZU................................... 6.00% 02/15/36 73,813
22,816 Series 2006-3150, Class DZ................................... 5.50% 05/15/36 22,954
977,643 Series 2006-3174, Class LF, 1 Mo. LIBOR + 0.35% (a).......... 3.76% 05/15/36 968,124
2,851,934 Series 2006-3196, Class ZK................................... 6.50% 04/15/32 3,051,572
760,509 Series 2007-3262, Class KS, IO,
1 Mo. LIBOR (x) -1 + 6.41% (b)............................ 3.00% 01/15/37 25,559
35,510 Series 2007-3274, Class B.................................... 6.00% 02/15/37 35,079
188,083 Series 2007-3322, Class NF, 1 Mo. LIBOR (x) 2,566.67 -
16,683.33%, 0.00% Floor (a)............................... 0.00% 05/15/37 167,308
Page 8 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Federal Home Loan Mortgage Corporation (Continued)
$ 33,948 Series 2007-3340, Class PF, 1 Mo. LIBOR + 0.30% (a).......... 3.71% 07/15/37 $ 33,218
40,472 Series 2007-3349, Class MY................................... 5.50% 07/15/37 40,873
69,577 Series 2007-3360, Class CB................................... 5.50% 08/15/37 69,053
1,014,990 Series 2007-3370, Class FM, 1 Mo. LIBOR + 0.62% (a).......... 4.03% 10/15/47 1,000,689
67,671 Series 2007-3380, Class FS, 1 Mo. LIBOR + 0.35% (a).......... 3.76% 11/15/36 64,742
156,506 Series 2008-3406, Class B.................................... 6.00% 01/15/38 154,410
97,926 Series 2008-3413, Class B.................................... 5.50% 04/15/37 95,924
231,369 Series 2008-3420, Class AZ................................... 5.50% 02/15/38 229,710
158,217 Series 2008-3448, Class SA, IO,
1 Mo. LIBOR (x) -1 + 6.05% (b)............................ 2.64% 05/15/38 1,210
2,167,631 Series 2009-3522, Class SE, IO,
1 Mo. LIBOR (x) -1 + 6.10% (b)............................ 2.69% 04/15/39 113,124
27,279 Series 2009-3523, Class SD,
1 Mo. LIBOR (x) -2.75 + 19.66% (b)........................ 10.28% 06/15/36 24,839
1,267,050 Series 2009-3542, Class ZP................................... 5.00% 06/15/39 1,253,282
177,000 Series 2009-3550, Class LL................................... 4.50% 07/15/39 171,653
771,572 Series 2009-3563, Class ZP................................... 5.00% 08/15/39 766,500
1,374,371 Series 2009-3572, Class JS, IO,
1 Mo. LIBOR (x) -1 + 6.80% (b)............................ 3.39% 09/15/39 72,803
34,429 Series 2009-3585, Class QZ................................... 5.00% 08/15/39 29,473
114,042 Series 2009-3587, Class FX, 1 Mo. LIBOR + 0.00% (a).......... 3.41% 12/15/37 103,761
422,807 Series 2009-3593, Class F, 1 Mo. LIBOR + 0.50% (a)........... 3.06% 03/15/36 414,189
1,139,304 Series 2009-3605, Class NC................................... 5.50% 06/15/37 1,130,676
500,000 Series 2010-3622, Class PB................................... 5.00% 01/15/40 496,938
107,000 Series 2010-3645, Class WD................................... 4.50% 02/15/40 94,739
513,292 Series 2010-3667, Class PL................................... 5.00% 05/15/40 490,402
58,521 Series 2010-3699, Class FD, 1 Mo. LIBOR + 0.60% (a).......... 4.01% 07/15/40 58,243
435,915 Series 2010-3704, Class ED................................... 4.00% 12/15/36 429,827
400,000 Series 2010-3714, Class PB................................... 4.75% 08/15/40 396,100
323,180 Series 2010-3735, Class IK, IO............................... 3.50% 10/15/25 10,451
67,653 Series 2010-3735, Class JI, IO............................... 4.50% 10/15/30 6,874
198,787 Series 2010-3740, Class SC, IO,
1 Mo. LIBOR (x) -1 + 6.00% (b)............................ 2.59% 10/15/40 18,431
153,134 Series 2010-3770, Class GZ................................... 4.50% 10/15/40 132,541
15,288 Series 2011-3795, Class ED................................... 3.00% 10/15/39 15,147
600,000 Series 2011-3796, Class PB................................... 5.00% 01/15/41 593,299
186,138 Series 2011-3819, Class ZQ................................... 6.00% 04/15/36 191,460
300,000 Series 2011-3820, Class NC................................... 4.50% 03/15/41 291,134
153,801 Series 2011-3828, Class SY,
1 Mo. LIBOR (x) -3 + 13.20% (b)........................... 2.96% 02/15/41 94,813
103,547 Series 2011-3842, Class BS,
1 Mo. LIBOR (x) -5 + 22.75% (b)........................... 7.11% 04/15/41 79,529
300,000 Series 2011-3844, Class PC................................... 5.00% 04/15/41 301,278
450,764 Series 2011-3852, Class SW, IO,
1 Mo. LIBOR (x) -1 + 6.00% (b)............................ 2.59% 05/15/41 33,203
1,387,000 Series 2011-3895, Class PW................................... 4.50% 07/15/41 1,346,627
1,878,392 Series 2011-3925, Class ZD................................... 4.50% 09/15/41 1,767,812
8,841,520 Series 2011-3954, Class GS, IO,
1 Mo. LIBOR (x) -1 + 6.00% (b)............................ 2.59% 11/15/41 772,619
326,590 Series 2012-267, Class S5, IO, STRIPS,
1 Mo. LIBOR (x) -1 + 6.00% (b)............................ 2.59% 08/15/42 21,893
See Notes to Financial Statements Page 9
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Federal Home Loan Mortgage Corporation (Continued)
$ 6,913,601 Series 2012-276, Class S5, IO, STRIPS,
1 Mo. LIBOR (x) -1 + 6.00% (b)............................ 2.59% 09/15/42 $ 555,311
391,354 Series 2012-3999, Class WA (c)............................... 5.55% 08/15/40 389,271
1,878,000 Series 2012-4000, Class PY................................... 4.50% 02/15/42 1,630,397
36,686 Series 2012-4012, Class GC................................... 3.50% 06/15/40 35,764
24,118 Series 2012-4015, Class KB................................... 1.75% 05/15/41 21,463
291,633 Series 2012-4021, Class IP, IO............................... 3.00% 03/15/27 12,481
1,150,850 Series 2012-4026, Class GZ................................... 4.50% 04/15/42 1,046,431
491,060 Series 2012-4030, Class IL, IO............................... 3.50% 04/15/27 22,755
761,203 Series 2012-4048, Class FJ, 1 Mo. LIBOR + 0.40% (a).......... 2.96% 07/15/37 742,520
953,293 Series 2012-4054, Class AI, IO............................... 3.00% 04/15/27 37,483
671,627 Series 2012-4090, Class YZ................................... 4.50% 08/15/42 568,523
25,342 Series 2012-4097, Class ES, IO,
1 Mo. LIBOR (x) -1 + 6.10% (b)............................ 2.69% 08/15/42 2,390
2,541,945 Series 2012-4097, Class SA, IO,
1 Mo. LIBOR (x) -1 + 6.05% (b)............................ 2.64% 08/15/42 240,274
2,447,000 Series 2012-4098, Class PE................................... 4.00% 08/15/42 2,067,259
250,918 Series 2012-4103, Class HI, IO............................... 3.00% 09/15/27 12,283
30,445 Series 2012-4116, Class AS, IO,
1 Mo. LIBOR (x) -1 + 6.15% (b)............................ 2.74% 10/15/42 3,082
940,189 Series 2012-4121, Class HI, IO............................... 3.50% 10/15/27 47,841
1,211,014 Series 2012-4132, Class AI, IO............................... 4.00% 10/15/42 213,308
296,201 Series 2012-4136, Class TU, IO,
1 Mo. LIBOR (x) -22.50 + 139.50%, 4.50% Cap (b)........... 4.50% 08/15/42 49,590
320,688 Series 2012-4145, Class YI, IO............................... 3.00% 12/15/27 16,215
286,704 Series 2013-303, Class C2, IO, STRIPS........................ 3.50% 01/15/28 15,594
223,233 Series 2013-299, Class S1, IO, STRIPS,
1 Mo. LIBOR (x) -1 + 6.00% (b)............................ 2.59% 01/15/43 22,161
5,431,067 Series 2013-303, Class C12, IO, STRIPS....................... 4.00% 12/15/32 577,465
12,208,169 Series 2013-303, Class C33, IO, STRIPS....................... 4.50% 01/15/43 2,313,564
3,128,754 Series 2013-304, Class C19, IO, STRIPS....................... 5.00% 06/15/42 736,407
210,264 Series 2013-304, Class C37, IO, STRIPS....................... 3.50% 12/15/27 9,192
905,578 Series 2013-304, Class C40, IO, STRIPS....................... 3.50% 09/15/26 36,227
898,355 Series 2013-4151, Class DI, IO............................... 3.50% 11/15/31 37,843
2,600,686 Series 2013-4154, Class IB, IO............................... 3.50% 01/15/28 136,645
7,703,966 Series 2013-4170, Class CO, PO............................... (d) 11/15/32 6,205,720
905,000 Series 2013-4176, Class HE................................... 4.00% 03/15/43 803,752
732,650 Series 2013-4177, Class GL................................... 3.00% 03/15/33 659,426
3,209,224 Series 2013-4193, Class AI, IO............................... 3.00% 04/15/28 180,832
826,035 Series 2013-4193, Class PB................................... 4.00% 04/15/43 724,779
13,897,219 Series 2013-4199, Class BZ................................... 3.50% 05/15/43 12,237,721
1,205,693 Series 2013-4203, Class US,
1 Mo. LIBOR (x) -1.50 + 6.00% (b)......................... 0.88% 05/15/33 776,360
500,000 Series 2013-4211, Class PB................................... 3.00% 05/15/43 414,091
13,970,779 Series 2013-4218, Class ZK................................... 2.50% 02/15/43 10,445,524
5,388,000 Series 2013-4224, Class ME................................... 4.00% 07/15/43 4,855,877
11,838 Series 2013-4226, Class NS,
1 Mo. LIBOR (x) -3 + 10.50% (b)........................... 1.12% 01/15/43 6,630
1,450,000 Series 2013-4247, Class AY................................... 4.50% 09/15/43 1,379,172
648,983 Series 2013-4261, Class GS,
1 Mo. LIBOR (x) -2.75 + 10.98% (b)........................ 1.61% 01/15/41 508,689
265,300 Series 2013-4265, Class IB, IO............................... 4.50% 12/15/24 7,234
Page 10 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Federal Home Loan Mortgage Corporation (Continued)
$ 15,605 Series 2014-4300, Class IM, IO (e)........................... 3.00% 03/15/37 $ 97
733,946 Series 2014-4314, Class CI, IO............................... 6.00% 03/15/44 161,902
2,551,126 Series 2014-4316, Class XZ................................... 4.50% 03/15/44 2,425,168
3,729,889 Series 2014-4347, Class YT................................... 3.50% 06/15/44 3,414,308
2,759,192 Series 2014-4387, Class IE, IO............................... 2.50% 11/15/28 120,166
632,795 Series 2015-4503, Class MI, IO............................... 5.00% 08/15/45 120,155
480,925 Series 2015-4512, Class W (c) (f)............................ 5.38% 05/15/38 474,645
79,932 Series 2015-4520, Class AI, IO............................... 3.50% 10/15/35 8,839
166,869 Series 2015-4522, Class JZ................................... 2.00% 01/15/45 163,261
279,433 Series 2016-4546, Class PZ................................... 4.00% 12/15/45 207,625
473,010 Series 2016-4546, Class ZT................................... 4.00% 01/15/46 350,465
6,139,680 Series 2016-4559, Class LI, IO............................... 2.50% 03/15/31 413,197
145,193 Series 2016-4568, Class MZ................................... 4.00% 04/15/46 102,988
11,016,518 Series 2016-4570, Class ST, IO,
1 Mo. LIBOR (x) -1 + 6.00% (b)............................ 2.59% 04/15/46 1,028,156
4,114,518 Series 2016-4572, Class LI, IO............................... 4.00% 08/15/45 688,714
20,440,368 Series 2016-4585, Class DS, IO,
1 Mo. LIBOR (x) -1 + 6.00% (b)............................ 2.59% 05/15/46 1,892,478
7,116,214 Series 2016-4587, Class ZH................................... 4.00% 03/15/44 6,414,186
1,264,686 Series 2016-4591, Class GI, IO............................... 4.00% 12/15/44 207,368
828,929 Series 2016-4596, Class FL, 1 Mo. LIBOR + 0.50% (a).......... 3.06% 11/15/41 830,402
771,702 Series 2016-4600, Class WT................................... 3.50% 07/15/36 681,263
136,619 Series 2016-4605, Class KS,
1 Mo. LIBOR (x) -1.57 + 4.71% (b)........................ 0.00% 08/15/43 79,101
216,566 Series 2016-4609, Class YI, IO............................... 4.00% 04/15/54 12,265
834,628 Series 2016-4615, Class GT,
1 Mo. LIBOR (x) -4 + 16.00%, 4.00% Cap (b)................ 2.35% 10/15/42 500,313
1,955,537 Series 2016-4641, Class DI, IO............................... 5.00% 05/15/41 264,242
1,173,000 Series 2017-4650, Class JH................................... 3.00% 01/15/47 819,076
11,289,000 Series 2017-4650, Class VC................................... 3.50% 07/15/37 10,849,379
10,302,433 Series 2017-4660, Class PO, PO............................... (d) 01/15/33 6,717,450
18,126,185 Series 2017-4680, Class GZ................................... 3.50% 03/15/47 15,485,838
600,000 Series 2017-4681, Class JY................................... 2.50% 05/15/47 473,407
2,908,874 Series 2018-4774, Class SL, IO,
1 Mo. LIBOR (x) -1 + 6.20% (b)............................ 2.79% 04/15/48 303,183
2,476,682 Series 2018-4790, Class IO, IO............................... 4.50% 05/15/48 454,464
4,584,784 Series 2018-4826, Class ME................................... 3.50% 09/15/48 4,178,895
2,755,607 Series 2018-4833, Class PY................................... 4.00% 10/15/48 2,567,134
3,263,617 Series 2019-4872, Class BZ................................... 4.00% 04/15/49 2,722,770
6,503,115 Series 2019-4910, Class SA, IO,
1 Mo. LIBOR (x) -1 + 6.05% (b)............................ 2.64% 06/15/49 962,202
8,622,450 Series 2019-4938, Class BS, IO,
1 Mo. LIBOR (x) -1 + 6.00% (b)............................ 2.41% 12/25/49 888,090
17,477,151 Series 2019-4941, Class YZ................................... 3.00% 12/25/49 15,490,999
9,423,639 Series 2019-4943, Class NS, IO,
1 Mo. LIBOR (x) -1 + 6.00% (b)............................ 2.41% 01/25/50 1,628,092
2,515,155 Series 2020-4974, Class IA, IO............................... 3.50% 12/25/49 657,511
5,857,301 Series 2020-4988, Class IJ, IO............................... 4.50% 12/15/47 967,539
8,040,895 Series 2020-5013, Class HI, IO............................... 5.00% 03/25/40 1,318,321
5,659,379 Series 2020-5013, Class IQ, IO............................... 3.50% 09/25/50 957,855
15,525,042 Series 2020-5034, Class IO, IO (c)........................... 0.49% 10/15/45 586,882
17,456,280 Series 2020-5050, Class MI, IO............................... 3.50% 10/25/50 2,841,250
See Notes to Financial Statements Page 11
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Federal Home Loan Mortgage Corporation (Continued)
$ 28,451,072 Series 2020-5051, Class CI, IO............................... 4.00% 12/25/35 $ 3,310,524
25,051,684 Series 2021-5086, Class MI, IO............................... 2.50% 03/25/51 3,538,004
8,815,818 Series 2021-5178, Class HL................................... 2.00% 01/25/52 5,642,846
17,810,336 Series 2022-5200, Class TZ................................... 2.50% 11/25/49 10,517,094
11,585,822 Series 2022-5208, Class HZ................................... 3.50% 03/25/52 9,361,486
13,597,436 Series 2022-5208, Class Z.................................... 3.00% 04/25/52 10,192,869
9,750,000 Series 2022-5210, Class LB................................... 3.00% 08/25/50 7,068,713
12,050,756 Series 2022-5220, Class KZ................................... 4.00% 02/25/51 10,313,652
33,673,000 Series 2022-5221, Class YC................................... 4.00% 05/25/52 29,916,534
4,956,814 Series 2022-5222, Class BZ................................... 3.50% 05/25/37 4,394,462
18,660,647 Series 2022-5223, Class GZ................................... 3.00% 08/25/51 12,116,141
10,568,297 Series 2022-5225, Class HZ................................... 4.00% 08/25/51 8,661,762
14,071,362 Series 2022-5225, Class NZ................................... 4.00% 05/25/52 11,567,518
8,200,268 Series 2022-5228, Class DZ................................... 4.50% 06/25/52 7,172,591
9,012,253 Series 2022-5232, Class GO, PO............................... (d) 08/25/51 5,003,432
8,493,324 Series 2022-5255, Class KZ................................... 4.00% 09/25/52 7,240,568
Federal National Mortgage Association
8 Series 1993-3, Class K....................................... 7.00% 02/25/23 8
665 Series 1993-39, Class Z...................................... 7.50% 04/25/23 665
49 Series 1993-46, Class FH, 7 Yr. Constant Maturity Treasury
Rate - 0.20% (a).......................................... 3.53% 04/25/23 48
19,913 Series 1993-169, Class L..................................... 6.50% 09/25/23 19,949
5,952 Series 1993-171, Class SB, 10 Yr. Constant Maturity Treasury
Rate (x) -2.17 + 21.99% (b)............................... 14.21% 09/25/23 5,971
1,618 Series 1993-214, Class 2, IO, STRIPS (e)..................... 7.50% 03/25/23 15
35,589 Series 1993-222, Class 2, IO, STRIPS (e)..................... 7.00% 06/25/23 556
3,689 Series 1993-230, Class FA, 1 Mo. LIBOR + 0.60% (a)........... 3.68% 12/25/23 3,689
28,901 Series 1994-61, Class FG, 1 Mo. LIBOR + 1.50% (a)............ 4.58% 04/25/24 29,015
19,274 Series 1996-51, Class AY, IO................................. 7.00% 12/18/26 1,479
16,798 Series 1998-37, Class VZ..................................... 6.00% 06/17/28 16,829
242,842 Series 2000-45, Class SD, IO,
1 Mo. LIBOR (x) -1 + 7.95% (b)............................ 4.51% 12/18/30 9,635
28,192 Series 2001-34, Class SR, IO,
1 Mo. LIBOR (x) -1 + 8.10% (b)............................ 4.66% 08/18/31 1,056
1,686 Series 2001-42, Class SB,
1 Mo. LIBOR (x) -16 + 128.00%, 8.50% Cap (b)............. 8.50% 09/25/31 1,658
75,037 Series 2001-46, Class F, 1 Mo. LIBOR + 0.40% (a)............. 3.84% 09/18/31 74,806
6,049 Series 2002-22, Class G...................................... 6.50% 04/25/32 6,280
56,782 Series 2002-30, Class Z...................................... 6.00% 05/25/32 58,268
73,664 Series 2002-80, Class CZ..................................... 4.50% 09/25/32 69,420
70,921 Series 2002-320, Class 2, IO, STRIPS......................... 7.00% 04/25/32 14,380
61,844 Series 2002-323, Class 6, IO, STRIPS......................... 6.00% 01/25/32 9,386
170,654 Series 2002-324, Class 2, IO, STRIPS......................... 6.50% 07/25/32 26,752
14,523 Series 2003-14, Class AT..................................... 4.00% 03/25/33 14,151
42,694 Series 2003-21, Class OA..................................... 4.00% 03/25/33 41,632
71,475 Series 2003-32, Class UI, IO................................. 6.00% 05/25/33 13,084
313,439 Series 2003-45, Class JB..................................... 5.50% 06/25/33 315,763
12,596 Series 2003-63, Class F1, 1 Mo. LIBOR + 0.30% (a)............ 3.89% 11/25/27 12,507
1,034,451 Series 2003-63, Class IP, IO................................. 6.00% 07/25/33 169,948
355,000 Series 2003-71, Class NH..................................... 4.29% 08/25/33 341,041
149,124 Series 2003-109, Class YB.................................... 6.00% 11/25/33 150,740
198,120 Series 2003-343, Class 2, IO, STRIPS......................... 4.50% 10/25/33 26,019
191,684 Series 2003-345, Class 14, IO, STRIPS........................ 6.00% 03/25/34 31,877
40,704 Series 2003-348, Class 17, IO, STRIPS........................ 7.50% 12/25/33 6,273
Page 12 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Federal National Mortgage Association (Continued)
$ 58,358 Series 2003-348, Class 18, IO, STRIPS (c).................... 7.50% 12/25/33 $ 9,790
175,463 Series 2004-10, Class ZB..................................... 6.00% 02/25/34 178,066
569,072 Series 2004-18, Class EZ..................................... 6.00% 04/25/34 585,634
218,838 Series 2004-25, Class LC..................................... 5.50% 04/25/34 221,161
238,698 Series 2004-25, Class UC..................................... 5.50% 04/25/34 240,682
44,157 Series 2004-28, Class ZH..................................... 5.50% 05/25/34 43,450
610,039 Series 2004-60, Class AC..................................... 5.50% 04/25/34 605,230
1,526,669 Series 2005-2, Class S, IO, 1 Mo. LIBOR (x) -1 + 6.60% (b)... 3.01% 02/25/35 97,116
277,635 Series 2005-2, Class TB, IO,
1 Mo. LIBOR (x) -1 + 5.90%, 0.40% Cap (b)................. 0.40% 07/25/33 2,372
60,112 Series 2005-29, Class ZT..................................... 5.00% 04/25/35 57,503
67,584 Series 2005-40, Class SA, IO,
1 Mo. LIBOR (x) -1 + 6.70% (b)............................ 3.11% 05/25/35 4,702
309,264 Series 2005-52, Class TZ..................................... 6.50% 06/25/35 338,830
1,116,906 Series 2005-57, Class KZ..................................... 6.00% 07/25/35 1,150,390
8,266 Series 2005-67, Class SC,
1 Mo. LIBOR (x) -2.15 + 14.41% (b)........................ 6.70% 08/25/35 7,684
36,793 Series 2005-79, Class NS, IO,
1 Mo. LIBOR (x) -1 + 6.09% (b)............................ 2.50% 09/25/35 2,167
3,712,312 Series 2005-86, Class WZ..................................... 5.50% 10/25/35 3,727,749
12,589 Series 2005-87, Class SC,
1 Mo. LIBOR (x) -1.67 + 13.83% (b)........................ 7.86% 10/25/35 12,746
58,089 Series 2005-95, Class WZ..................................... 6.00% 11/25/35 62,546
19,225 Series 2005-102, Class DS,
1 Mo. LIBOR (x) -2.75 + 19.80% (b)........................ 9.94% 11/25/35 16,587
486,375 Series 2005-104, Class UE.................................... 5.50% 12/25/35 491,116
100,083 Series 2005-359, Class 6, IO, STRIPS......................... 5.00% 11/25/35 15,774
305,562 Series 2005-359, Class 12, IO, STRIPS........................ 5.50% 10/25/35 60,754
87,059 Series 2005-362, Class 13, IO, STRIPS........................ 6.00% 08/25/35 16,334
42,401 Series 2006-5, Class 2A2 (a)................................. 2.56% 02/25/35 42,436
19,143,731 Series 2006-5, Class N2, IO (f).............................. 0.00% 02/25/35 11,965
44,959 Series 2006-15, Class IS, IO,
1 Mo. LIBOR (x) -1 + 6.58% (b)............................ 2.99% 03/25/36 4,054
793,500 Series 2006-20, Class PI, IO,
1 Mo. LIBOR (x) -1 + 6.68% (b)............................ 3.09% 11/25/30 18,354
26,846 Series 2006-31, Class PZ..................................... 6.00% 05/25/36 28,593
38,069 Series 2006-42, Class CF, 1 Mo. LIBOR + 0.45% (a)............ 4.04% 06/25/36 37,542
1,174,470 Series 2006-42, Class EI, IO,
1 Mo. LIBOR (x) -1 + 6.55% (b)............................ 2.96% 06/25/36 110,906
313,763 Series 2006-59, Class SL, IO,
1 Mo. LIBOR (x) -1 + 6.57% (b)............................ 2.98% 07/25/36 28,677
420,449 Series 2006-80, Class PH..................................... 6.00% 08/25/36 433,478
43,512 Series 2006-85, Class MZ..................................... 6.50% 09/25/36 44,930
1,475,940 Series 2006-110, Class PI, IO................................ 5.50% 11/25/36 319,693
1,729,835 Series 2006-116, Class ES, IO,
1 Mo. LIBOR (x) -1 + 6.65% (b)............................ 3.06% 12/25/36 139,119
174,639 Series 2006-117, Class GF, 1 Mo. LIBOR + 0.35% (a)........... 3.94% 12/25/36 171,115
1,564,516 Series 2006-118, Class A1, 1 Mo. LIBOR + 0.06% (a)........... 3.14% 12/25/36 1,555,429
313,274 Series 2007-7, Class KA...................................... 5.75% 08/25/36 318,323
20,417 Series 2007-25, Class FB, 1 Mo. LIBOR + 0.33% (a)............ 3.92% 04/25/37 19,978
538,990 Series 2007-28, Class ZA..................................... 6.00% 04/25/37 538,736
865,350 Series 2007-57, Class ZG..................................... 4.75% 06/25/37 833,081
See Notes to Financial Statements Page 13
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Federal National Mortgage Association (Continued)
$ 562,631 Series 2007-60, Class ZS..................................... 4.75% 07/25/37 $ 545,019
505,051 Series 2007-68, Class AE..................................... 6.50% 07/25/37 523,540
294,012 Series 2007-116, Class PB.................................... 5.50% 08/25/35 296,353
76,530 Series 2007-117, Class MD.................................... 5.50% 07/25/37 73,956
2,823,740 Series 2007-W10, Class 3A (f)................................ 2.52% 06/25/47 2,807,611
122,635 Series 2008-3, Class FZ, 1 Mo. LIBOR + 0.55% (a)............. 4.14% 02/25/38 112,019
20,875 Series 2008-8, Class ZA...................................... 5.00% 02/25/38 20,188
8,268 Series 2008-17, Class IP, IO................................. 6.50% 02/25/38 683
627,629 Series 2008-389, Class 4, IO, STRIPS......................... 6.00% 03/25/38 113,061
1,611 Series 2009-10, Class AB..................................... 5.00% 03/25/24 1,603
614,595 Series 2009-11, Class PI, IO................................. 5.50% 03/25/36 107,427
464 Series 2009-14, Class BS, IO,
1 Mo. LIBOR (x) -1 + 6.25% (b) (e)........................ 2.66% 03/25/24 2
1,399,269 Series 2009-37, Class NZ..................................... 5.71% 02/25/37 1,426,482
4,400,000 Series 2009-50, Class GX..................................... 5.00% 07/25/39 4,393,999
2,725,818 Series 2009-85, Class J...................................... 4.50% 10/25/39 2,661,049
187,767 Series 2009-91, Class HL..................................... 5.00% 11/25/39 186,094
97,000 Series 2009-92, Class DB..................................... 5.00% 11/25/39 97,058
825,400 Series 2009-103, Class PZ.................................... 6.00% 12/25/39 879,049
180,426 Series 2009-106, Class SN, IO,
1 Mo. LIBOR (x) -1 + 6.25% (b)............................ 2.66% 01/25/40 11,646
278,402 Series 2009-109, Class PZ.................................... 4.50% 01/25/40 256,142
52,315 Series 2009-115, Class HZ.................................... 5.00% 01/25/40 52,242
893,018 Series 2009-397, Class 2, IO, STRIPS......................... 5.00% 09/25/39 164,074
87,957 Series 2009-398, Class C13, IO, STRIPS....................... 4.00% 06/25/24 1,724
1,225,997 Series 2010-2, Class LC...................................... 5.00% 02/25/40 1,210,359
200,349 Series 2010-3, Class DZ...................................... 4.50% 02/25/40 182,588
136,386 Series 2010-21, Class KO, PO................................. (d) 03/25/40 113,028
500,000 Series 2010-35, Class EP..................................... 5.50% 04/25/40 503,640
300,143 Series 2010-38, Class KC..................................... 4.50% 04/25/40 288,710
305,602 Series 2010-45, Class WB..................................... 5.00% 05/25/40 292,425
364,500 Series 2010-68, Class BI, IO................................. 5.50% 07/25/50 78,685
33,364 Series 2010-75, Class MT (f)................................. 1.49% 12/25/39 31,090
54,370 Series 2010-110, Class KI, IO................................ 5.50% 10/25/25 615
81,984 Series 2010-115, Class PO, PO................................ (d) 04/25/40 68,611
228,841 Series 2010-129, Class SM, IO,
1 Mo. LIBOR (x) -1 + 6.00% (b)............................ 2.41% 11/25/40 5,739
2,821,000 Series 2010-142, Class DL.................................... 4.00% 12/25/40 2,626,161
158,220 Series 2011-9, Class AZ...................................... 5.00% 05/25/40 151,059
1,507,000 Series 2011-10, Class AY..................................... 6.00% 02/25/41 1,597,957
104,405 Series 2011-30, Class LS, IO (c)............................. 0.00% 04/25/41 4,613
133,680 Series 2011-30, Class ZB..................................... 5.00% 04/25/41 131,399
320,222 Series 2011-52, Class GB..................................... 5.00% 06/25/41 318,754
1,066,632 Series 2011-73, Class PI, IO................................. 4.50% 05/25/41 61,326
200,017 Series 2011-74, Class TQ, IO,
1 Mo. LIBOR (x) -6.43 + 55.93%, 4.50% Cap (b)............. 4.50% 12/25/33 24,601
1,180,693 Series 2011-87, Class YI, IO................................. 5.00% 09/25/41 218,477
1,747,848 Series 2011-101, Class EI, IO................................ 3.50% 10/25/26 56,939
750,000 Series 2011-105, Class MB.................................... 4.00% 10/25/41 656,806
1,796,322 Series 2011-111, Class PZ.................................... 4.50% 11/25/41 1,728,797
4,320,958 Series 2011-123, Class JS, IO,
1 Mo. LIBOR (x) -1 + 6.65% (b)............................ 3.06% 03/25/41 200,502
1,199,816 Series 2012-28, Class PT..................................... 4.00% 03/25/42 1,115,007
Page 14 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Federal National Mortgage Association (Continued)
$ 776,952 Series 2012-39, Class PB..................................... 4.25% 04/25/42 $ 739,449
351,327 Series 2012-52, Class BZ..................................... 4.00% 05/25/42 295,070
521,967 Series 2012-65, Class IO, IO................................. 5.50% 07/25/40 91,057
118,836 Series 2012-66, Class DI, IO................................. 3.50% 06/25/27 5,829
2,733,469 Series 2012-101, Class AI, IO................................ 3.00% 06/25/27 87,691
2,815,297 Series 2012-103, Class HI, IO................................ 3.00% 09/25/27 120,424
223,191 Series 2012-111, Class B..................................... 7.00% 10/25/42 232,363
142,253 Series 2012-118, Class IB, IO................................ 3.50% 11/25/42 22,755
7,382,899 Series 2012-122, Class SD, IO,
1 Mo. LIBOR (x) -1 + 6.10% (b)............................ 2.51% 11/25/42 636,097
435,138 Series 2012-133, Class KO, PO................................ (d) 12/25/42 193,138
503,891 Series 2012-138, Class MA.................................... 1.00% 12/25/42 408,609
1,132,167 Series 2012-146, Class QA.................................... 1.00% 01/25/43 942,150
283,005 Series 2012-409, Class 49, IO, STRIPS (c).................... 3.50% 11/25/41 44,061
314,798 Series 2012-409, Class 53, IO, STRIPS (c).................... 3.50% 04/25/42 48,646
690,000 Series 2013-10, Class HQ..................................... 2.50% 02/25/43 464,982
350,656 Series 2013-13, Class IK, IO................................. 2.50% 03/25/28 16,471
50,765 Series 2013-23, Class ZB..................................... 3.00% 03/25/43 34,255
750,000 Series 2013-41, Class DB..................................... 3.00% 05/25/43 581,676
1,126,379 Series 2013-43, Class IX, IO................................. 4.00% 05/25/43 232,960
360,784 Series 2013-51, Class PI, IO................................. 3.00% 11/25/32 34,507
352,951 Series 2013-52, Class MD..................................... 1.25% 06/25/43 286,033
5,704,548 Series 2013-54, Class LI, IO................................. 7.00% 11/25/34 998,471
553,297 Series 2013-55, Class AI, IO................................. 3.00% 06/25/33 58,733
3,370,698 Series 2013-67, Class IL, IO................................. 6.50% 07/25/43 631,508
132,266 Series 2013-70, Class JZ..................................... 3.00% 07/25/43 112,069
93,118 Series 2013-75, Class FC, 1 Mo. LIBOR + 0.25% (a)............ 3.84% 07/25/42 92,496
11,733,477 Series 2013-75, Class ZG..................................... 3.25% 07/25/43 9,114,120
379,979 Series 2013-105, Class BN.................................... 4.00% 05/25/43 331,322
186,717 Series 2013-105, Class KO, PO................................ (d) 10/25/43 162,162
195,852 Series 2013-106, Class KN.................................... 3.00% 10/25/43 148,660
1,003,000 Series 2013-130, Class QY.................................... 4.50% 06/25/41 959,280
1,707,525 Series 2013-417, Class C21, IO, STRIPS....................... 4.00% 12/25/42 262,258
3,922,070 Series 2013-418, Class C1, IO, STRIPS........................ 3.50% 08/25/43 568,682
56,715 Series 2014-29, Class GI, IO................................. 3.00% 05/25/29 2,891
1,979,759 Series 2014-44, Class NI, IO................................. 4.50% 08/25/29 64,621
53,604 Series 2014-46, Class KA (c)................................. 40.88% 08/25/44 136,392
94,583 Series 2014-68, Class GI, IO................................. 4.50% 10/25/43 9,425
602,009 Series 2014-82, Class GZ..................................... 4.00% 12/25/44 478,207
569,961 Series 2014-84, Class LI, IO................................. 3.50% 12/25/26 19,283
875,000 Series 2015-16, Class MY..................................... 3.50% 04/25/45 725,042
14,276 Series 2015-38, Class GI, IO................................. 3.00% 09/25/43 106
9,633,511 Series 2015-40, Class AI, IO................................. 6.00% 05/25/37 1,870,389
359,811 Series 2015-76, Class BI, IO................................. 4.00% 10/25/39 18,911
45,181 Series 2015-93, Class KI, IO................................. 3.00% 09/25/44 2,677
420,059 Series 2015-97, Class AI, IO................................. 4.00% 09/25/41 3,406
4,847,776 Series 2016-2, Class EZ...................................... 2.50% 02/25/46 4,151,723
8,774,460 Series 2016-37, Class PY..................................... 3.00% 06/25/46 6,794,740
17,314,322 Series 2016-40, Class MS, IO,
1 Mo. LIBOR (x) -1 + 6.00% (b)............................ 2.41% 07/25/46 1,960,572
11,510,000 Series 2016-50, Class GY..................................... 3.00% 08/25/46 8,705,548
See Notes to Financial Statements Page 15
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Federal National Mortgage Association (Continued)
$ 7,283,862 Series 2016-62, Class SB, IO,
1 Mo. LIBOR (x) -1 + 6.10% (b)............................ 2.51% 09/25/46 $ 435,090
855,541 Series 2016-71, Class NI, IO................................. 3.50% 04/25/46 103,445
2,969,694 Series 2016-73, Class PI, IO................................. 3.00% 08/25/46 538,945
376,135 Series 2016-74, Class HI, IO................................. 3.50% 10/25/46 62,964
305,601 Series 2016-84, Class DF, 1 Mo. LIBOR + 0.42% (a)............ 2.98% 11/25/46 298,540
780,797 Series 2016-87, Class AF, 1 Mo. LIBOR + 0.40% (a)............ 2.96% 11/25/46 760,961
8,054,497 Series 2017-18, Class AS, IO,
1 Mo. LIBOR (x) -1 + 6.05% (b)............................ 2.46% 03/25/47 936,425
597,364 Series 2017-46, Class BY..................................... 3.00% 06/25/47 433,396
12,262,412 Series 2017-50, Class BZ..................................... 3.00% 07/25/47 9,844,136
5,699,338 Series 2017-65, Class SA, IO,
1 Mo. LIBOR (x) -1 + 5.90%, 5.00% Cap (b)................. 2.31% 09/25/47 479,853
4,061,016 Series 2017-84, Class ZK..................................... 3.50% 10/25/57 3,301,708
3,332,892 Series 2017-87, Class GI, IO................................. 4.00% 06/25/44 527,915
2,164,091 Series 2017-87, Class ZA..................................... 4.00% 11/25/57 1,690,455
2,598,139 Series 2018-17, Class Z...................................... 3.50% 03/25/48 2,004,222
5,009,170 Series 2018-86, Class DL..................................... 3.50% 12/25/48 4,626,681
2,829,581 Series 2018-92, Class DB..................................... 3.50% 01/25/49 2,607,942
6,162,556 Series 2018-94, Class AZ..................................... 4.00% 01/25/49 5,657,595
7,904,381 Series 2019-8, Class DY...................................... 3.50% 03/25/49 7,286,750
8,299,284 Series 2019-17, Class GZ..................................... 4.00% 11/25/56 6,984,574
10,358,097 Series 2019-26, Class GA..................................... 3.50% 06/25/49 9,626,480
4,326,011 Series 2019-27, Class HA..................................... 3.00% 06/25/49 3,912,483
7,017,538 Series 2019-29, Class HT..................................... 3.00% 06/25/49 6,208,075
6,104,031 Series 2019-34, Class JA..................................... 3.00% 07/25/49 5,393,343
14,383,872 Series 2019-34, Class LA..................................... 3.00% 07/25/49 12,827,281
3,949,552 Series 2019-37, Class A...................................... 3.00% 07/25/49 3,492,056
13,518,749 Series 2019-41, Class SN, IO,
1 Mo. LIBOR (x) -1 + 6.05% (b)............................ 2.46% 08/25/49 1,213,924
10,052,612 Series 2019-57, Class JA..................................... 2.50% 10/25/49 8,721,801
4,151,929 Series 2019-59, Class PT..................................... 2.50% 10/25/49 3,599,342
10,260,913 Series 2019-66, Class C...................................... 3.00% 11/25/49 9,201,588
38,131,658 Series 2019-68, Class KP..................................... 2.50% 11/25/49 31,631,808
22,953,767 Series 2019-70, Class WA, PO................................. (d) 11/25/42 18,669,008
32,511,453 Series 2020-5, Class BZ...................................... 3.00% 02/25/50 27,515,285
13,733,132 Series 2020-9, Class SJ, IO, 1 Mo. LIBOR (x) -1 + 6.00% (b).. 2.41% 02/25/50 1,768,127
11,969,763 Series 2020-20, Class KI, IO................................. 4.00% 03/25/50 3,974,999
31,150,681 Series 2020-34, Class AI, IO................................. 3.50% 06/25/35 2,856,879
11,970,235 Series 2020-37, Class QI, IO................................. 4.50% 06/25/50 2,419,845
4,623,415 Series 2020-66, Class IC, IO................................. 6.00% 10/25/47 1,080,580
41,409,465 Series 2020-74, Class IQ, IO................................. 6.00% 10/25/50 8,567,072
31,845,417 Series 2020-77, Class DI, IO................................. 4.00% 11/25/35 3,617,321
14,571,838 Series 2020-93, Class NI, IO................................. 3.00% 01/25/51 1,520,528
15,025,825 Series 2021-1, Class IB, IO.................................. 3.50% 02/25/61 3,154,179
44,785,859 Series 2021-66, Class CI, IO................................. 4.00% 10/25/36 5,827,084
10,176,318 Series 2022-15, Class ZH..................................... 3.00% 04/25/52 6,529,331
8,292,747 Series 2022-18, Class Z...................................... 3.50% 04/25/52 6,172,806
16,696,224 Series 2022-23, Class EZ..................................... 3.00% 03/25/52 10,294,919
26,444,277 Series 2022-29, Class JZ..................................... 1.50% 06/25/42 17,487,246
Page 16 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Federal National Mortgage Association Grantor Trust
$ 1,946,040 Series 2005-T1, Class A1, 1 Mo. LIBOR + 0.40% (a)............ 3.99% 05/25/35 $ 1,884,651
Government National Mortgage Association
19,418 Series 2001-60, Class PZ..................................... 6.00% 12/20/31 19,374
196,626 Series 2002-72, Class ZB..................................... 6.00% 10/20/32 196,180
159,048 Series 2003-4, Class MZ...................................... 5.50% 01/20/33 158,950
281,018 Series 2003-18, Class PG..................................... 5.50% 03/20/33 280,256
1,530,238 Series 2003-35, Class TZ..................................... 5.75% 04/16/33 1,526,918
129,411 Series 2003-62, Class MZ..................................... 5.50% 07/20/33 131,307
173,616 Series 2003-84, Class Z...................................... 5.50% 10/20/33 174,563
97,821 Series 2004-37, Class B...................................... 6.00% 04/17/34 100,097
549,994 Series 2004-49, Class MZ..................................... 6.00% 06/20/34 561,984
39,101 Series 2004-68, Class ZC..................................... 6.00% 08/20/34 39,974
46,781 Series 2004-71, Class ST,
1 Mo. LIBOR (x) -6.25 + 44.50%, 7.00% Cap (b)............. 7.00% 09/20/34 47,129
84,893 Series 2004-83, Class AK, 1 Mo. LIBOR (x) -3 + 16.49% (b).... 6.26% 10/16/34 71,720
335,416 Series 2004-88, Class SM, IO,
1 Mo. LIBOR (x) -1 + 6.10% (b)............................ 2.69% 10/16/34 12,496
35,113 Series 2004-92, Class AK, 1 Mo. LIBOR (x) -3 + 16.50% (b).... 6.26% 11/16/34 29,909
1,293,995 Series 2004-92, Class BZ..................................... 5.50% 11/16/34 1,298,099
243,468 Series 2004-105, Class JZ.................................... 5.00% 12/20/34 238,116
213,627 Series 2004-105, Class KA.................................... 5.00% 12/16/34 209,836
242,457 Series 2005-3, Class JZ...................................... 5.00% 01/16/35 225,377
242,457 Series 2005-3, Class KZ...................................... 5.00% 01/16/35 232,666
16,785 Series 2005-7, Class AJ, 1 Mo. LIBOR (x) -4 + 22.00% (b)..... 8.35% 02/16/35 14,634
121,791 Series 2005-7, Class MA,
1 Mo. LIBOR (x) -2.81 + 18.95% (b)....................... 9.37% 12/17/34 115,143
124,567 Series 2005-33, Class AY..................................... 5.50% 04/16/35 125,950
110,251 Series 2005-41, Class PA..................................... 4.00% 05/20/35 107,281
252,473 Series 2005-44, Class IO, IO................................. 5.50% 07/20/35 24,521
2,196,182 Series 2005-78, Class ZA..................................... 5.00% 10/16/35 2,187,877
190,732 Series 2005-93, Class PO, PO................................. (d) 06/20/35 166,590
378,422 Series 2006-17, Class TW..................................... 6.00% 04/20/36 388,797
500,000 Series 2006-38, Class OH..................................... 6.50% 08/20/36 511,299
194,711 Series 2006-61, Class ZA..................................... 5.00% 11/20/36 193,006
460,618 Series 2007-16, Class OZ..................................... 6.00% 04/20/37 473,056
122,683 Series 2007-27, Class SD, IO,
1 Mo. LIBOR (x) -1 + 6.20% (b)............................ 2.71% 05/20/37 4,458
98,757 Series 2007-41, Class OL, PO................................. (d) 07/20/37 85,716
175,842 Series 2007-42, Class SB, IO,
1 Mo. LIBOR (x) -1 + 6.75% (b)............................ 3.26% 07/20/37 11,469
529,886 Series 2007-71, Class ZD..................................... 6.00% 11/20/37 536,456
151,979 Series 2007-81, Class FZ, 1 Mo. LIBOR + 0.35% (a)............ 3.84% 12/20/37 151,276
79,008 Series 2008-33, Class XS, IO,
1 Mo. LIBOR (x) -1 + 7.70% (b)............................ 4.29% 04/16/38 5,330
483,070 Series 2008-47, Class ML..................................... 5.25% 06/16/38 481,834
143,490 Series 2008-54, Class PE..................................... 5.00% 06/20/38 142,643
387,089 Series 2008-71, Class JI, IO................................. 6.00% 04/20/38 31,915
4,562 Series 2009-10, Class PA..................................... 4.50% 12/20/38 4,549
105,112 Series 2009-14, Class KI, IO................................. 6.50% 03/20/39 16,514
34,490 Series 2009-14, Class KS, IO,
1 Mo. LIBOR (x) -1 + 6.30% (b)............................ 2.81% 03/20/39 1,117
See Notes to Financial Statements Page 17
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Government National Mortgage Association (Continued)
$ 81,042 Series 2009-25, Class SE, IO,
1 Mo. LIBOR (x) -1 + 7.60% (b)............................ 4.11% 09/20/38 $ 4,452
2,780,948 Series 2009-29, Class PC..................................... 7.00% 05/20/39 2,929,137
417,969 Series 2009-32, Class SZ..................................... 5.50% 05/16/39 422,824
269,490 Series 2009-42, Class BI, IO................................. 6.00% 06/20/39 33,073
3,732,457 Series 2009-57, Class VB..................................... 5.00% 06/16/39 3,709,559
283,372 Series 2009-61, Class PZ..................................... 7.50% 08/20/39 314,168
8,720,687 Series 2009-61, Class WQ, IO,
1 Mo. LIBOR (x) -1 + 6.25% (b)............................ 2.84% 11/16/35 630,970
1,031,203 Series 2009-69, Class ZB..................................... 6.00% 08/20/39 1,018,673
670,560 Series 2009-72, Class SM, IO,
1 Mo. LIBOR (x) -1 + 6.25% (b)............................ 2.84% 08/16/39 39,301
455,000 Series 2009-75, Class JN..................................... 5.50% 09/16/39 459,475
627,362 Series 2009-78, Class KZ..................................... 5.50% 09/16/39 644,466
100,577 Series 2009-79, Class OK, PO................................. (d) 11/16/37 82,847
147,614 Series 2009-81, Class TZ..................................... 5.50% 09/20/39 149,726
594,620 Series 2009-87, Class EI, IO................................. 5.50% 08/20/39 59,915
69,000 Series 2009-94, Class AL..................................... 5.00% 10/20/39 68,556
298,636 Series 2009-106, Class DZ.................................... 5.50% 11/20/39 304,510
3,753,191 Series 2009-106, Class SL, IO,
1 Mo. LIBOR (x) -1 + 6.10% (b)............................ 2.61% 04/20/36 171,897
50,788 Series 2009-106, Class WZ.................................... 5.50% 11/16/39 51,667
732,000 Series 2009-126, Class LB.................................... 5.00% 12/20/39 726,443
23,066 Series 2010-4, Class WA...................................... 3.00% 01/16/40 21,979
958,028 Series 2010-14, Class BV, IO,
1 Mo. LIBOR (x) -1 + 6.25% (b)............................ 2.84% 02/16/40 34,769
68,367 Series 2010-42, Class CO, PO................................. (d) 06/16/39 66,727
1,456,261 Series 2010-46, Class FC, 1 Mo. LIBOR + 0.80% (a)............ 4.29% 03/20/35 1,462,178
939,324 Series 2010-59, Class ZD..................................... 6.50% 05/20/40 1,029,166
1,137,280 Series 2010-85, Class SL, IO,
1 Mo. LIBOR (x) -1 + 6.60% (b)............................ 3.11% 07/20/37 37,622
89,000 Series 2010-116, Class BM.................................... 4.50% 09/16/40 86,110
1,406,100 Series 2010-116, Class JB.................................... 5.00% 06/16/40 1,362,173
586,366 Series 2010-157, Class OP, PO................................ (d) 12/20/40 479,566
50,345 Series 2010-166, Class DI, IO................................ 4.50% 02/20/39 882
156,364 Series 2011-4, Class PZ...................................... 5.00% 01/20/41 156,972
771,202 Series 2011-35, Class BP..................................... 4.50% 03/16/41 750,835
200,657 Series 2011-48, Class LI, IO................................. 5.50% 01/16/41 26,209
5,766,065 Series 2011-61, Class WS, IO,
1 Mo. LIBOR (x) -1 + 6.47% (b)............................ 2.98% 02/20/38 257,352
43,056 Series 2011-63, Class BI, IO................................. 6.00% 02/20/38 3,230
579,613 Series 2011-71, Class ZC..................................... 5.50% 07/16/34 583,859
1,422,342 Series 2011-81, Class IC, IO,
1 Mo. LIBOR (x) -1 + 6.72%, 0.62% Cap (b)................. 0.62% 07/20/35 19,531
281,461 Series 2011-112, Class IP, IO (e)............................ 0.50% 08/16/26 4
239,265 Series 2011-129, Class CL.................................... 5.00% 03/20/41 238,465
3,619 Series 2011-136, Class GB.................................... 2.50% 05/20/40 3,577
223,278 Series 2011-146, Class EI, IO................................ 5.00% 11/16/41 38,386
36,809 Series 2011-151, Class TB, IO,
1 Mo. LIBOR (x) -70 + 465.50%, 3.50% Cap (b).............. 3.50% 04/20/41 3,024
127,737 Series 2012-10, Class LI, IO (e)............................. 3.50% 07/20/40 692
Page 18 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Government National Mortgage Association (Continued)
$ 1,987,723 Series 2012-18, Class IA, IO,
1 Mo. LIBOR (x) -1 + 6.68%, 0.58% Cap (b)................. 0.58% 07/20/39 $ 17,227
1,005,417 Series 2012-48, Class MI, IO................................. 5.00% 04/16/42 180,770
7,520,747 Series 2012-84, Class QS, IO,
1 Mo. LIBOR (x) -1 + 6.10% (b)............................ 2.69% 07/16/42 366,806
6,711,842 Series 2012-84, Class SJ,
1 Mo. LIBOR (x) -0.57 + 2.51% (b)......................... 0.56% 07/16/42 3,719,699
251,623 Series 2012-108, Class KB.................................... 2.75% 09/16/42 194,010
3,496,648 Series 2012-143, Class TI, IO................................ 3.00% 12/16/27 161,782
1,686,579 Series 2012-149, Class PC (c)................................ 6.33% 12/20/42 1,747,807
13,221,793 Series 2013-4, Class IC, IO.................................. 4.00% 09/20/42 2,303,283
76,128 Series 2013-5, Class IA, IO.................................. 3.50% 10/16/42 10,136
532,987 Series 2013-10, Class DI, IO................................. 3.50% 09/20/42 45,633
2,223,000 Series 2013-20, Class QM..................................... 2.63% 02/16/43 1,793,845
1,460,576 Series 2013-22, Class IO, IO................................. 3.00% 02/20/43 171,511
3,431,730 Series 2013-23, Class IP, IO................................. 3.50% 08/20/42 469,498
1,530,967 Series 2013-53, Class OI, IO................................. 3.50% 04/20/43 162,421
1,569,404 Series 2013-69, Class AI, IO................................. 3.50% 05/20/43 256,091
176,877 Series 2013-69, Class PI, IO................................. 5.00% 05/20/43 19,181
953,680 Series 2013-70, Class PM..................................... 2.50% 05/20/43 743,241
2,084,445 Series 2013-91, Class PB..................................... 3.50% 09/20/42 2,045,323
795,712 Series 2013-130, Class WS, IO,
1 Mo. LIBOR (x) -1 + 6.10% (b)............................ 2.61% 09/20/43 86,614
2,863,173 Series 2013-170, Class IG, IO................................ 5.50% 11/16/43 238,330
688,000 Series 2013-183, Class PB.................................... 4.50% 12/20/43 663,438
2,019,672 Series 2014-6, Class IJ, IO.................................. 4.50% 06/16/43 133,309
11,871,346 Series 2014-30, Class EA (c)................................. 1.77% 02/16/44 10,274,570
5,494,452 Series 2014-43, Class Z...................................... 4.00% 03/20/44 5,212,002
2,154,891 Series 2014-44, Class IC, IO................................. 3.00% 04/20/28 109,944
5,662,920 Series 2014-44, Class ID, IO (c) (f)......................... 0.33% 03/16/44 54,801
20,357 Series 2014-91, Class JI, IO................................. 4.50% 01/20/40 1,276
592,083 Series 2014-94, Class Z...................................... 4.50% 01/20/44 581,769
2,645,876 Series 2014-99, Class HI, IO................................. 4.50% 06/20/44 425,642
2,318,093 Series 2014-115, Class QI, IO................................ 3.00% 03/20/29 64,168
2,750,854 Series 2014-116, Class SB, IO,
1 Mo. LIBOR (x) -1 + 5.60% (b)............................ 2.11% 08/20/44 240,656
1,395,107 Series 2014-118, Class TV, IO,
1 Mo. LIBOR (x) -1 + 6.25% (b)............................ 2.76% 05/20/44 108,505
7,385,955 Series 2015-3, Class ZD...................................... 4.00% 01/20/45 6,729,326
9,144,935 Series 2015-40, Class IO, IO................................. 4.00% 03/20/45 1,559,632
4,920,764 Series 2015-66, Class LI, IO................................. 5.00% 05/16/45 497,861
32,425 Series 2015-95, Class IK, IO (c)............................. 1.62% 05/16/37 663
10,661,502 Series 2015-99, Class EI, IO................................. 5.50% 07/16/45 1,839,239
4,541,076 Series 2015-124, Class DI, IO................................ 3.50% 01/20/38 151,402
265,728 Series 2015-137, Class WA (c) (f)............................ 5.55% 01/20/38 272,043
358,458 Series 2015-138, Class MI, IO................................ 4.50% 08/20/44 42,624
78,564 Series 2015-151, Class KW (c)................................ 5.19% 04/20/34 77,599
3,765,723 Series 2015-162, Class ZG.................................... 4.00% 11/20/45 3,421,509
3,831,029 Series 2015-168, Class GI, IO................................ 5.50% 02/16/33 244,651
195,376 Series 2016-16, Class KZ..................................... 3.00% 02/16/46 148,733
6,862,799 Series 2016-37, Class AF, 1 Mo. LIBOR + 0.47% (a)............ 2.50% 11/20/43 6,662,176
125,034 Series 2016-55, Class PB (c)................................. 5.48% 03/20/31 125,064
See Notes to Financial Statements Page 19
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Government National Mortgage Association (Continued)
$ 897,436 Series 2016-69, Class WI, IO................................. 4.50% 05/20/46 $ 230,956
2,717,603 Series 2016-75, Class SA, IO,
1 Mo. LIBOR (x) -1 + 6.00% (b)............................ 2.51% 05/20/40 166,771
467,966 Series 2016-78, Class UI, IO................................. 4.00% 06/20/46 53,691
2,485,365 Series 2016-89, Class HI, IO................................. 3.50% 07/20/46 430,998
298,553 Series 2016-99, Class JA (c)................................. 5.53% 11/20/45 303,135
1,030,860 Series 2016-109, Class ZM.................................... 3.50% 08/20/36 877,473
6,415,809 Series 2016-111, Class PI, IO................................ 3.50% 06/20/45 625,129
674,031 Series 2016-118, Class GI, IO................................ 4.50% 02/16/40 97,717
7,520,772 Series 2016-120, Class AS, IO,
1 Mo. LIBOR (x) -1 + 6.10% (b)............................ 2.61% 09/20/46 779,742
464,000 Series 2016-141, Class PC.................................... 5.00% 10/20/46 456,782
329,160 Series 2016-145, Class LZ.................................... 3.00% 10/20/46 230,965
504,029 Series 2016-154, Class WF, 1 Mo. LIBOR + 0.40% (a)........... 2.57% 11/20/45 488,320
7,461,641 Series 2016-156, Class ZM.................................... 3.50% 11/20/46 6,737,343
303,000 Series 2016-160, Class LE.................................... 2.50% 11/20/46 206,653
198,123 Series 2016-167, Class KI, IO................................ 6.00% 12/16/46 28,820
2,142,504 Series 2017-12, Class SD, IO,
1 Mo. LIBOR (x) -1 + 6.10% (b)............................ 2.61% 01/20/47 221,902
960,165 Series 2017-17, Class KZ..................................... 4.50% 02/20/47 879,354
3,998,163 Series 2017-32, Class DI, IO................................. 5.50% 05/20/35 740,354
2,372,463 Series 2017-32, Class IB, IO................................. 5.00% 02/16/47 232,272
6,136,810 Series 2017-33, Class PZ..................................... 3.00% 02/20/47 5,105,148
4,397,681 Series 2017-56, Class BI, IO................................. 6.00% 04/16/47 719,371
7,740,575 Series 2017-57, Class IO, IO................................. 5.00% 04/20/47 1,538,863
2,883,291 Series 2017-113, Class IE, IO................................ 5.50% 07/20/47 428,855
8,550,060 Series 2017-117, Class ZN.................................... 3.00% 08/20/47 6,512,030
12,553,390 Series 2017-122, Class CZ.................................... 3.00% 08/20/47 9,658,609
3,734,389 Series 2017-123, Class IO, IO................................ 5.00% 08/16/47 889,154
4,860,296 Series 2017-130, Class LS, IO,
1 Mo. LIBOR (x) -1 + 6.20% (b)............................ 2.79% 08/16/47 326,708
4,638,289 Series 2017-133, Class JI, IO................................ 7.00% 06/20/41 646,720
11,716,077 Series 2017-134, Class AZ.................................... 3.00% 09/20/47 9,181,893
4,613,081 Series 2017-177, Class DI, IO................................ 4.50% 11/16/47 877,570
13,476,869 Series 2017-179, Class IN, IO................................ 5.00% 07/20/44 3,351,169
3,478,370 Series 2017-186, Class TI, IO,
1 Mo. LIBOR (x) -1 + 6.50%, 0.50% Cap (b)................. 0.50% 05/20/40 45,266
915,131 Series 2018-44, Class Z...................................... 2.50% 09/20/47 651,916
5,154,260 Series 2018-79, Class IO, IO................................. 5.00% 06/20/48 721,386
13,288,150 Series 2018-97, Class DZ..................................... 3.50% 07/20/48 12,083,877
6,048,164 Series 2018-131, Class IA, IO................................ 5.00% 04/20/44 680,934
10,000,000 Series 2018-134, Class KB.................................... 3.50% 10/20/48 9,107,395
7,759,006 Series 2018-155, Class KD.................................... 4.00% 11/20/48 7,385,054
5,698,789 Series 2018-160, Class GY.................................... 4.50% 11/20/48 5,408,449
5,413,112 Series 2018-78I, Class EZ.................................... 3.00% 04/20/48 4,796,178
3,167,536 Series 2019-6, Class EI, IO.................................. 5.00% 09/20/39 445,164
7,723,305 Series 2019-15, Class MZ..................................... 4.50% 02/20/49 7,384,826
12,488,006 Series 2019-18, Class TP..................................... 3.50% 02/20/49 11,620,789
1,058,809 Series 2019-27, Class DI, IO................................. 5.50% 01/20/40 174,756
3,530,251 Series 2019-35, Class BZ..................................... 3.50% 03/20/49 2,682,082
5,566,697 Series 2019-45, Class ZB..................................... 3.50% 04/20/49 4,343,110
35,300,559 Series 2019-128, Class EF, 1 Mo. LIBOR + 0.57% (a)........... 4.00% 10/20/49 32,237,176
Page 20 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Government National Mortgage Association (Continued)
$ 18,134,658 Series 2020-31, Class IO, IO................................. 6.50% 03/20/50 $ 2,313,906
13,007,862 Series 2020-62, Class IA, IO................................. 5.50% 05/20/50 2,601,255
3,000,000 Series 2020-62, Class IC, IO................................. 2.50% 01/20/50 683,087
14,014,801 Series 2020-62, Class WI, IO................................. 2.50% 08/20/49 3,092,426
7,097,422 Series 2020-84, Class IM, IO................................. 2.50% 05/20/50 1,670,818
19,759,118 Series 2020-84, Class IO, IO................................. 2.50% 04/20/50 4,831,500
24,495,962 Series 2020-129, Class IO, IO................................ 2.50% 09/20/50 2,998,453
18,753,704 Series 2021-8, Class DI, IO.................................. 3.50% 01/20/51 2,113,467
48,445,136 Series 2021-27, Class IO, IO................................. 2.50% 02/20/51 6,394,869
37,119,523 Series 2021-27, Class PI, IO................................. 2.00% 02/20/51 3,668,994
7,117,038 Series 2021-46, Class IL, IO................................. 3.00% 03/20/51 916,060
11,942,419 Series 2021-46, Class LI, IO................................. 3.00% 03/20/51 1,720,257
24,604,806 Series 2021-91, Class IB, IO................................. 3.00% 05/20/51 3,199,862
96,486,982 Series 2021-97, Class NI, IO................................. 2.50% 08/20/49 9,380,899
30,060,182 Series 2021-159, Class QE.................................... 2.00% 09/20/51 24,737,651
36,619,667 Series 2021-188, Class PA.................................... 2.00% 10/20/51 30,235,863
5,620,787 Series 2022-60, Class CZ..................................... 3.00% 03/20/52 3,501,766
32,360,403 Series 2022-63, Class AZ..................................... 3.00% 08/20/51 25,089,033
16,593,373 Series 2022-63, Class BZ..................................... 3.50% 11/20/46 13,572,428
19,405,913 Series 2022-63, Class HZ..................................... 2.50% 11/20/51 13,533,847
11,092,149 Series 2022-63, Class MZ..................................... 3.00% 05/20/51 8,449,676
7,105,514 Series 2022-68, Class DZ..................................... 3.50% 04/20/52 5,265,981
12,384,534 Series 2022-68, Class MZ..................................... 3.50% 04/20/52 9,467,087
12,784,462 Series 2022-68, Class Z...................................... 3.50% 04/20/52 10,075,295
17,188,925 Series 2022-68, Class ZC..................................... 3.50% 04/20/52 12,878,610
12,991,946 Series 2022-69, Class QL..................................... 3.00% 04/20/52 10,777,568
10,917,513 Series 2022-78, Class AM..................................... 3.50% 04/20/52 8,501,822
14,027,030 Series 2022-90, Class KZ..................................... 3.00% 04/20/51 10,186,187
8,693,137 Series 2022-90, Class ZG..................................... 1.50% 02/20/52 4,472,097
22,341,349 Series 2022-124, Class EY.................................... 4.00% 07/20/52 19,342,919
Seasoned Credit Risk Transfer Trust
15,000,000 Series 2022-1, Class MBU..................................... 3.25% 11/25/61 11,191,528
Seasoned Loans Structured Transaction Trust
3,905,081 Series 2019-3, Class A1C..................................... 2.75% 11/25/29 3,556,062
10,000,000 Series 2022-1, Class A2...................................... 3.50% 05/25/32 8,706,750
Vendee Mortgage Trust
1,604,205 Series 2003-2, Class Z....................................... 5.00% 05/15/33 1,589,281
5,661,078 Series 2010-1, Class DZ...................................... 4.25% 04/15/40 5,327,615
9,293,092 Series 2011-1, Class DZ...................................... 3.75% 09/15/46 8,403,622
18,579,186 Series 2011-2, Class DZ...................................... 3.75% 10/15/41 17,013,068
----------------
1,215,419,254
----------------
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 18.1%
Federal Home Loan Mortgage Corporation Multiclass Certificates
50,000,000 Series 2020-RR06, Class BX, IO (c)........................... 1.84% 05/27/33 6,051,822
37,600,000 Series 2020-RR09, Class AX, IO (c)........................... 2.63% 11/27/28 4,598,480
47,500,000 Series 2020-RR09, Class BX, IO (c)........................... 2.20% 02/27/29 5,158,500
96,907,000 Series 2020-RR10, Class X, IO (c)............................ 2.01% 12/27/27 7,422,272
112,919,000 Series 2020-RR11, Class AX, IO (c)........................... 2.84% 01/27/29 14,460,543
44,200,500 Series 2020-RR11, Class BX, IO (c)........................... 2.44% 12/27/28 4,108,931
38,909,006 Series 2021-P009, Class X, IO (f)............................ 1.45% 01/25/31 2,400,211
4,237,458 Series 2021-P011, Class X1, IO (f)........................... 1.80% 09/25/45 529,436
See Notes to Financial Statements Page 21
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COMMERCIAL MORTGAGE-BACKED SECURITIES (CONTINUED)
Federal Home Loan Mortgage Corporation Multiclass Certificates
(Continued)
$ 112,345,000 Series 2021-RR15, Class X, IO (f)............................ 1.56% 10/27/34 $ 13,106,449
100,924,000 Series 2021-RR18, Class X, IO (f) (g) (h).................... 1.90% 10/27/28 8,750,111
55,000,000 Series 2021-RR20, Class X, IO (f)............................ 1.85% 04/25/33 7,776,565
Federal Home Loan Mortgage Corporation Multifamily Structured
Pass Through Certificates
5,545,944 Series 2013-K027, Class A2................................... 2.64% 01/25/23 5,528,685
13,079,058 Series 2013-K030, Class A2................................... 3.25% 04/25/23 12,997,380
103,907,773 Series 2013-K030, Class X1, IO (f)........................... 0.14% 04/25/23 33,957
20,358,685 Series 2013-K031, Class A2................................... 3.30% 04/25/23 20,186,087
23,900,000 Series 2013-K032, Class A2................................... 3.31% 05/25/23 23,649,550
24,990,241 Series 2013-K034, Class A2................................... 3.53% 07/25/23 24,705,058
11,046,323 Series 2013-K035, Class A2................................... 3.46% 08/25/23 10,911,570
25,000,000 Series 2014-K036, Class A2................................... 3.53% 10/25/23 24,634,225
74,208,513 Series 2014-K036, Class X1, IO (f)........................... 0.69% 10/25/23 366,085
34,959,674 Series 2015-K045, Class A2................................... 3.02% 01/25/25 33,552,607
2,249,095 Series 2016-K054, Class A1................................... 2.30% 01/25/25 2,180,012
12,264,000 Series 2016-K152, Class A2................................... 3.08% 01/25/31 10,857,254
286,775,031 Series 2016-KIR1, Class X, IO (f)............................ 1.04% 03/25/26 8,367,981
26,585,018 Series 2017-K724, Class A2................................... 3.06% 11/25/23 26,060,692
12,085,553 Series 2017-K728, Class A2................................... 3.06% 08/25/24 11,695,227
45,155,000 Series 2018-K156, Class A3................................... 3.70% 06/25/33 40,761,838
30,175,200 Series 2018-K157, Class A2................................... 3.99% 05/25/33 28,491,985
1,650,000 Series 2018-K157, Class A3................................... 3.99% 08/25/33 1,517,874
7,101,000 Series 2018-K159, Class A3................................... 3.95% 11/25/33 6,475,715
1,090,000 Series 2019-1512, Class A2................................... 2.99% 05/25/31 948,665
3,000,000 Series 2019-1513, Class A2................................... 2.73% 12/25/31 2,587,546
74,073,786 Series 2019-K097, Class X1, IO (f)........................... 1.09% 07/25/29 4,284,072
57,666,529 Series 2019-K099, Class X1, IO (f)........................... 0.88% 09/25/29 2,737,586
57,790,000 Series 2019-K099, Class XAM, IO (f).......................... 1.14% 09/25/29 3,763,553
125,653,675 Series 2019-K100, Class X1, IO (f)........................... 0.65% 09/25/29 4,505,400
69,537,861 Series 2019-K101, Class X1, IO (c)........................... 0.84% 10/25/29 3,171,246
64,993,000 Series 2019-K102, Class XAM, IO (c).......................... 1.09% 10/25/29 4,062,078
59,029,000 Series 2019-K103, Class XAM, IO (f).......................... 0.90% 11/25/29 3,140,279
28,596,283 Series 2019-K1510, Class X1, IO (f).......................... 0.48% 01/25/34 1,069,312
158,169,249 Series 2019-K1512, Class X1, IO (f).......................... 0.91% 04/25/34 10,545,887
56,938,480 Series 2019-K1513, Class X1, IO (f).......................... 0.86% 08/25/34 3,624,299
102,858,332 Series 2019-K734, Class X1, IO (f)........................... 0.65% 02/25/26 1,718,053
68,018,000 Series 2019-K734, Class XAM, IO (f).......................... 0.42% 02/25/26 926,282
42,136,931 Series 2019-K735, Class X1, IO (f)........................... 0.96% 05/25/26 1,142,488
54,447,193 Series 2019-K736, Class X1, IO (f)........................... 1.29% 07/25/26 2,043,376
7,100,000 Series 2020-K108, Class A2................................... 1.52% 03/25/30 5,642,178
8,471,000 Series 2020-K109, Class A2................................... 1.56% 04/25/30 6,722,232
35,424,000 Series 2020-K109, Class XAM, IO (f).......................... 1.80% 04/25/30 3,776,832
108,586,842 Series 2020-K110, Class X1, IO (f)........................... 1.70% 04/25/30 10,117,112
29,090,000 Series 2020-K112, Class XAM, IO (f).......................... 1.66% 05/25/30 2,901,666
82,019,000 Series 2020-K113, Class XAM, IO (f).......................... 1.58% 06/25/30 7,908,223
53,100,000 Series 2020-K114, Class XAM, IO (f).......................... 1.34% 06/25/30 4,352,501
120,835,893 Series 2020-K115, Class X1, IO (f)........................... 1.33% 06/25/30 9,280,994
55,537,412 Series 2020-K115, Class XAM, IO (f).......................... 1.55% 07/25/30 5,228,298
13,000,000 Series 2020-K116, Class A2................................... 1.38% 07/25/30 10,074,333
16,436,722 Series 2020-K116, Class X1, IO (f)........................... 1.43% 07/25/30 1,328,618
Page 22 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COMMERCIAL MORTGAGE-BACKED SECURITIES (CONTINUED)
Federal Home Loan Mortgage Corporation Multifamily Structured
Pass Through Certificates (Continued)
$ 55,500,000 Series 2020-K116, Class XAM, IO (f).......................... 1.60% 08/25/30 $ 5,440,288
8,000,000 Series 2020-K117, Class A2................................... 1.41% 08/25/30 6,198,256
63,500,000 Series 2020-K117, Class XAM, IO (f).......................... 1.43% 09/25/30 5,695,531
10,000,000 Series 2020-K118, Class A2................................... 1.49% 09/25/30 7,787,386
77,477,334 Series 2020-K118, Class X1, IO (f)........................... 0.96% 09/25/30 4,396,784
37,051,661 Series 2020-K118, Class XAM, IO (f).......................... 1.17% 09/25/30 2,702,278
14,000,000 Series 2020-K119, Class A2................................... 1.57% 09/25/30 10,958,664
51,000,000 Series 2020-K119, Class XAM, IO (f).......................... 1.13% 10/25/30 3,619,720
7,000,000 Series 2020-K120, Class A2................................... 1.50% 10/25/30 5,434,857
75,535,017 Series 2020-K120, Class XAM, IO (f).......................... 1.21% 10/25/30 5,763,065
28,247,742 Series 2020-K121, Class X1, IO (f)........................... 1.02% 10/25/30 1,679,809
21,236,000 Series 2020-K121, Class XAM, IO (f).......................... 1.19% 11/25/30 1,591,725
78,295,761 Series 2020-K122, Class X1, IO (f)........................... 0.88% 11/25/30 4,131,503
35,210,000 Series 2020-K122, Class XAM, IO (f).......................... 1.08% 11/25/30 2,426,437
89,950,700 Series 2020-K1515, Class X1, IO (f).......................... 1.51% 02/25/35 10,681,628
86,843,891 Series 2020-K1516, Class X1, IO (f).......................... 1.51% 05/25/35 10,737,683
109,722,927 Series 2020-K1517, Class X1, IO (f).......................... 1.33% 07/25/35 11,531,474
52,918,755 Series 2020-KG04, Class X1, IO (f)........................... 0.85% 11/25/30 2,692,136
75,273,331 Series 2020-K737, Class X1, IO (c)........................... 0.64% 10/25/26 1,455,696
38,559,000 Series 2020-K738, Class XAM, IO (c).......................... 1.37% 03/25/27 1,952,404
131,364,641 Series 2020-K739, Class X1, IO (f)........................... 1.22% 09/25/27 5,822,646
46,072,531 Series 2020-K739, Class XAM, IO (f).......................... 1.57% 09/25/27 2,903,717
70,811,000 Series 2020-K740, Class XAM (f).............................. 1.11% 10/25/27 3,253,900
33,900,000 Series 2021-K128, Class XAM, IO (f).......................... 0.73% 03/25/31 1,654,083
27,836,000 Series 2021-K129, Class XAM, IO (f).......................... 1.22% 05/25/31 2,257,739
41,565,013 Series 2021-K130, Class XAM, IO (f).......................... 1.21% 07/25/31 3,425,863
78,491,000 Series 2021-K132, Class XAM, IO (f).......................... 0.86% 09/25/31 4,645,513
149,719,311 Series 2021-K1520, Class X1, IO (f).......................... 0.47% 02/25/36 6,095,208
143,990,000 Series 2021-KG05, Class X1, IO (f)........................... 0.31% 01/25/31 2,961,039
64,467,885 Series 2021-KG06, Class X1, IO (f)........................... 0.53% 10/25/31 2,324,802
107,703,000 Series 2021-K741, Class XAM, IO (f).......................... 0.95% 12/25/27 4,508,230
107,087,198 Series 2021-K744, Class X1, IO (f)........................... 0.86% 07/25/28 4,225,050
200,000,000 Series 2022-K148, Class XAM, IO (f).......................... 0.25% 08/25/32 4,595,736
FREMF Mortgage Trust
14,800,000 Series 2013-K26, Class B (f) (i)............................. 3.55% 12/25/45 14,745,940
6,203,000 Series 2013-K28, Class B (f) (i)............................. 3.46% 06/25/46 6,115,739
8,700,000 Series 2013-K29, Class B (f) (i)............................. 3.47% 05/25/46 8,585,557
11,943,000 Series 2013-K32, Class B (f) (i)............................. 3.53% 10/25/46 11,770,686
29,145,000 Series 2013-K35, Class B (f) (i)............................. 3.93% 12/25/46 28,611,751
4,505,000 Series 2015-K44, Class B (f) (i)............................. 3.72% 01/25/48 4,280,003
8,205,000 Series 2015-K45, Class B (f) (i)............................. 3.61% 04/25/48 7,820,789
2,300,000 Series 2016-K55, Class B (f) (i)............................. 4.17% 04/25/49 2,170,274
1,676,768 Series 2020-KI05, Class B, 1 Mo. LIBOR + 2.30% (a) (i)....... 5.44% 07/25/24 1,652,917
Government National Mortgage Association
2,982,278 Series 2011-31, Class Z (c).................................. 3.53% 09/16/52 2,683,998
18,886,971 Series 2012-120, Class Z (c)................................. 2.46% 01/16/55 12,883,547
97,261 Series 2013-74, Class AG (f)................................. 2.58% 12/16/53 79,158
5,853 Series 2013-194, Class AE (c)................................ 2.75% 11/16/44 5,498
16,294,676 Series 2015-30, Class DZ..................................... 2.95% 05/16/55 14,039,265
6,835,513 Series 2015-70, Class IO, IO (c)............................. 0.57% 12/16/49 134,576
4,355,736 Series 2015-125, Class VA (c)................................ 2.70% 05/16/35 3,984,683
See Notes to Financial Statements Page 23
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COMMERCIAL MORTGAGE-BACKED SECURITIES (CONTINUED)
Government National Mortgage Association (Continued)
$ 16,036,840 Series 2016-11, Class IO, IO (c)............................. 0.78% 01/16/56 $ 570,586
7,768,802 Series 2016-26, Class IO, IO (c)............................. 0.68% 02/16/58 200,454
10,807,085 Series 2016-52, Class IO, IO (c)............................. 0.75% 03/16/58 368,983
3,886,372 Series 2016-110, Class VA.................................... 2.10% 01/16/38 3,309,868
9,895,309 Series 2016-127, Class IO, IO (c)............................ 0.86% 05/16/58 412,988
3,185,509 Series 2017-23, Class Z...................................... 2.50% 05/16/59 2,043,365
4,144,810 Series 2017-35, Class Z (c).................................. 2.50% 05/16/59 2,746,618
6,651,151 Series 2017-76, Class B...................................... 2.60% 12/16/56 5,227,073
2,329,078 Series 2017-106, Class AE.................................... 2.60% 12/16/56 1,968,163
2,633,979 Series 2017-146, Class Z..................................... 2.60% 09/16/57 1,755,569
4,333,951 Series 2018-4, Class Z....................................... 2.50% 10/16/59 2,634,938
13,696,340 Series 2018-98, Class C (c).................................. 3.00% 08/16/60 10,490,102
17,332,506 Series 2018-123, Class Z..................................... 2.50% 06/16/60 13,034,429
24,789,476 Series 2018-170, Class Z..................................... 2.50% 11/16/60 18,999,562
18,314,819 Series 2019-7, Class Z....................................... 2.50% 01/16/61 12,648,740
1,882,833 Series 2019-104, Class Z..................................... 2.80% 05/16/61 1,136,565
6,700,000 Series 2020-161, Class B..................................... 2.00% 08/16/62 4,197,715
8,800,865 Series 2020-169, Class Z..................................... 1.83% 06/16/62 4,340,528
22,598,137 Series 2022-43, Class Z...................................... 2.00% 09/16/61 13,254,915
19,269,127 Series 2022-106, Class Z..................................... 2.00% 05/16/63 13,032,391
5,388,191 Series 2022-109, Class Z (c)................................. 2.25% 08/16/64 2,516,116
4,789,673 Series 2022-166, Class Z (f)................................. 2.50% 04/16/65 2,344,099
----------------
877,289,209
----------------
PASS-THROUGH SECURITIES -- 39.2%
Federal Home Loan Mortgage Corporation
1,006,282 Pool 760043, 5 Yr. Constant Maturity Treasury Rate +
1.39% (a)................................................. 2.94% 12/01/48 994,868
4,130,105 Pool 840359, 12 Mo. LIBOR + 1.64% (a)........................ 3.14% 06/01/46 4,120,925
88,261 Pool A19763.................................................. 5.00% 04/01/34 86,479
347,141 Pool A47828.................................................. 3.50% 08/01/35 310,297
156,403 Pool A47937.................................................. 5.50% 08/01/35 160,004
61,200 Pool A48972.................................................. 5.50% 05/01/36 62,594
66,315 Pool A54675.................................................. 5.50% 01/01/36 68,081
141,977 Pool A65324.................................................. 5.50% 09/01/37 141,713
80,791 Pool A97294.................................................. 4.00% 02/01/41 76,080
697,372 Pool B70791.................................................. 4.00% 06/01/39 680,328
2,963 Pool C01310.................................................. 6.50% 03/01/32 3,070
10,064 Pool C03458.................................................. 5.00% 02/01/40 10,087
89,052 Pool C04269.................................................. 3.00% 10/01/42 78,260
15,846 Pool C91482.................................................. 3.50% 07/01/32 14,997
10,784 Pool E02883.................................................. 4.00% 04/01/26 10,591
13,786 Pool G01443.................................................. 6.50% 08/01/32 14,247
224,779 Pool G02017.................................................. 5.00% 12/01/35 225,287
102,888 Pool G04814.................................................. 5.50% 10/01/38 105,613
19,439 Pool G05173.................................................. 4.50% 11/01/31 18,577
217,714 Pool G05275.................................................. 5.50% 02/01/39 223,184
57,018 Pool G05449.................................................. 4.50% 05/01/39 55,284
176,028 Pool G06583.................................................. 5.00% 06/01/41 176,426
426,349 Pool G07100.................................................. 5.50% 07/01/40 437,687
41,407 Pool G07266.................................................. 4.00% 12/01/42 38,819
323,967 Pool G07329.................................................. 4.00% 01/01/43 305,266
Page 24 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Federal Home Loan Mortgage Corporation (Continued)
$ 315,439 Pool G07683.................................................. 4.00% 03/01/44 $ 296,445
1,627 Pool G08113.................................................. 6.50% 02/01/36 1,690
4 Pool G12978.................................................. 5.50% 12/01/22 4
3,233 Pool G13625.................................................. 5.50% 01/01/24 3,224
25,285 Pool G13733.................................................. 5.00% 11/01/24 25,247
23,377 Pool G14088.................................................. 4.00% 02/01/26 23,013
12,753 Pool G14106.................................................. 6.00% 10/01/24 12,735
3,474 Pool G14167.................................................. 5.50% 07/01/23 3,467
163 Pool G14233.................................................. 6.00% 01/01/24 163
249,710 Pool G14348.................................................. 4.00% 10/01/26 245,844
7,047 Pool G14376.................................................. 4.00% 09/01/25 6,940
7,348 Pool G14995.................................................. 5.50% 12/01/24 7,333
621 Pool G15821.................................................. 5.00% 07/01/25 620
55,102 Pool G15949.................................................. 4.00% 01/01/29 54,252
3,580 Pool G15957.................................................. 5.50% 12/01/24 3,574
24,455 Pool G18264.................................................. 5.00% 07/01/23 24,418
43,658 Pool G18287.................................................. 5.50% 12/01/23 43,483
8,923 Pool G60020.................................................. 4.50% 12/01/43 8,542
368,659 Pool G60114.................................................. 5.50% 06/01/41 378,405
544,596 Pool G60168.................................................. 4.50% 07/01/45 528,805
197,565 Pool G60194.................................................. 3.50% 08/01/45 178,556
195,692 Pool G60808.................................................. 3.00% 10/01/46 170,521
2,740 Pool H09034.................................................. 5.50% 05/01/37 2,734
40,242 Pool J09465.................................................. 4.00% 04/01/24 39,636
22,879 Pool J09504.................................................. 4.00% 04/01/24 22,430
6,031 Pool J09798.................................................. 4.00% 05/01/24 5,926
10,484 Pool J10623.................................................. 4.00% 09/01/24 10,204
130,066 Pool N70075.................................................. 5.00% 01/01/35 127,637
257,513 Pool N70081.................................................. 5.50% 07/01/38 252,420
51,907 Pool Q07189.................................................. 4.00% 04/01/42 48,912
18,099 Pool Q07479.................................................. 3.50% 04/01/42 16,476
75,902 Pool Q11791.................................................. 3.50% 10/01/42 69,069
51,466 Pool Q11836.................................................. 3.50% 10/01/42 46,827
370,484 Pool Q14034.................................................. 3.50% 12/01/42 337,267
385,897 Pool Q54651.................................................. 4.50% 03/01/48 370,732
705,051 Pool Q55037.................................................. 4.50% 04/01/48 677,893
1,984,972 Pool Q61217.................................................. 4.00% 01/01/49 1,841,025
6,389,000 Pool QF0184.................................................. 5.50% 09/01/52 6,441,859
8,065,885 Pool QK1195.................................................. 2.50% 11/01/41 6,791,215
13,274,699 Pool QK1203.................................................. 2.50% 11/01/41 11,185,357
2,724,198 Pool QO0748.................................................. 4.50% 08/01/37 2,662,458
3,047,037 Pool QO0750.................................................. 4.50% 08/01/37 2,980,523
1,072,548 Pool QO0773.................................................. 4.50% 08/01/37 1,048,578
5,402,139 Pool QO0807.................................................. 4.50% 09/01/37 5,281,374
8,490,133 Pool SC0190.................................................. 2.50% 09/01/41 7,227,098
11,041,119 Pool SC0252.................................................. 3.00% 01/01/42 9,650,214
9,249,698 Pool SC0270.................................................. 2.50% 04/01/42 7,828,213
7,279,032 Pool SC0277.................................................. 3.00% 05/01/42 6,416,130
12,825,796 Pool SC0298.................................................. 6.00% 01/01/30 12,925,187
10,943,345 Pool SD0887.................................................. 3.50% 09/01/49 9,894,364
16,970,412 Pool SD0948.................................................. 3.00% 05/01/47 14,791,209
24,412,412 Pool SD0949.................................................. 3.00% 09/01/48 21,409,706
See Notes to Financial Statements Page 25
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Federal Home Loan Mortgage Corporation (Continued)
$ 18,546,726 Pool SD0954.................................................. 3.00% 02/01/47 $ 16,279,537
11,768,391 Pool SD0961.................................................. 3.50% 11/01/48 10,608,390
20,831,120 Pool SD1170.................................................. 3.50% 09/01/49 18,786,760
5,553,840 Pool SD1289.................................................. 3.00% 10/01/50 4,818,691
7,942,986 Pool SD1361.................................................. 3.50% 02/01/50 7,191,499
21,040,404 Pool SD1469.................................................. 5.50% 08/01/52 21,214,478
20,473,164 Pool SD1627.................................................. 5.00% 09/01/52 20,261,211
319,570 Pool U50165.................................................. 4.00% 05/01/32 295,486
2,170,048 Pool U59020.................................................. 4.00% 06/01/35 2,006,091
964,369 Pool U64762.................................................. 4.50% 10/01/45 923,076
89,293 Pool U80068.................................................. 3.50% 10/01/32 81,377
55,325 Pool U80212.................................................. 3.50% 02/01/33 50,411
74,824 Pool U90245.................................................. 3.50% 10/01/42 67,582
748,516 Pool U90690.................................................. 3.50% 06/01/42 674,204
10,960 Pool U90932.................................................. 3.00% 02/01/43 9,523
26,777 Pool U92272.................................................. 4.50% 12/01/43 25,659
86,796 Pool U99045.................................................. 3.50% 03/01/43 78,560
94,497 Pool U99084.................................................. 4.50% 02/01/44 91,592
43,992 Pool U99091.................................................. 4.50% 03/01/44 42,279
126,313 Pool U99096.................................................. 4.50% 05/01/44 121,443
11,581,404 Pool ZA4196.................................................. 3.00% 04/01/43 10,157,215
1,387,559 Pool ZS2492.................................................. 6.50% 04/01/35 1,446,462
Federal National Mortgage Association
37,455 Pool 190371.................................................. 6.50% 07/01/36 38,983
22,545 Pool 255190.................................................. 5.50% 05/01/34 23,054
9,814 Pool 255984.................................................. 4.50% 11/01/25 9,448
75,552 Pool 256181.................................................. 5.50% 03/01/36 75,840
287,113 Pool 256576.................................................. 5.50% 01/01/37 288,233
6,605 Pool 256808.................................................. 5.50% 07/01/37 6,475
41,895 Pool 256936.................................................. 6.00% 10/01/37 42,453
46,969 Pool 545759.................................................. 6.50% 07/01/32 49,036
10,490 Pool 555851.................................................. 6.50% 01/01/33 10,828
150,445 Pool 683246.................................................. 5.50% 02/01/33 150,377
146,134 Pool 725014.................................................. 5.50% 12/01/33 149,342
305,592 Pool 735415.................................................. 6.50% 12/01/32 315,843
2,867 Pool 745875.................................................. 6.50% 09/01/36 2,983
38,554 Pool 747097.................................................. 6.00% 10/01/29 38,656
264,715 Pool 788149.................................................. 5.50% 05/01/33 264,401
127,802 Pool 812741.................................................. 5.50% 02/01/35 126,243
167,386 Pool 827948.................................................. 5.50% 05/01/35 165,400
234,359 Pool 850000.................................................. 5.50% 01/01/36 240,301
34,340 Pool 871039.................................................. 5.50% 02/01/37 34,188
870,283 Pool 879015.................................................. 4.00% 10/01/35 817,450
101,659 Pool 888001.................................................. 5.50% 10/01/36 104,240
85,628 Pool 888163.................................................. 7.00% 12/01/33 90,475
281,459 Pool 889610.................................................. 5.50% 06/01/38 288,609
9,554 Pool 890149.................................................. 6.50% 10/01/38 10,022
13,692 Pool 890231.................................................. 5.00% 07/01/25 13,655
70 Pool 890314.................................................. 5.50% 12/01/22 70
1,479 Pool 890378.................................................. 6.00% 05/01/24 1,474
705,109 Pool 890556.................................................. 4.50% 10/01/43 674,848
133,992 Pool 905917.................................................. 5.50% 01/01/37 137,390
Page 26 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Federal National Mortgage Association (Continued)
$ 64,419 Pool 922386.................................................. 5.50% 01/01/37 $ 63,148
9,532 Pool 930562.................................................. 5.00% 02/01/39 9,542
75,990 Pool 931808.................................................. 5.50% 08/01/39 77,918
127,088 Pool 953115.................................................. 5.50% 11/01/38 125,516
4,658 Pool 962556.................................................. 5.00% 04/01/23 4,645
1,825 Pool 973561.................................................. 5.00% 03/01/23 1,820
37,348 Pool 976871.................................................. 6.50% 08/01/36 38,559
13,303 Pool 995097.................................................. 6.50% 10/01/37 14,017
68,343 Pool 995149.................................................. 6.50% 10/01/38 71,376
32,305 Pool 995228.................................................. 6.50% 11/01/38 34,219
10,999 Pool 995252.................................................. 5.00% 12/01/23 10,970
5,322 Pool 995259.................................................. 6.50% 11/01/23 5,307
94,735 Pool AA3303.................................................. 5.50% 06/01/38 92,751
408,312 Pool AB0460.................................................. 5.50% 02/01/37 409,295
130,020 Pool AB0731.................................................. 4.00% 06/01/39 122,307
34,422 Pool AB2092.................................................. 4.00% 01/01/41 32,376
11,739 Pool AB2133.................................................. 4.00% 01/01/26 11,515
856,082 Pool AB2506.................................................. 5.00% 03/01/41 855,631
974,043 Pool AB2959.................................................. 4.50% 07/01/40 932,341
431,102 Pool AB8676.................................................. 3.50% 05/01/42 389,160
10,573 Pool AC1232.................................................. 5.00% 07/01/24 10,545
163,416 Pool AC3267.................................................. 5.50% 09/01/39 167,570
21,808 Pool AD0889.................................................. 6.00% 09/01/24 21,715
210,032 Pool AD4317.................................................. 4.00% 04/01/40 197,549
7,838 Pool AD5222.................................................. 4.50% 05/01/30 7,748
52,259 Pool AD7137.................................................. 5.50% 07/01/40 53,263
172,300 Pool AE0137.................................................. 4.50% 03/01/36 166,077
58,074 Pool AE4476.................................................. 4.00% 03/01/41 54,621
76,448 Pool AE7005.................................................. 4.00% 10/01/40 71,904
2,722,514 Pool AE7733.................................................. 5.00% 11/01/40 2,715,526
20,327 Pool AE9284.................................................. 4.00% 11/01/40 19,118
483,982 Pool AE9959.................................................. 5.00% 03/01/41 476,324
207,562 Pool AH0979.................................................. 3.50% 01/01/41 182,971
144,180 Pool AH1089.................................................. 4.00% 11/01/40 135,403
87,372 Pool AH1141.................................................. 4.50% 12/01/40 84,655
56,336 Pool AH4404.................................................. 4.00% 01/01/41 52,984
53,238 Pool AH7204.................................................. 4.00% 03/01/41 50,070
131,123 Pool AI6093.................................................. 4.50% 06/01/31 128,977
21,615 Pool AI6581.................................................. 4.50% 07/01/41 20,942
91,259 Pool AI8779.................................................. 4.00% 11/01/41 85,833
324,186 Pool AI9114.................................................. 4.00% 06/01/42 304,424
1,401,617 Pool AI9124.................................................. 4.00% 08/01/42 1,316,757
924,439 Pool AI9158.................................................. 6.50% 01/01/41 976,654
100,536 Pool AK5555.................................................. 4.00% 04/01/42 94,557
66,001 Pool AL0212.................................................. 5.50% 02/01/38 67,540
172,536 Pool AL0241.................................................. 4.00% 04/01/41 162,270
1,676 Pool AL0399.................................................. 6.00% 08/01/24 1,671
563 Pool AL0446.................................................. 6.00% 05/01/24 561
2,519 Pool AL1195.................................................. 6.00% 09/01/23 2,512
64,518 Pool AL2142.................................................. 6.50% 09/01/38 66,751
2,075 Pool AL2589.................................................. 5.50% 05/01/25 2,069
65,774 Pool AL2892.................................................. 3.50% 12/01/42 59,772
See Notes to Financial Statements Page 27
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Federal National Mortgage Association (Continued)
$ 404,832 Pool AL3093.................................................. 3.50% 02/01/43 $ 367,812
918,582 Pool AL4703.................................................. 3.50% 12/01/28 871,927
2,395 Pool AL4962.................................................. 6.00% 05/01/24 2,388
485,606 Pool AL5890.................................................. 4.50% 03/01/43 470,497
543 Pool AL6057.................................................. 6.00% 08/01/24 542
33,419 Pool AL6948.................................................. 5.00% 09/01/25 33,331
482,175 Pool AL7637.................................................. 5.00% 01/01/42 473,835
1,537,201 Pool AL7905.................................................. 4.50% 03/01/34 1,477,655
102,234 Pool AL9226.................................................. 5.50% 12/01/41 105,773
14,628,949 Pool AL9401.................................................. 4.00% 02/01/46 13,721,916
7,303,097 Pool AL9566.................................................. 3.50% 06/01/46 6,585,122
784,123 Pool AL9777.................................................. 4.50% 01/01/47 753,363
185,571 Pool AP1197.................................................. 3.50% 09/01/42 168,711
112,313 Pool AP7963.................................................. 4.00% 09/01/42 106,110
1,542,576 Pool AQ0411.................................................. 3.50% 10/01/42 1,402,491
41,194 Pool AQ9715.................................................. 3.00% 01/01/43 35,722
250,097 Pool AQ9999.................................................. 3.00% 02/01/43 216,874
2,273,426 Pool AS1719.................................................. 5.00% 02/01/44 2,257,004
319,040 Pool AS5236.................................................. 4.00% 05/01/45 300,842
169,862 Pool AS7211.................................................. 3.00% 04/01/46 147,611
192,938 Pool AS9990.................................................. 4.50% 07/01/47 183,052
67,194 Pool AT0332.................................................. 3.00% 04/01/43 56,785
62,945 Pool AY0013.................................................. 4.50% 01/01/45 59,530
250,389 Pool BE3631.................................................. 4.50% 05/01/47 239,153
10,234 Pool BH9428.................................................. 4.50% 09/01/47 9,732
45,687 Pool BJ6232.................................................. 5.00% 04/01/48 44,105
700,398 Pool BJ9100.................................................. 4.50% 02/01/48 678,256
451,227 Pool BJ9111.................................................. 4.50% 03/01/48 435,459
1,013,258 Pool BJ9124.................................................. 4.50% 04/01/48 982,046
229,859 Pool BK4769.................................................. 5.00% 08/01/48 225,665
79,009 Pool BK4851.................................................. 5.00% 05/01/48 76,256
12,772,357 Pool BM3867.................................................. 4.00% 02/01/46 11,986,105
10,781,725 Pool BM4122.................................................. 7.47% 01/01/40 11,416,976
4,798,151 Pool BM4785.................................................. 4.50% 10/01/38 4,694,980
5,749,292 Pool BM5671.................................................. 4.50% 01/01/49 5,522,598
418,205 Pool BN1027.................................................. 5.50% 03/01/49 418,427
914,693 Pool BN4059.................................................. 4.00% 12/01/48 833,933
10,540,963 Pool BR1090.................................................. 2.50% 06/01/41 8,966,342
5,483,456 Pool BT7849.................................................. 5.00% 07/01/52 5,426,688
5,167,971 Pool BT7872.................................................. 5.50% 09/01/52 5,210,730
4,704,024 Pool BT7879.................................................. 4.50% 09/01/37 4,603,213
4,997,194 Pool BT7897.................................................. 5.00% 10/01/52 4,924,772
10,220,563 Pool BT9396.................................................. 2.50% 11/01/41 8,611,864
6,483,388 Pool BT9397.................................................. 2.50% 11/01/41 5,458,742
7,451,047 Pool BV7699.................................................. 2.50% 04/01/42 6,305,991
3,336,883 Pool BV7979.................................................. 4.50% 08/01/37 3,264,046
4,825,153 Pool BV7981.................................................. 4.50% 08/01/37 4,711,784
2,878,729 Pool BV7982.................................................. 4.50% 08/01/37 2,813,492
4,561,457 Pool BV8046.................................................. 4.50% 09/01/52 4,348,948
5,221,183 Pool BW1146.................................................. 5.50% 09/01/52 5,264,378
1,929,343 Pool CA2520.................................................. 4.00% 10/01/33 1,869,667
3,782,482 Pool CA2947.................................................. 4.00% 12/01/48 3,508,032
Page 28 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Federal National Mortgage Association (Continued)
$ 7,705,992 Pool CB2113.................................................. 2.50% 11/01/41 $ 6,521,460
14,202,877 Pool CB3540.................................................. 3.00% 05/01/42 12,307,345
39,669,361 Pool CB3851.................................................. 4.00% 06/01/52 36,472,214
4,888,314 Pool CB4196.................................................. 4.50% 07/01/37 4,793,353
16,441,888 Pool CB4266.................................................. 4.50% 07/01/37 16,089,765
52,454,817 Pool CB4688.................................................. 5.00% 09/01/52 51,489,636
24,961,252 Pool CB4947.................................................. 5.00% 10/01/52 24,599,512
1,812,838 Pool FM1284.................................................. 3.50% 02/01/46 1,646,988
1,687,121 Pool FM1285.................................................. 4.00% 10/01/43 1,586,800
5,271,134 Pool FM2450.................................................. 3.50% 12/01/39 4,818,327
29,940,356 Pool FM2863.................................................. 3.50% 09/01/48 26,996,464
86,287,862 Pool FM2972.................................................. 4.00% 12/01/44 80,940,014
100,471,494 Pool FM3003.................................................. 4.00% 05/01/49 94,245,115
7,004,012 Pool FM8218.................................................. 4.00% 04/01/48 6,567,329
11,665,508 Pool FM8953.................................................. 5.00% 11/01/43 11,677,373
5,023,663 Pool FM9408.................................................. 4.50% 06/01/46 4,816,052
8,611,051 Pool FM9585.................................................. 2.50% 11/01/41 7,287,329
14,258,464 Pool FS0045.................................................. 3.00% 09/01/47 12,414,930
15,600,005 Pool FS0074.................................................. 3.00% 01/01/47 13,690,224
52,067,603 Pool FS0697.................................................. 2.50% 02/01/42 44,069,381
40,182,989 Pool FS0742.................................................. 3.50% 05/01/44 36,493,848
16,015,888 Pool FS1540.................................................. 3.00% 04/01/42 13,958,337
29,305,941 Pool FS1541.................................................. 3.00% 04/01/42 25,467,084
26,116,409 Pool FS1573.................................................. 2.50% 11/01/41 22,103,447
40,598,686 Pool FS1797.................................................. 3.50% 07/01/46 36,909,644
9,935,380 Pool FS1884.................................................. 4.00% 05/01/42 9,220,998
50,132,144 Pool FS2044.................................................. 4.50% 07/01/44 48,571,129
40,119,694 Pool FS2045.................................................. 4.50% 12/01/43 38,870,466
29,179,170 Pool FS2127.................................................. 3.50% 06/01/48 26,310,257
9,852,701 Pool FS2310.................................................. 5.00% 09/01/48 9,673,924
25,275,368 Pool FS2590.................................................. 5.00% 08/01/52 24,768,870
9,354,613 Pool FS2787.................................................. 4.00% 10/01/48 8,776,938
18,050,732 Pool FS2796.................................................. 3.50% 08/01/47 16,313,693
14,353,892 Pool FS2871.................................................. 3.50% 07/01/42 12,978,334
14,299,545 Pool FS2872.................................................. 3.50% 08/01/42 12,889,564
15,987,035 Pool FS2905.................................................. 5.00% 09/01/52 15,715,753
19,001,280 Pool FS2925.................................................. 3.00% 08/01/48 16,667,345
36,066,708 Pool FS2961.................................................. 5.50% 10/01/52 36,518,574
75,429 Pool MA0096.................................................. 4.50% 06/01/29 74,559
1,838 Pool MA0293.................................................. 4.50% 01/01/30 1,817
29,352 Pool MA0295.................................................. 5.00% 01/01/30 29,184
25,633 Pool MA0353.................................................. 4.50% 03/01/30 25,337
3,090 Pool MA0777.................................................. 5.00% 06/01/31 3,072
28,445 Pool MA1222.................................................. 4.00% 10/01/32 27,215
47,489 Pool MA1228.................................................. 3.00% 09/01/42 41,652
144,344 Pool MA2024.................................................. 4.00% 07/01/29 139,881
1,945 Pool MA2509.................................................. 3.00% 01/01/46 1,643
166,924 Pool MA3101.................................................. 4.50% 08/01/47 159,712
96,392 Pool MA3123.................................................. 5.00% 08/01/47 94,353
233,500,000 Pool TBA..................................................... 3.00% 12/01/48 198,411,152
22,000,000 Pool TBA..................................................... 2.50% 11/15/52 18,029,688
60,000,000 Pool TBA..................................................... 4.00% 11/15/52 54,618,750
See Notes to Financial Statements Page 29
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Federal National Mortgage Association (Continued)
$ 5,000,000 Pool TBA..................................................... 5.50% 11/15/52 $ 4,928,125
98,000,000 Pool TBA (j)................................................. 2.50% 12/15/52 80,317,890
181,500,000 Pool TBA..................................................... 3.50% 12/15/52 159,677,460
24,200,000 Pool TBA (j)................................................. 5.00% 12/15/52 23,295,336
15,000,000 Pool TBA..................................................... 5.50% 12/15/52 14,756,250
10,000,000 Pool TBA..................................................... 6.00% 12/15/52 10,014,063
5,000,000 Pool TBA..................................................... 2.00% 01/15/53 3,949,414
10,000,000 Pool TBA (j)................................................. 5.50% 01/15/53 9,822,656
Government National Mortgage Association
53,506 Pool 3149.................................................... 6.00% 10/20/31 55,488
34,570 Pool 3172.................................................... 6.00% 12/20/31 36,417
36,683 Pool 3227.................................................... 6.00% 04/20/32 37,987
7,438 Pool 3474.................................................... 6.00% 11/20/33 7,787
49,540 Pool 4251.................................................... 5.50% 10/20/23 49,339
38,335 Pool 455986.................................................. 5.25% 07/15/25 36,102
73,013 Pool 487108.................................................. 6.00% 04/15/29 75,055
30,605 Pool 553144.................................................. 5.50% 04/15/33 31,782
97,774 Pool 604338.................................................. 5.00% 05/15/33 98,126
69,989 Pool 604897.................................................. 5.00% 12/15/33 69,757
92,318 Pool 605389.................................................. 5.00% 04/15/34 92,647
226,638 Pool 615403.................................................. 4.50% 08/15/33 220,477
8,025 Pool 627123.................................................. 5.50% 03/15/34 8,331
69,381 Pool 638704.................................................. 5.50% 11/15/36 70,852
148,565 Pool 653143.................................................. 4.90% 04/15/36 147,459
239,019 Pool 658324.................................................. 5.50% 03/15/37 241,194
113,738 Pool 677190.................................................. 5.00% 06/15/38 114,148
15,480 Pool 687833.................................................. 6.00% 08/15/38 16,280
41,138 Pool 706840.................................................. 4.50% 05/15/40 40,080
187,378 Pool 706855.................................................. 4.50% 09/15/40 182,560
232,219 Pool 711483.................................................. 4.00% 01/15/40 220,710
108,485 Pool 711543.................................................. 4.00% 11/15/40 103,061
729,418 Pool 711563.................................................. 4.50% 03/15/41 710,661
4,321,532 Pool 720225.................................................. 4.50% 07/15/39 4,179,126
232,481 Pool 723216.................................................. 4.50% 08/15/40 226,291
60,940 Pool 723248.................................................. 5.00% 10/15/39 61,160
230,233 Pool 724230.................................................. 5.00% 08/15/39 230,525
60,585 Pool 724267.................................................. 5.00% 09/15/39 60,663
140,063 Pool 724340.................................................. 4.50% 09/15/39 135,589
79,952 Pool 725272.................................................. 4.50% 11/15/39 76,897
39,190 Pool 726394.................................................. 4.50% 10/15/39 38,205
12,938 Pool 728921.................................................. 4.50% 12/15/24 12,709
189,767 Pool 733595.................................................. 4.50% 04/15/40 184,990
67,777 Pool 733733.................................................. 5.00% 06/15/40 67,863
485,720 Pool 736317.................................................. 4.25% 06/20/36 461,086
99,980 Pool 736617.................................................. 4.00% 12/15/35 94,871
736,836 Pool 737673.................................................. 4.50% 11/15/40 717,253
164,527 Pool 737996.................................................. 4.00% 02/15/41 155,491
239,343 Pool 739341.................................................. 3.50% 10/15/41 220,044
138,832 Pool 743673.................................................. 4.50% 07/15/40 136,412
244,580 Pool 745478.................................................. 5.00% 08/20/40 243,637
525,856 Pool 748939.................................................. 4.00% 09/20/40 491,658
73,159 Pool 754384.................................................. 4.50% 03/20/42 72,608
Page 30 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Government National Mortgage Association (Continued)
$ 280,352 Pool 762905.................................................. 4.50% 04/15/41 $ 272,366
999,469 Pool 769102.................................................. 4.50% 07/20/41 981,519
279,458 Pool 781623.................................................. 5.00% 06/15/33 276,216
44,813 Pool 781697.................................................. 6.00% 11/15/33 47,291
227,342 Pool 781824.................................................. 5.50% 11/15/34 238,632
9,177 Pool 781862.................................................. 5.50% 01/15/35 9,401
25,791 Pool 782070.................................................. 7.00% 06/15/32 26,475
46,698 Pool 782810.................................................. 4.50% 11/15/39 45,884
69,777 Pool 783091.................................................. 5.50% 06/15/40 73,536
11,227 Pool 783220.................................................. 5.50% 09/15/24 11,205
123,169 Pool 783375.................................................. 5.00% 08/15/41 123,107
7,375,323 Pool 783590.................................................. 4.50% 06/20/41 7,224,798
188,175 Pool 783760.................................................. 5.00% 02/15/42 189,517
2,843,101 Pool 784063.................................................. 5.00% 09/20/45 2,826,204
400,731 Pool 784343.................................................. 5.00% 02/15/41 403,542
3,689,978 Pool 784752.................................................. 4.00% 03/15/45 3,505,469
1,754,290 Pool 785020.................................................. 3.00% 05/20/50 1,495,038
1,929,606 Pool AC0197.................................................. 4.00% 12/20/42 1,825,392
388,907 Pool AD0026.................................................. 3.50% 06/20/33 361,352
76,978 Pool AD0856.................................................. 3.75% 08/20/33 73,023
35,727 Pool AG8899.................................................. 4.00% 12/20/43 33,612
546,691 Pool AI6317.................................................. 4.50% 06/20/44 524,444
403,509 Pool AK2389.................................................. 4.50% 11/20/44 385,285
108,274 Pool AN4469.................................................. 5.00% 12/15/40 106,509
202,979 Pool AR8421.................................................. 5.00% 10/20/41 198,734
868,259 Pool BB1216.................................................. 4.50% 06/20/47 849,645
425,270 Pool BB4731.................................................. 4.00% 07/20/47 397,801
295,534 Pool BB4757.................................................. 4.00% 08/20/47 279,707
164,876 Pool BB4769.................................................. 4.00% 08/20/47 154,222
289,326 Pool BD0483.................................................. 4.50% 11/20/47 276,563
401,536 Pool BF0415.................................................. 5.00% 06/20/35 393,273
272,762 Pool BL6909.................................................. 5.00% 03/20/49 265,837
1,139,570 Pool CB3161.................................................. 5.50% 03/20/50 1,167,227
125,152 Pool MA1017.................................................. 6.00% 05/20/43 131,489
88,799 Pool MA1162.................................................. 6.00% 07/20/43 93,297
11,250 Pool MA2215.................................................. 3.50% 09/20/44 10,015
80,390 Pool MA2683.................................................. 6.00% 03/20/45 84,443
84,825 Pool MA2759.................................................. 6.00% 01/20/45 89,142
37,888 Pool MA2897.................................................. 6.00% 03/20/45 39,810
164,454 Pool MA2966.................................................. 6.00% 09/20/39 172,824
170,258 Pool MA3249.................................................. 6.00% 04/20/40 178,264
364,774 Pool MA3459.................................................. 6.00% 08/20/39 383,217
287,181 Pool MA4076.................................................. 7.00% 01/20/39 299,191
2,517,568 Pool MA5714.................................................. 6.00% 01/20/49 2,634,941
----------------
1,907,303,442
----------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES..................................... 4,000,011,905
(Cost $4,373,967,405) ----------------
See Notes to Financial Statements Page 31
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
MORTGAGE-BACKED SECURITIES -- 12.2%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 7.8%
Arroyo Mortgage Trust
$ 9,000,000 Series 2019-2, Class M1 (i).................................. 4.76% 04/25/49 $ 7,312,584
2,740,896 Series 2019-3, Class A3 (i).................................. 3.42% 10/25/48 2,525,959
2,825,121 Series 2021-1R, Class A2 (i)................................. 1.48% 10/25/48 2,423,568
3,900,362 Series 2021-1R, Class A3 (i)................................. 1.64% 10/25/48 3,357,384
BRAVO Residential Funding Trust
1,915,132 Series 2021-NQM1, Class A2 (i)............................... 1.26% 02/25/49 1,761,344
4,787,830 Series 2021-NQM1, Class A3 (i)............................... 1.33% 02/25/49 4,401,975
3,363,224 Series 2021-NQM2, Class A1 (i)............................... 0.97% 03/25/60 3,170,564
Chase Home Lending Mortgage Trust
1,394,350 Series 2019-ATR2, Class A11, 1 Mo. LIBOR +
0.90% (a) (i)............................................. 4.49% 07/25/49 1,341,659
CHL Mortgage Pass-Through Trust
29,772 Series 2004-8, Class 2A1..................................... 4.50% 06/25/19 29,887
CIM Trust
175,839 Series 2017-7, Class A (i)................................... 3.00% 04/25/57 175,342
2,118,503 Series 2018-J1, Class A22 (i)................................ 3.50% 03/25/48 1,867,247
1,747,254 Series 2019-INV1, Class A11 (i).............................. 4.00% 02/25/49 1,679,826
Citigroup Global Markets Mortgage Securities VII, Inc.
237 Series 2003-UP2, Class PO1, PO............................... (d) 12/25/18 203
Citigroup Mortgage Loan Trust
5,787,374 Series 2018-RP2, Class A1 (i)................................ 3.18% 02/25/58 5,537,134
COLT Mortgage Loan Trust
11,694,510 Series 2022-5, Class A1 (i).................................. 4.55% 04/25/67 10,693,734
Connecticut Avenue Securities Trust
2,048,514 Series 2019-R01, Class 2M2, 1 Mo. LIBOR + 2.45% (a) (i)...... 6.04% 07/25/31 2,041,365
725,767 Series 2019-R02, Class 1M2, 1 Mo. LIBOR + 2.30% (a) (i)...... 5.89% 08/25/31 724,940
421,905 Series 2019-R03, Class 1M2, 1 Mo. LIBOR + 2.15% (a) (i)...... 5.74% 09/25/31 420,888
656,885 Series 2019-R06, Class 2M2, 1 Mo. LIBOR + 2.10% (a) (i)...... 5.69% 09/25/39 655,131
2,950,000 Series 2022-R02, Class 2M2, 30 Day Average SOFR +
3.00% (a) (i)............................................. 6.00% 01/25/42 2,643,677
6,000,000 Series 2022-R03, Class 1M2, 30 Day Average SOFR +
3.50% (a) (i)............................................. 6.50% 03/25/42 5,724,674
4,251,000 Series 2022-R04, Class 1M2, 30 Day Average SOFR +
3.10% (a) (i)............................................. 6.10% 03/25/42 3,992,860
8,251,823 Series 2022-R07, Class 1M1, 30 Day Average SOFR +
2.95% (a) (i)............................................. 5.97% 06/25/42 8,292,841
CSMC Trust
2,465,354 Series 2018-RPL9, Class A1 (a) (i)........................... 3.85% 09/25/57 2,364,221
Ellington Financial Mortgage Trust
5,990,567 Series 2022-2, Class A1 (i).................................. 4.30% 04/25/67 5,454,446
Federal Home Loan Mortgage Corporation STACR Debt Notes
12,058,947 Series 2020-HQA5, Class M2, 30 Day Average SOFR +
2.60% (a) (i)............................................. 5.60% 11/25/50 12,066,390
5,500,000 Series 2022-DNA2, Class M1B, 30 Day Average SOFR +
2.40% (a) (i)............................................. 5.40% 02/25/42 5,074,493
Federal Home Loan Mortgage Corporation STACR REMIC Trust
1,209,968 Series 2020-DNA1, Class M2, 1 Mo. LIBOR +
1.70% (a) (i)............................................. 5.29% 01/25/50 1,188,876
5,895,370 Series 2020-HQA2, Class M2, 1 Mo. LIBOR +
3.10% (a) (i)............................................. 6.69% 03/25/50 5,901,905
5,293,560 Series 2021-DNA5, Class M2, 30 Day Average SOFR +
1.65% (a) (i)............................................. 4.65% 01/25/34 5,153,565
Page 32 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Federal Home Loan Mortgage Corporation STACR REMIC Trust
(Continued)
$ 4,000,000 Series 2022-DNA3, Class M1B, 30 Day Average SOFR +
2.90% (a) (i)............................................. 5.90% 04/25/42 $ 3,721,578
Federal National Mortgage Association Connecticut
Avenue Securities
9,034,174 Series 2018-C06, Class 1M2, 1 Mo. LIBOR + 2.00% (a).......... 5.59% 03/25/31 9,004,777
Flagstar Mortgage Trust
437,065 Series 2018-2, Class A4 (i).................................. 3.50% 04/25/48 428,309
2,450,344 Series 2018-4, Class B1 (f) (i).............................. 4.21% 07/25/48 2,051,377
1,620,991 Series 2019-2, Class A11 (i)................................. 3.50% 12/25/49 1,424,685
17,081,778 Series 2021-9INV, Class A1 (i)............................... 2.50% 09/25/41 14,576,819
GCAT Trust
6,999,297 Series 2021-NQM7, Class A1 (i)............................... 1.92% 08/25/66 5,794,672
4,930,666 Series 2022-NQM4, Class A1, steps up to 6.27% on
08/01/26 (i) (k).......................................... 5.27% 08/25/67 4,671,702
GMACM Mortgage Loan Trust
723 Series 2003-J10, Class A1.................................... 4.75% 01/25/19 712
GS Mortgage-Backed Securities Trust
743,467 Series 2019-PJ3, Class A1 (i)................................ 3.50% 03/25/50 685,851
3,417,255 Series 2021-PJ6, Class A8 (i)................................ 2.50% 11/25/51 2,916,132
Homeward Opportunities Fund Trust
3,366,469 Series 2022-1, Class A1, steps up to 6.08% on
06/01/26 (i) (k).......................................... 5.08% 07/25/67 3,188,760
JP Morgan Mortgage Trust
5,408 Series 2004-S2, Class 5A1.................................... 5.50% 12/25/19 4,782
1,140 Series 2014-IVR3, Class 2A1 (f) (i).......................... 2.62% 09/25/44 1,128
3,442,083 Series 2015-IVR2, Class A5 (f) (i)........................... 4.01% 01/25/45 3,343,078
1,337,604 Series 2018-5, Class A1 (i).................................. 3.50% 10/25/48 1,169,147
1,214,348 Series 2018-5, Class A13 (i)................................. 3.50% 10/25/48 1,027,652
1,436,215 Series 2018-8, Class A7 (i).................................. 4.00% 01/25/49 1,313,995
1,878,227 Series 2019-1, Class A5 (i).................................. 4.00% 05/25/49 1,748,716
551,796 Series 2019-5, Class A15 (i)................................. 4.00% 11/25/49 525,792
701,535 Series 2019-8, Class A15 (i)................................. 3.50% 03/25/50 612,527
1,250,614 Series 2019-INV2, Class A15 (i).............................. 3.50% 02/25/50 1,133,061
5,490 Series 2019-LTV2, Class A11, 1 Mo. LIBOR + 0.90% (a) (i)..... 4.49% 12/25/49 5,481
170,845 Series 2019-LTV3, Class A15 (i).............................. 3.50% 03/25/50 166,014
4,497,295 Series 2020-INV1, Class A15 (i).............................. 3.50% 08/25/50 3,939,386
4,373,400 Series 2021-6, Class A4 (i).................................. 2.50% 10/25/51 3,732,062
JP Morgan Wealth Management
10,000,000 Series 2020-ATR1, Class A5 (i)............................... 3.00% 02/25/50 8,043,761
MASTR Seasoned Securitization Trust
1,003 Series 2005-2, Class 3A1..................................... 6.00% 11/25/17 957
Mello Mortgage Capital Acceptance
4,568,352 Series 2018-MTG2, Class A9 (i)............................... 4.32% 10/25/48 4,282,432
MetLife Securitization Trust
3,894,052 Series 2018-1A, Class A (i).................................. 3.75% 03/25/57 3,651,018
MFA Trust
9,382,735 Series 2022-INV1, Class A1, steps up to 4.91% on
03/25/26 (i) (k).......................................... 3.91% 04/25/66 8,757,687
Mill City Mortgage Loan Trust
1,689,340 Series 2018-1, Class A1 (i).................................. 3.25% 05/25/62 1,626,874
1,381,010 Series 2018-2, Class A1 (f) (i).............................. 3.50% 05/25/58 1,353,499
4,662,543 Series 2018-4, Class A1B (i)................................. 3.48% 04/25/66 4,414,131
See Notes to Financial Statements Page 33
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
New Residential Mortgage Loan Trust
$ 5,488,692 Series 2015-2A, Class B1 (i)................................. 4.50% 08/25/55 $ 5,173,762
4,000,484 Series 2016-1A, Class A1 (i)................................. 3.75% 03/25/56 3,674,689
9,942,826 Series 2018-3A, Class A1 (i)................................. 4.50% 05/25/58 9,349,195
2,523,748 Series 2018-4A, Class A1M, 1 Mo. LIBOR + 0.90% (a) (i)....... 4.49% 01/25/48 2,440,189
18,412,115 Series 2018-4A, Class A1S, 1 Mo. LIBOR + 0.75% (a) (i)....... 4.34% 01/25/48 17,797,399
4,864,623 Series 2019-NQM5, Class A1 (i)............................... 2.71% 11/25/59 4,295,143
OBX Trust
1,360,713 Series 2018-EXP1, Class 1A3 (i).............................. 4.00% 04/25/48 1,236,443
1,171,414 Series 2018-EXP1, Class 2A1, 1 Mo. LIBOR +
0.85% (a) (i)............................................. 4.44% 04/25/48 1,157,532
PRKCM Trust
8,306,466 Series 2021-AFC1, Class A1 (i)............................... 1.51% 08/25/56 6,453,177
Provident Funding Mortgage Trust
1,327,909 Series 2019-1, Class A5 (i).................................. 3.00% 12/25/49 1,084,866
2,053,179 Series 2020-1, Class A5 (i).................................. 3.00% 02/25/50 1,665,941
PSMC Trust
3,204,550 Series 2020-3, Class A1 (i).................................. 3.00% 11/25/50 2,726,442
RUN Trust
9,522,993 Series 2022-NQM1, Class A1 (i)............................... 4.00% 03/25/67 8,558,299
Seasoned Credit Risk Transfer Trust
6,913,915 Series 2017-2, Class M1 (i).................................. 4.00% 08/25/56 6,689,819
Sequoia Mortgage Trust
1,822,447 Series 2017-2, Class A19 (i)................................. 3.50% 02/25/47 1,584,354
590,614 Series 2017-CH1, Class A13 (i)............................... 4.00% 08/25/47 555,250
5,323,456 Series 2018-CH1, Class B1B (i)............................... 4.45% 03/25/48 4,653,282
3,364,299 Series 2020-1, Class A19 (i)................................. 3.50% 02/25/50 2,864,654
10,449,117 Series 2020-1, Class A7 (i).................................. 3.50% 02/25/50 9,064,242
Starwood Mortgage Residential Trust 2022-3
8,528,430 Series 2022-3, Class A1 (i).................................. 4.16% 03/25/67 8,005,185
TIAA Bank Mortgage Loan Trust
314,038 Series 2018-3, Class A1 (i).................................. 4.00% 11/25/48 289,500
Towd Point Mortgage Trust
29,169 Series 2015-3, Class A4B (i)................................. 3.50% 03/25/54 29,016
3,464,771 Series 2018-2, Class A1 (i).................................. 3.25% 03/25/58 3,309,975
11,459,462 Series 2018-3, Class A1 (i).................................. 3.75% 05/25/58 10,738,281
2,495,879 Series 2018-5, Class A1A (i)................................. 3.25% 07/25/58 2,386,285
12,947,047 Series 2019-1, Class A1 (i).................................. 3.70% 03/25/58 11,949,938
2,025,344 Series 2019-4, Class A1 (i).................................. 2.90% 10/25/59 1,855,362
Verus Securitization Trust
2,751,186 Series 2019-INV3, Class A2 (i)............................... 2.95% 11/25/59 2,633,433
6,255,000 Series 2020-INV1, Class A3, steps up to 4.89% on
05/26/24 (i) (k).......................................... 3.89% 03/25/60 5,982,451
6,869,870 Series 2021-3, Class A1 (i).................................. 1.05% 06/25/66 5,379,692
5,823,391 Series 2022-4, Class A1, steps up to 5.47% on
04/25/26 (i) (k).......................................... 4.47% 04/25/67 5,473,585
11,682,551 Series 2022-5, Class A1, steps up to 4.80% on
06/25/26 (i) (k).......................................... 3.80% 04/25/67 10,421,067
Vista Point Securitization Trust
5,743,000 Series 2020-1, Class M1 (i).................................. 4.15% 03/25/65 5,298,105
Wells Fargo Mortgage Backed Securities Trust
390,296 Series 2019-1, Class A1 (i).................................. 3.94% 11/25/48 369,819
210,067 Series 2019-3, Class A1 (i).................................. 3.50% 07/25/49 191,316
Page 34 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
WinWater Mortgage Loan Trust
$ 1,223,261 Series 2016-1, Class 1A18 (i)................................ 3.50% 01/20/46 $ 1,081,361
526,160 Series 2016-1, Class 2A3 (i)................................. 3.00% 12/20/30 480,114
3,807,646 Series 2016-1, Class B1 (f) (i).............................. 3.78% 01/20/46 3,378,147
----------------
377,574,546
----------------
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 4.4%
Austin Fairmont Hotel Trust
5,000,000 Series 2019-FAIR, Class A, 1 Mo. LIBOR + 1.05% (a) (i)....... 4.46% 09/15/32 4,877,485
BAMLL Commercial Mortgage Securities Trust
7,000,000 Series 2013-WBRK, Class A (f) (i)............................ 3.53% 03/10/37 6,368,568
BBCMS Mortgage Trust
12,000,000 Series 2017-DELC, Class A, 1 Mo. LIBOR + 0.98% (a) (i)....... 4.39% 08/15/36 11,711,634
8,394,000 Series 2018-TALL, Class A, 1 Mo. LIBOR + 0.72% (a) (i)....... 4.13% 03/15/37 7,905,133
BPR Trust
4,800,514 Series 2021-WILL, Class A, 1 Mo. LIBOR + 1.75% (a) (i)....... 5.16% 06/15/38 4,647,628
10,000,000 Series 2022-OANA, Class A, 1 Mo. CME Term SOFR +
1.90% (a) (i)............................................. 5.27% 04/15/37 9,713,631
BX Commercial Mortgage Trust
10,000,000 Series 2019-IMC, Class A, 1 Mo. LIBOR + 1.00% (a) (i)........ 4.41% 04/15/34 9,747,318
Citigroup Commercial Mortgage Trust
2,915,000 Series 2014-GC23, Class B.................................... 4.18% 07/10/47 2,766,436
89,101,277 Series 2016-P4, Class XA, IO (f)............................. 1.89% 07/10/49 4,525,294
COMM Mortgage Trust
7,450,000 Series 2012-CR3, Class AM (i)................................ 3.42% 10/15/45 6,744,502
10,000,000 Series 2013-CR13, Class AM................................... 4.45% 11/10/46 9,764,155
11,300,000 Series 2014-CR15, Class AM................................... 4.43% 02/10/47 10,962,610
6,850,000 Series 2014-CR21, Class AM................................... 3.99% 12/10/47 6,501,219
DBWF Mortgage Trust
10,844,968 Series 2018-GLKS, Class A, 1 Mo. LIBOR + 1.03% (a) (i)....... 4.51% 12/19/30 10,432,178
Fontainebleau Miami Beach Trust
5,000,000 Series 2019-FBLU, Class C (i)................................ 3.75% 12/10/36 4,625,330
GS Mortgage Securities Trust
3,826,645 Series 2014-GC18, Class A3................................... 3.80% 01/10/47 3,753,025
Hawaii Hotel Trust
9,290,000 Series 2019-MAUI, Class A, 1 Mo. LIBOR + 1.15% (a) (i)....... 4.56% 05/15/38 8,958,302
J.P. Morgan Chase Commercial Mortgage Securities Trust
9,690,857 Series 2018-PHH, Class A, 1 Mo. LIBOR + 1.21%, 2.71% Flo
or (a) (i)................................................ 4.62% 06/15/35 9,395,808
MHC Commercial Mortgage Trust
6,335,000 Series 2021-MHC, Class A, 1 Mo. LIBOR + 0.80% (a) (i)........ 4.21% 04/15/38 6,080,286
Morgan Stanley Bank of America Merrill Lynch Trust
8,015,000 Series 2014-C15, Class AS.................................... 4.26% 04/15/47 7,766,425
RBS Commercial Funding, Inc. Trust
7,045,000 Series 2013-GSP, Class A (f) (i)............................. 3.83% 01/15/32 6,753,899
Ready Capital Mortgage Financing LLC
9,048,933 Series 2021-FL6, Class A, 1 Mo. LIBOR + 0.95% (a) (i)........ 4.54% 07/25/36 8,792,282
RIAL 2022-FL8 Issuer Ltd
4,428,000 Series 2022-FL8, Class A, 1 Mo. CME Term SOFR +
2.25% (a) (i)............................................. 5.67% 01/19/37 4,295,160
UBS-Barclays Commercial Mortgage Trust
5,062,043 Series 2013-C5, Class A4..................................... 3.18% 03/10/46 5,036,992
See Notes to Financial Statements Page 35
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
MORTGAGE-BACKED SECURITIES (CONTINUED)
COMMERCIAL MORTGAGE-BACKED SECURITIES (CONTINUED)
VMC Finance LLC
$ 2,983,500 Series 2021-HT1, Class A, 1 Mo. LIBOR + 1.65% (a) (i)........ 5.09% 01/18/37 $ 2,966,738
Wells Fargo Commercial Mortgage Trust
20,708,882 Series 2013-LC12, Class A3FL, 1 Mo. LIBOR +
1.05% (a) (i)............................................. 4.46% 07/15/46 20,708,033
3,774,182 Series 2015-LC22, Class ASB.................................. 3.57% 09/15/58 3,663,031
7,500,000 Series 2015-NXS2, Class B (f)................................ 4.28% 07/15/58 6,928,561
66,663,882 Series 2016-C37, Class XA, IO (f)............................ 0.81% 12/15/49 1,566,368
5,450,000 Series 2020-SDAL, Class C, 1 Mo. LIBOR + 1.74% (a) (i)....... 5.15% 02/15/37 5,166,614
WFRBS Commercial Mortgage Trust
3,495,311 Series 2013-C18, Class A4.................................... 3.90% 12/15/46 3,405,237
----------------
216,529,882
----------------
TOTAL MORTGAGE-BACKED SECURITIES............................................................ 594,104,428
(Cost $639,571,718) ----------------
ASSET-BACKED SECURITIES -- 4.8%
American Credit Acceptance Receivables Trust
5,935,290 Series 2022-1, Class A (i)................................... 0.99% 12/15/25 5,849,229
9,000,000 Series 2022-1, Class B (i)................................... 1.68% 09/14/26 8,619,245
3,904,061 Series 2022-2, Class A (i)................................... 2.66% 02/13/26 3,859,155
CFMT LLC
4,052,000 Series 2021-EBO1, Class M1 (i)............................... 1.65% 11/25/50 3,668,318
Chase Auto Owner Trust
8,800,000 Series 2022-AA, Class A2 (i)................................. 3.86% 10/27/25 8,700,123
CIG Auto Receivables Trust
3,835,949 Series 2021-1A, Class A (i).................................. 0.69% 04/14/25 3,754,079
Corevest American Finance Trust
6,426,877 Series 2020-1, Class A1 (i).................................. 1.83% 03/15/50 5,969,159
11,291,593 Series 2020-3, Class A (i)................................... 1.36% 08/15/53 9,833,545
6,129,343 Series 2020-4, Class A (i)................................... 1.17% 12/15/52 5,359,332
CWABS, Inc. Asset-Backed Certificates Trust
2,258,237 Series 2004-5, Class M1, 1 Mo. LIBOR + 0.86% (a)............. 4.44% 08/25/34 2,211,550
Diamond Resorts Owner Trust
5,465,305 Series 2021-1A, Class A (i).................................. 1.51% 11/21/33 5,022,513
DT Auto Owner Trust
3,432,772 Series 2021-4A, Class A (i).................................. 0.56% 09/15/25 3,363,567
FCI Funding LLC
1,713,071 Series 2019-1A, Class A (i).................................. 3.63% 02/18/31 1,711,507
Flagship Credit Auto Trust
15,216,159 Series 2021-4, Class A (i)................................... 0.81% 07/17/26 14,712,688
10,162,157 Series 2022-1, Class A (i)................................... 1.79% 10/15/26 9,766,741
10,000,000 Series 2022-3, Class A2 (i).................................. 4.06% 10/15/25 9,897,490
FNA VI LLC
7,674,061 Series 2021-1A, Class A (i).................................. 1.35% 01/10/32 6,985,136
Foursight Capital Automobile Receivables Trust
10,351,002 Series 2022-1, Class A2 (i).................................. 1.15% 09/15/25 10,121,257
GLS Auto Receivables Issuer Trust
12,635,081 Series 2021-4A, Class A (i).................................. 0.84% 07/15/25 12,424,300
GM Financial Automobile Leasing Trust
7,000,000 Series 2022-3, Class A2A..................................... 4.01% 10/21/24 6,934,203
GSAMP Trust
5,111,058 Series 2006-SEA1, Class M2, 1 Mo. LIBOR + 1.65% (a) (i)...... 5.24% 05/25/36 5,035,821
Page 36 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
ASSET-BACKED SECURITIES (CONTINUED)
Honda Auto Receivables Owner Trust
$ 8,300,000 Series 2022-2, Class A2...................................... 3.81% 03/18/25 $ 8,210,400
M360 Ltd.
5,000,000 Series 2021-CRE3, Class A, 1 Mo. LIBOR + 1.50% (a) (i)....... 5.07% 11/22/38 4,862,500
MF1 Ltd.
4,000,000 Series 2021-FL7, Class A, 1 Mo. LIBOR + 1.08% (a) (i)........ 4.52% 10/16/36 3,856,608
OSCAR US Funding XIV LLC
8,794,360 Series 2022-1A, Class A2 (i)................................. 1.60% 03/10/25 8,657,850
Santander Drive Auto Receivables Trust
7,466,002 Series 2021-4, Class A3...................................... 0.51% 08/15/25 7,417,857
16,250,000 Series 2022-1, Class A3...................................... 1.94% 11/17/25 15,893,150
10,000,000 Series 2022-5, Class A2...................................... 3.98% 01/15/25 9,932,588
4,000,000 Series 2022-5, Class A3...................................... 4.11% 08/17/26 3,910,301
Sierra Timeshare Receivables Funding LLC
1,978,009 Series 2019-1A, Class A (i).................................. 3.20% 01/20/36 1,893,996
4,368,903 Series 2020-2A, Class A (i).................................. 1.33% 07/20/37 4,056,729
United Auto Credit Securitization Trust
3,033,800 Series 2022-1, Class A (i)................................... 1.11% 07/10/24 3,010,994
Westlake Automobile Receivables Trust
10,750,000 Series 2021-3A, Class A3 (i)................................. 0.95% 06/16/25 10,414,035
10,000,000 Series 2022-1A, Class A3 (i)................................. 2.42% 07/15/25 9,704,190
----------------
TOTAL ASSET-BACKED SECURITIES............................................................... 235,620,156
(Cost $243,662,607) ----------------
U.S. GOVERNMENT BONDS AND NOTES -- 5.9%
45,000,000 U.S. Treasury Bond.............................................. 1.13% 08/15/40 26,530,664
163,933,500 U.S. Treasury Note.............................................. 1.50% 03/31/23 162,054,111
30,000,000 U.S. Treasury Note.............................................. 0.25% 04/15/23 29,452,217
10,000,000 U.S. Treasury Note.............................................. 0.13% 04/30/23 9,789,301
40,000,000 U.S. Treasury Note.............................................. 2.75% 04/30/23 39,683,778
20,000,000 U.S. Treasury Note.............................................. 2.75% 05/31/23 19,800,560
----------------
TOTAL U.S. GOVERNMENT BONDS AND NOTES....................................................... 287,310,631
(Cost $289,494,972) ----------------
U.S. TREASURY BILLS -- 4.6%
50,000,000 U.S. Treasury Bill.............................................. (d) 12/15/22 49,786,875
21,000,000 U.S. Treasury Bill.............................................. (d) 12/22/22 20,892,454
100,000,000 U.S. Treasury Bill.............................................. (d) 03/02/23 98,620,768
51,000,000 U.S. Treasury Bill.............................................. (d) 12/08/22 50,820,276
----------------
TOTAL U.S. TREASURY BILLS................................................................... 220,120,373
(Cost $220,456,187) ----------------
SHARES DESCRIPTION VALUE
---------------- -------------------------------------------------------------------------------------------- ----------------
EXCHANGE-TRADED FUNDS -- 0.0%
CAPITAL MARKETS -- 0.0%
24,359 First Trust Long Duration Opportunities ETF (l)............................................. 523,731
(Cost $662,348) ----------------
TOTAL INVESTMENTS -- 109.8%................................................................. 5,337,691,224
(Cost $5,767,815,237) ----------------
See Notes to Financial Statements Page 37
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
---------------- ---------------------------------------------- ---------------- ------------ ------------ ----------------
PURCHASED OPTIONS -- 0.0%
CALL OPTIONS PURCHASED -- 0.0%
100 U.S. Treasury Long Bond Futures Call.......... $ 12,050,000 $130.00 11/25/22 $ 12,500
25 U.S. Treasury Long Bond Futures Call.......... 3,012,500 133.00 11/25/22 1,563
----------------
TOTAL CALL OPTIONS PURCHASED................................................................ 14,063
(Cost $87,824) ----------------
PUT OPTIONS PURCHASED -- 0.0%
250 U.S. Treasury Long Bond Futures Put........... 30,125,000 120.00 11/25/22 457,031
(Cost $345,179) ----------------
TOTAL PURCHASED OPTIONS..................................................................... 471,094
(Cost $433,003) ----------------
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES SOLD SHORT -- (11.6)%
Federal National Mortgage Association
$ (25,000,000) Pool TBA (j)................................................. 2.50% 11/15/37 (22,533,150)
(10,000,000) Pool TBA (j)................................................. 1.50% 12/15/37 (8,520,956)
(85,000,000) Pool TBA (j)................................................. 2.00% 12/15/37 (74,546,483)
(60,000,000) Pool TBA (j)................................................. 2.50% 12/15/37 (54,084,247)
(5,000,000) Pool TBA..................................................... 2.00% 01/15/38 (4,387,236)
(15,000,000) Pool TBA (j)................................................. 2.50% 01/15/38 (13,518,718)
(15,000,000) Pool TBA..................................................... 3.00% 11/15/52 (12,747,070)
(5,000,000) Pool TBA (j)................................................. 2.00% 12/15/52 (3,947,070)
(111,800,000) Pool TBA..................................................... 4.00% 12/15/52 (101,724,898)
(70,000,000) Pool TBA..................................................... 4.50% 12/15/52 (65,644,140)
(45,000,000) Pool TBA (j)................................................. 3.00% 01/15/53 (38,241,211)
(94,000,000) Pool TBA (j)................................................. 3.50% 01/15/53 (82,683,281)
(90,000,000) Pool TBA (j)................................................. 4.00% 01/15/53 (81,875,390)
----------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES SOLD SHORT.......................... (564,453,850)
(Proceeds $568,271,906) ----------------
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
---------------- ---------------------------------------------- ---------------- ------------ ------------ ----------------
WRITTEN OPTIONS -- (0.1)%
CALL OPTIONS WRITTEN -- (0.0)%
(150) U.S. 5-Year Treasury Futures Call............. $ (15,989,063) $107.50 11/25/22 (55,078)
(75) U.S. 5-Year Treasury Futures Call............. (7,994,531) 112.00 11/25/22 (1,172)
(500) U.S. 5-Year Treasury Futures Call............. (53,410,150) 106.50 12/23/22 (613,281)
(100) U.S. 10-Year Treasury Futures Call............ (11,059,375) 115.00 11/25/22 (7,812)
(300) U.S. Treasury Long Bond Futures Call.......... (36,150,000) 125.00 11/25/22 (168,750)
(500) U.S. Treasury Long Bond Futures Call.......... (60,250,000) 135.00 11/25/22 (23,438)
(50) U.S. Treasury Long Bond Futures Call.......... (6,009,375) 132.00 12/23/22 (14,063)
----------------
TOTAL CALL OPTIONS WRITTEN.................................................................. (883,594)
(Premiums received $1,299,474) ----------------
PUT OPTIONS WRITTEN -- (0.1)%
(214) U.S. 5-Year Treasury Futures Put.............. (22,811,063) 106.00 11/25/22 (103,656)
(425) U.S. 5-Year Treasury Futures Put.............. (45,302,344) 107.00 11/25/22 (408,399)
(75) U.S. 5-Year Treasury Futures Put.............. (8,011,523) 105.00 12/23/22 (29,883)
(325) U.S. Treasury Long Bond Futures Put........... (39,162,500) 116.00 11/25/22 (187,891)
(75) U.S. Treasury Long Bond Futures Put........... (9,574,219) 122.00 11/25/22 (80,859)
Page 38 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
---------------- ---------------------------------------------- ---------------- ------------ ------------ ----------------
WRITTEN OPTIONS (CONTINUED)
PUT OPTIONS WRITTEN (CONTINUED)
(75) U.S. Treasury Long Bond Futures Put........... $ (9,037,500) $124.00 11/25/22 $ (321,094)
(250) U.S. Treasury Long Bond Futures Put........... (30,125,000) 126.00 11/25/22 (1,472,656)
(10) U.S. Treasury Long Bond Futures Put........... (1,276,563) 132.00 11/25/22 (57,656)
----------------
TOTAL PUT OPTIONS WRITTEN................................................................... (2,662,094)
(Premiums received $1,289,764) ----------------
TOTAL WRITTEN OPTIONS....................................................................... (3,545,688)
(Premiums received $2,589,238) ----------------
NET OTHER ASSETS AND LIABILITIES -- 1.9%.................................................... 93,084,282
----------------
NET ASSETS -- 100.0%........................................................................ $ 4,863,247,062
================
FUTURES CONTRACTS AT OCTOBER 31, 2022 (See Note 2D - Futures Contracts in the
Notes to Financial Statements):
UNREALIZED
APPRECIATION
NUMBER OF EXPIRATION NOTIONAL (DEPRECIATION)/
FUTURES CONTRACTS POSITION CONTRACTS DATE VALUE VALUE
------------------------------------------------------ ----------- ----------- ----------- --------------- ----------------
U.S. 2-Year Treasury Notes Long 640 Dec-2022 $ 130,805,000 $ (140,751)
U.S. 5-Year Treasury Notes Long 490 Dec-2022 52,230,937 (30,177)
U.S 10-Year Short Bond Futures Short 2,546 Dec-2022 (281,571,687) 4,416,495
Ultra 10-Year U.S. Treasury Notes Short 7,920 Dec-2022 (918,596,250) 68,861,437
U.S. Treasury Long Bond Futures Short 1,227 Dec-2022 (147,853,500) 9,422,819
Ultra U.S. Treasury Bond Futures Short 800 Dec-2022 (102,125,000) 6,838,972
--------------- ----------------
$(1,267,110,500) $ 89,368,795
=============== ================
-----------------------------
(a) Floating or variable rate security.
(b) Inverse floating rate security.
(c) Weighted Average Coupon security. Coupon is based on the blended interest
rate of the underlying holdings, which may have different coupons. The
coupon may change in any period.
(d) Zero coupon security.
(e) Pursuant to procedures approved by the Trust's Board of Trustees, this
security has been determined to be illiquid by First Trust Advisors L.P.
(the "Advisor").
(f) Collateral Strip Rate security. Coupon is based on the weighted net
interest rate of the investment's underlying collateral. The interest rate
resets periodically.
(g) This security's value was determined using significant unobservable inputs
(see Note 2A - Portfolio Valuation in the Notes to Financial Statements).
(h) This security is fair valued by the Advisor's Pricing Committee in
accordance with procedures approved by the Trust's Board of Trustees, and
in accordance with provisions of the Investment Company Act of 1940 and
rules thereunder, as amended. At October 31, 2022, securities noted as
such are valued at $8,750,111 or 0.2% of net assets.
(i) This security, sold within the terms of a private placement memorandum, is
exempt from registration upon resale under Rule 144A of the Securities Act
of 1933, as amended, and may be resold in transactions exempt from
registration, normally to qualified institutional buyers. Pursuant to
procedures approved by the Trust's Board of Trustees, this security has
been determined to be liquid by the Advisor. Although market instability
can result in periods of increased overall market illiquidity, liquidity
for each security is determined based on security-specific factors and
assumptions, which require subjective judgment. At October 31, 2022,
securities noted as such amounted to $785,287,520 or 16.1% of net assets.
(j) All or a portion of this security is part of a mortgage dollar roll
agreement (see Note 2I- Mortgage Dollar Rolls and TBA Transactions in the
Notes to Financial Statements).
(k) Step-up security. A security where the coupon increases or steps up at a
predetermined date.
(l) Investment in an affiliated fund.
See Notes to Financial Statements Page 39
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2022
IO - Interest-Only Security - Principal amount shown represents par value on
which interest payments are based.
LIBOR - London Interbank Offered Rate
PO - Principal-Only Security
REMIC - Real Estate Mortgage Investment Conduit
SOFR - Secured Overnight Financing Rate
STRIPS - Separate Trading of Registered Interest and Principal of Securities
TBA - To-Be-Announced Security
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of October 31,
2022 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
ASSETS TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
10/31/2022 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
U.S. Government Agency Mortgage-Backed Securities..... $ 4,000,011,905 $ -- $ 3,991,261,794 $ 8,750,111
Mortgage-Backed Securities............................ 594,104,428 -- 594,104,428 --
U.S. Government Bonds and Notes....................... 287,310,631 -- 287,310,631 --
Asset-Backed Securities............................... 235,620,156 -- 235,620,156 --
Exchange-Traded Funds*................................ 523,731 523,731 -- --
U.S. Treasury Bills................................... 220,120,373 -- 220,120,373 --
--------------- --------------- --------------- ---------------
Total Investments..................................... 5,337,691,224 523,731 5,328,417,382 8,750,111
Call Options Purchased................................ 14,063 14,063 -- --
Put Options Purchased................................. 457,031 457,031 -- --
Futures Contracts**................................... 89,539,723 89,539,723 -- --
--------------- --------------- --------------- ---------------
Total................................................. $ 5,427,702,041 $ 90,534,548 $ 5,328,417,382 $ 8,750,111
=============== =============== =============== ===============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
10/31/2022 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
U.S. Government Agency Mortgage-Backed Securities
Sold Short......................................... $ (564,453,850) $ -- $ (564,453,850) $ --
Call Options Written.................................. (883,594) (883,594) -- --
Put Options Written................................... (2,662,094) (2,662,094) -- --
Futures Contracts**................................... (170,928) (170,928) -- --
--------------- --------------- --------------- ---------------
Total................................................. $ (568,170,466) $ (3,716,616) $ (564,453,850) $ --
=============== =============== =============== ===============
* See Portfolio of Investments for industry breakout.
** Includes cumulative appreciation/depreciation on futures contracts as
reported in the Futures Contracts table. Only the current day's variation margin
is presented on the Statement of Assets and Liabilities.
Level 3 investments are fair valued by the Advisor's Pricing Committee and are
footnoted in the Portfolio of Investments. All Level 3 investments values are
based on unobservable inputs.
Page 40 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2022
ASSETS:
Investments, at value - Unaffiliated...................................... $ 5,337,167,493
Investments, at value - Affiliated........................................ 523,731
---------------
Total investments, at value............................................... 5,337,691,224
Options contracts purchased, at value..................................... 471,094
Cash...................................................................... 275,276,534
Cash segregated as collateral for open futures and written options
contracts.............................................................. 40,294,401
Receivables:
Investment securities sold............................................. 6,682,673,388
Interest............................................................... 19,579,894
Variation margin....................................................... 8,806,302
Capital shares sold.................................................... 21,162
---------------
Total Assets........................................................ 12,364,813,999
---------------
LIABILITIES:
Investments sold short, at value (proceeds $568,271,906).................. 564,453,850
Options contracts written, at value....................................... 3,545,688
Payables:
Investment securities purchased........................................ 6,879,924,174
Capital shares purchased............................................... 39,934,247
Distribution to shareholders........................................... 10,962,000
Investment advisory fees............................................... 2,746,978
---------------
Total Liabilities................................................... 7,501,566,937
---------------
NET ASSETS................................................................ $ 4,863,247,062
===============
NET ASSETS CONSIST OF:
Paid-in capital........................................................... $ 5,311,418,240
Par value................................................................. 1,035,500
Accumulated distributable earnings (loss)................................. (449,206,678)
---------------
NET ASSETS................................................................ $ 4,863,247,062
===============
NET ASSET VALUE, per share................................................ $ 46.97
===============
Number of shares outstanding (unlimited number of shares authorized,
par value $0.01 per share)............................................. 103,550,002
===============
Investments, at cost - Unaffiliated....................................... $ 5,767,152,889
===============
Investments, at cost - Affiliated......................................... $ 662,348
===============
Total investments, at cost................................................ $ 5,767,815,237
===============
Premiums paid on options contracts purchased.............................. $ 433,003
===============
Premiums received on options contracts written............................ $ 2,589,238
===============
See Notes to Financial Statements Page 41
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 2022
INVESTMENT INCOME:
Interest.................................................................. $ 129,827,717
Dividends - Unaffiliated.................................................. 335,446
Dividends - Affiliated.................................................... 10,456
---------------
Total investment income................................................ 130,173,619
---------------
EXPENSES:
Investment advisory fees.................................................. 36,627,971
---------------
Total expenses......................................................... 36,627,971
---------------
NET INVESTMENT INCOME (LOSS).............................................. 93,545,648
---------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments - Unaffiliated............................................. (359,905,823)
Investments - Affiliated............................................... (24,888)
Investments sold short................................................. 151,012,925
Futures contracts...................................................... 178,120,025
Purchased options contracts............................................ (2,170,216)
Written options contracts.............................................. 18,015,565
---------------
Net realized gain (loss).................................................. (14,952,412)
---------------
Net change in unrealized appreciation (depreciation) on:
Investments - Unaffiliated............................................. (441,143,921)
Investments - Affiliated............................................... (146,222)
Investments sold short................................................. 3,301,458
Futures contracts...................................................... 74,921,071
Purchased options contracts............................................ 38,091
Written options contracts.............................................. 7,006
---------------
Net change in unrealized appreciation (depreciation)...................... (363,022,517)
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................... (377,974,929)
---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS........................................................ $ (284,429,281)
===============
Page 42 See Notes to Financial Statements
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
STATEMENTS OF CHANGES IN NET ASSETS
YEAR YEAR
ENDED ENDED
10/31/2022 10/31/2021
--------------- ---------------
OPERATIONS:
Net investment income (loss).............................................. $ 93,545,648 $ 50,844,582
Net realized gain (loss).................................................. (14,952,412) 31,189,777
Net change in unrealized appreciation (depreciation)...................... (363,022,517) (86,269,103)
--------------- ---------------
Net increase (decrease) in net assets resulting from operations........... (284,429,281) (4,234,744)
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations..................................................... (108,879,377) (48,092,827)
Return of capital......................................................... -- (90,717,550)
--------------- ---------------
Total distributions to shareholders....................................... (108,879,377) (138,810,377)
--------------- ---------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................................. 116,467,481 1,099,737,143
Cost of shares redeemed................................................... (1,640,879,473) (565,466,073)
--------------- ---------------
Net increase (decrease) in net assets resulting from
shareholder transactions............................................... (1,524,411,992) 534,271,070
--------------- ---------------
Total increase (decrease) in net assets................................... (1,917,720,650) 391,225,949
NET ASSETS:
Beginning of period....................................................... 6,780,967,712 6,389,741,763
--------------- ---------------
End of period............................................................. $ 4,863,247,062 $ 6,780,967,712
=============== ===============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................................... 134,550,002 124,200,002
Shares sold............................................................... 2,350,000 21,450,000
Shares redeemed........................................................... (33,350,000) (11,100,000)
--------------- ---------------
Shares outstanding, end of period......................................... 103,550,002 134,550,002
=============== ===============
See Notes to Financial Statements Page 43
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------------
2022 2021 2020 2019 2018
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period............ $ 50.40 $ 51.45 $ 51.87 $ 50.78 $ 51.76
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).................... 0.85 0.39 0.87 1.24 1.17
Net realized and unrealized gain (loss)......... (3.32) (0.40) (0.10) 1.21 (0.74)
---------- ---------- ---------- ---------- ----------
Total from investment operations................ (2.47) (0.01) 0.77 2.45 0.43
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income........................... (0.69) (0.36) (0.99) (1.23) (1.13)
Net realized gain............................... (0.27) -- -- (0.05) (0.28)
Return of capital............................... -- (0.68) (0.20) (0.08) --
---------- ---------- ---------- ---------- ----------
Total distributions............................. (0.96) (1.04) (1.19) (1.36) (1.41)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.................. $ 46.97 $ 50.40 $ 51.45 $ 51.87 $ 50.78
========== ========== ========== ========== ==========
TOTAL RETURN (a)................................ (4.96)% (0.02)% 1.50% 4.88% 0.84%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)............ $4,863,247 $6,780,968 $6,389,742 $3,765,469 $1,729,078
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average
net assets (b)............................... 0.65% 0.65% 0.65% 0.65% 0.65%
Ratio of net investment income (loss) to average
net assets................................... 1.66% 0.75% 1.57% 2.41% 2.32%
Portfolio turnover rate (c) (d)................. 831% 495% 434% 373% 331%
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year.
(b) The Fund indirectly bears its proportionate share of fees and expenses
incurred by the underlying funds in which the Fund invests. This ratio
does not include these indirect fees and expenses.
(c) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
(d) The portfolio turnover rate not including mortgage dollar rolls was 641%,
368%, 245%, 246%, and 117% for the years ended October 31, 2022, 2021,
2020, 2019, and 2018, respectively.
Page 44 See Notes to Financial Statements
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
OCTOBER 31, 2022
1. ORGANIZATION
First Trust Exchange-Traded Fund IV (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on September 15,
2010, and is registered with the Securities and Exchange Commission ("SEC")
under the Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of twelve funds that are offering shares. This
report covers the First Trust Low Duration Opportunities ETF (the "Fund"), a
diversified series of the Trust, which trades under the ticker "LMBS" on The
Nasdaq Stock Market LLC ("Nasdaq"). The Fund represents a separate series of
shares of beneficial interest in the Trust. Unlike conventional mutual funds,
the Fund issues and redeems shares on a continuous basis, at net asset value
("NAV"), only in large blocks of shares known as "Creation Units."
The Fund is an actively managed exchange-traded fund ("ETF"). The Fund's primary
investment objective is to generate current income. The Fund's secondary
investment objective is to provide capital appreciation. The Fund seeks to
achieve its investment objectives by investing, under normal market conditions,
at least 60% of its net assets (including investment borrowings) in
mortgage-related debt securities and other mortgage-related instruments
(collectively, "Mortgage-Related Investments"). The Fund normally expects to
invest in Mortgage-Related Investments tied to residential and commercial
mortgages. Mortgage-Related Investments include residential mortgage-backed
securities, commercial mortgage-backed securities, stripped mortgage-backed
securities, collateralized mortgage obligations and real estate mortgage
investment conduits. The Fund may also invest in investment companies, including
ETFs, that invest primarily in Mortgage-Related Investments. The Fund will limit
its investments in Mortgage-Related Investments that are not issued or
guaranteed by Government Entities(1) to 20% of its net assets (including
investment borrowings). The Fund may invest, without limitation, in mortgage
dollar rolls. The Fund intends to enter into mortgage dollar rolls only with
high quality securities dealers and banks, as determined by the Fund's
investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor").
The Fund may also invest in to-be-announced transactions ("TBA Transactions").
Further, the Fund may enter into short sales as part of its overall portfolio
management strategies or to offset a potential decline in the value of a
security; however, the Fund does not expect, under normal market conditions, to
engage in short sales with respect to more than 30% of the value of its net
assets (including investment borrowings). Although the Fund intends to invest
primarily in investment grade securities, the Fund may invest up to 20% of its
net assets (including investment borrowings) in securities of any credit
quality, including securities that are below investment grade, which are also
known as high yield securities, or commonly referred to as "junk" bonds, or
unrated securities that have not been judged by the Advisor to be of comparable
quality to rated investment grade securities. In the case of a split rating
between one or more of the nationally recognized statistical rating
organizations, the Fund will consider the highest rating. The Fund targets an
estimated effective duration of three years or less.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund is considered an investment company and follows accounting and
reporting guidance under Financial Accounting Standards Board Accounting
Standards Codification Topic 946, "Financial Services-Investment Companies." The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of the financial statements. The preparation of
the financial statements in accordance with accounting principles generally
accepted in the United States of America ("U.S. GAAP") requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
The Fund's NAV is determined daily as of the close of regular trading on the New
York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the
NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV
is determined as of that time. Domestic debt securities and foreign securities
are priced using data reflecting the earlier closing of the principal markets
for those securities. The Fund's NAV is calculated by dividing the value of all
assets of the Fund (including accrued interest and dividends), less all
liabilities (including accrued expenses and dividends declared but unpaid), by
the total number of shares outstanding.
The Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent readily available market quotations such as last sale or
official closing prices from a national or foreign exchange (i.e., a regulated
market) and are primarily obtained from third-party pricing services. Fair value
prices represent any prices not considered market value prices and are either
obtained from a third-party pricing service or are determined by the Advisor's
Pricing Committee, in accordance with valuation procedures approved by the
Trust's Board of Trustees, and in accordance with provisions of the 1940 Act and
rules thereunder. Investments valued by the Advisor's Pricing Committee, if any,
are footnoted as such in the footnotes to the Portfolio of Investments. The
Fund's investments are valued as follows:
-----------------------------
(1) "Government Entities" means the U.S. government, its agencies and
instrumentalities, and U.S. government-sponsored entities.
Page 45
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
OCTOBER 31, 2022
U.S. government securities, mortgage-backed securities, asset-backed
securities and other debt securities are fair valued on the basis of
valuations provided by a third-party pricing service approved by the
Advisor's Pricing Committee, which may use the following valuation inputs
when available:
1) benchmark yields;
2) reported trades;
3) broker/dealer quotes;
4) issuer spreads;
5) benchmark securities;
6) bids and offers; and
7) reference data including market research publications.
Pricing services generally value fixed-income securities assuming orderly
transactions of an institutional round lot size, but a Fund may hold or
transact in such securities in smaller, odd lot sizes. Odd lots may trade
at lower prices than institutional round lots.
Securities traded in an over-the-counter market are fair valued at the
mean of their most recent bid and asked price, if available, and otherwise
at their last trade price.
Common stocks and other equity securities listed on any national or
foreign exchange (excluding Nasdaq and the London Stock Exchange
Alternative Investment Market ("AIM")) are valued at the last sale price
on the exchange on which they are principally traded or, for Nasdaq and
AIM securities, the official closing price. Securities traded on more than
one securities exchange are valued at the last sale price or official
closing price, as applicable, at the close of the securities exchange
representing the primary exchange for such securities.
Shares of open-end funds are valued based on NAV per share.
Exchange-traded futures contracts are valued at the closing price in the
market where such contracts are principally traded. If no closing price is
available, exchange-traded futures contracts are valued at the mean of
their most recent bid and asked price, if available, and otherwise at
their closing bid price.
Exchange-traded options contracts are valued at the closing price in the
market where such contracts are principally traded. If no closing price is
available, exchange-traded options contracts are valued at the mean of
their most recent bid and asked price, if available, and otherwise at
their closing bid price.
Fixed income and other debt securities having a remaining maturity of
sixty days or less when purchased are fair valued at cost adjusted for
amortization of premiums and accretion of discounts (amortized cost),
provided the Advisor's Pricing Committee has determined that the use of
amortized cost is an appropriate reflection of fair value given market and
issuer-specific conditions existing at the time of the determination.
Factors that may be considered in determining the appropriateness of the
use of amortized cost include, but are not limited to, the following:
1) the credit conditions in the relevant market and changes
thereto;
2) the liquidity conditions in the relevant market and changes
thereto;
3) the interest rate conditions in the relevant market and
changes thereto (such as significant changes in interest
rates);
4) issuer-specific conditions (such as significant credit
deterioration); and
5) any other market-based data the Advisor's Pricing Committee
considers relevant. In this regard, the Advisor's Pricing
Committee may use last-obtained market-based data to assist it
when valuing portfolio securities using amortized cost.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Advisor's Pricing Committee at
fair value. These securities generally include, but are not limited to,
restricted securities (securities which may not be publicly sold without
registration under the Securities Act of 1933, as amended) for which a
third-party pricing service is unable to provide a market price; securities
whose trading has been formally suspended; a security whose market or fair value
price is not available from a pre-established pricing source; a security with
respect to which an event has occurred that is likely to materially affect the
value of the security after the market has closed but before the calculation of
the Fund's NAV or make it difficult or impossible to obtain a reliable market
quotation; and a security whose price, as provided by the third-party pricing
service, does not reflect the security's fair value. As a general principle, the
current fair value of a security would appear to be the amount which the owner
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FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
OCTOBER 31, 2022
might reasonably expect to receive for the security upon its current sale. When
fair value prices are used, generally they will differ from market quotations or
official closing prices on the applicable exchanges. A variety of factors may be
considered in determining the fair value of such securities, including, but not
limited to, the following:
1) the most recent price provided by a pricing service;
2) the fundamental business data relating to the issuer;
3) an evaluation of the forces which influence the market in
which these securities are purchased and sold;
4) the type, size and cost of a security;
5) the financial statements of the borrower/issuer, or financial
condition of the country of issue;
6) the credit quality and cash flow of the issuer, or country of
issue, based on the Pricing Committee's, sub-adviser's or
portfolio manager's analysis, as applicable, or external
analysis;
7) the information as to any transactions in or offers for the
security;
8) the price and extent of public trading in similar securities
of the issuer/borrower, or comparable companies;
9) the coupon payments;
10) the quality, value and salability of collateral, if any,
securing the security;
11) the business prospects of the issuer, including any ability to
obtain money or resources from a parent or affiliate and an
assessment of the issuer's management (for corporate debt
only);
12) the prospects for the issuer's industry, and multiples (of
earnings and/or cash flows) being paid for similar businesses
in that industry (for corporate debt only); and
13) other relevant factors.
The Fund is subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investment.
The inputs or methodologies used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value the Fund's investments as of October 31, 2022, is
included with the Fund's Portfolio of Investments.
In December 2020, the SEC adopted Rule 2a-5 under the 1940 Act, establishing
requirements to determine fair value in good faith for purposes of the 1940 Act.
The rule permits fund boards to designate a fund's investment adviser to perform
fair value determinations, subject to board oversight and certain other
conditions. The rule also defines when market quotations are "readily available"
for purposes of the 1940 Act and requires a fund to fair value a portfolio
investment when a market quotation is not readily available. The SEC also
adopted new Rule 31a-4 under the 1940 Act, which sets forth recordkeeping
requirements associated with fair value determinations. The compliance date for
Rule 2a-5 and Rule 31a-4 was September 8, 2022.
Effective September 8, 2022 and pursuant to the requirements of Rule 2a-5, the
Trust's Board of Trustees designated the Advisor as its valuation designee to
perform fair value determinations and approved new Advisor Valuation Procedures
for the Trust.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income is recorded
daily on the accrual basis. Amortization of premiums and accretion of discounts
are recorded using the effective interest method.
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FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
OCTOBER 31, 2022
The United Kingdom's Financial Conduct Authority (the "FCA"), which regulates
the London Interbank Offered Rates ("LIBOR") announced on March 5, 2021 that it
intended to phase-out all LIBOR reference rates, beginning December 31, 2021.
Since that announcement, the FCA has ceased publication of all non-USD LIBOR
reference rates and the 1-week and 2-month USD LIBOR reference rates as of
December 31, 2021. The remaining USD LIBOR settings will cease to be published
or no longer be representative immediately after June 30, 2023. The
International Swaps and Derivatives Association, Inc. ("ISDA") confirmed that
the FCA's March 5, 2021 announcement of its intention to cease providing LIBOR
reference rates, constituted an index cessation event under the Interbank
Offered Rates ("IBOR") Fallbacks Supplement and the ISDA 2020 IBOR Fallbacks
Protocol for all 35 LIBOR settings and confirmed that the spread adjustment to
be used in ISDA fallbacks was fixed as of the date of the announcement.
In the United States, the Alternative Reference Rates Committee (the "ARRC"), a
group of market participants convened by the Board of Governors of the Federal
Reserve System and the Federal Reserve Bank of New York in cooperation with
other federal and state government agencies, has since 2014 undertaken efforts
to identify U.S. dollar reference interest rates as alternatives to LIBOR and to
facilitate the mitigation of LIBOR-related risks. In June 2017, the ARRC
identified the Secured Overnight Financing Rate ("SOFR"), a broad measure of the
cost of cash overnight borrowing collateralized by U.S. Treasury securities, as
the preferred alternative for U.S. dollar LIBOR. The Federal Reserve Bank of New
York began daily publishing of SOFR in April 2018. There is no assurance that
any alternative reference rate, including SOFR, will be similar to or produce
the same value or economic equivalence as LIBOR or that instruments using an
alternative rate will have the same volume or liquidity.
At this time, it is not possible to predict the full impact of the elimination
of LIBOR and the establishment of an alternative reference rate on the Fund or
its investments.
The Fund invests in interest-only securities. For these securities, if there is
a change in the estimated cash flows, based on an evaluation of current
information, then the estimated yield is adjusted. Additionally, if the
evaluation of current information indicates a permanent impairment of the
security, the cost basis of the security is written down and a loss is
recognized. Debt obligations may be placed on non-accrual status and the related
interest income may be reduced by ceasing current accruals and writing off
interest receivables when the collection of all or a portion of interest has
become doubtful based on consistently applied procedures. A debt obligation is
removed from non-accrual status when the issuer resumes interest payments or
when collectability of interest is reasonably assured.
Securities purchased or sold on a when-issued, delayed-delivery or forward
purchase commitment basis may have extended settlement periods. The value of the
security so purchased is subject to market fluctuations during this period. The
Fund maintains liquid assets with a current value at least equal to the amount
of its when-issued, delayed-delivery or forward purchase commitments until
payment is made. At October 31, 2022, the Fund did not hold when-issued or
delayed-delivery securities. At October 31, 2022, the Fund held $403,398,117 of
forward purchase commitments.
C. SHORT SALES
Short sales are utilized to manage interest rate and spread risk, and are
transactions in which securities or other instruments (such as options,
forwards, futures or other derivative contracts) are sold that are not currently
owned in the Fund's portfolio. When the Fund engages in a short sale, the Fund
must borrow the security sold short and deliver the security to the
counterparty. Short selling allows the Fund to profit from a decline in a market
price to the extent such decline exceeds the transaction costs and the costs of
borrowing the securities. The Fund is charged a fee or premium to borrow the
securities sold short and is obligated to repay the lenders of the securities.
Any dividends or interest that accrues on the securities during the period of
the loan are due to the lenders. A gain, limited to the price at which the
security was sold short, or a loss, unlimited in size, will be recognized upon
the termination of the short sale; which is effected by the Fund purchasing the
security sold short and delivering the security to the lender. Any such gain or
loss may be offset, completely or in part, by the change in the value of the
long portion of the Fund's portfolio. The Fund is subject to the risk it may be
unable to reacquire a security to terminate a short position except at a price
substantially in excess of the last quoted price. Also, there is the risk that
the counterparty to a short sale may fail to honor its contractual terms,
causing a loss to the Fund.
D. FUTURES CONTRACTS
The Fund may purchase or sell (i.e., is long or short) exchange-listed futures
contracts to hedge against or gain exposure to changes in interest rates
(interest rate risk). Futures contracts are agreements between the Fund and a
counterparty to buy or sell a specific quantity of an underlying instrument at a
specified price and at a specified date. Depending on the terms of the contract,
futures contracts are settled either through physical delivery of the underlying
instrument on the settlement date or by payment of a cash settlement amount on
the settlement date. Open futures contracts can also be closed out prior to
settlement by entering into an offsetting transaction in a matching futures
contract. If the Fund is not able to enter into an offsetting transaction, the
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FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
OCTOBER 31, 2022
Fund will continue to be required to maintain margin deposits on the futures
contract. When the contract is closed or expires, the Fund records a realized
gain or loss equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed or expired. This gain
or loss is included in "Net realized gain (loss) on futures contracts" on the
Statement of Operations.
Upon entering into a futures contract, the Fund must deposit funds, called
margin, with its custodian in the name of the clearing broker equal to a
specified percentage of the current value of the contract. Open futures
contracts are marked-to-market daily with the change in value recognized as a
component of "Net change in unrealized appreciation (depreciation) on futures
contracts" on the Statement of Operations. Pursuant to the contract, the Fund
agrees to receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known as
variation margin and are included in "Variation margin" receivable or payable on
the Statement of Assets and Liabilities. If market conditions change
unexpectedly, the Fund may not achieve the anticipated benefits of the futures
contract and may realize a loss. The use of futures contracts involves the risk
of imperfect correlation in movements in the price of the futures contracts,
interest rates and the underlying instruments.
E. OPTIONS CONTRACTS
The Fund may invest in exchange-listed options on U.S. Treasury securities,
exchange-listed options on U.S. Treasury futures contracts and exchange-listed
U.S. Treasury futures contracts. The Fund may also invest up to 20% of its net
assets in over-the-counter derivatives. The Fund uses derivative instruments
primarily to hedge interest rate risk and actively manage interest rate
exposure. The primary risk exposure is interest rate risk.
The Fund may purchase (buy) or write (sell) put and call options on futures
contracts and enter into closing transactions with respect to such options to
terminate an existing position. A futures option gives the holder the right, in
return for the premium paid, to assume a long position (call) or short position
(put) in a futures contract at a specified exercise price prior to the
expiration of the option. Upon exercise of a call option, the holder acquires a
long position in the futures contract and the writer is assigned the opposite
short position. In the case of a put option, the opposite is true. Prior to
exercise or expiration, a futures option contract may be closed out by an
offsetting purchase or sale of a futures option of the same series. When the
Fund writes (sells) an option, an amount equal to the premium received by the
Fund is included in "Options contracts written, at value" on the Statement of
Assets and Liabilities. When the Fund purchases (buys) an option, the premium
paid represents the cost of the option, which is included in "Premiums paid on
options contracts purchased" on the Statement of Assets and Liabilities. Options
are marked-to-market daily and their value is affected by changes in the value
of the underlying security, changes in interest rates, changes in the actual or
perceived volatility of the securities markets and the underlying securities,
and the remaining time to the option's expiration. The value of options may also
be adversely affected if the market for the options becomes less liquid or the
trading volume diminishes.
The Fund uses options on futures contracts in connection with hedging
strategies. Generally, these strategies are applied under the same market and
market sector conditions in which the Fund uses put and call options on
securities. The purchase of put options on futures contracts is analogous to the
purchase of puts on securities so as to hedge the Fund's securities holdings
against the risk of declining market prices. The writing of a call option or the
purchasing of a put option on a futures contract constitutes a partial hedge
against declining prices of securities which are deliverable upon exercise of
the futures contract. If the price at expiration of a written call option is
below the exercise price, the Fund will retain the full amount of the option
premium which provides a partial hedge against any decline that may have
occurred in the Fund's holdings of securities. If the price when the option is
exercised is above the exercise price, however, the Fund will incur a loss,
which may be offset, in whole or in part, by the increase in the value of the
securities held by the Fund that were being hedged. Writing a put option or
purchasing a call option on a futures contract serves as a partial hedge against
an increase in the value of the securities the Fund intends to acquire. Realized
gains and losses on written options are included in "Net realized gain (loss) on
written options contracts" on the Statement of Operations. Realized gains and
losses on purchased options are included in "Net realized gain (loss) on
purchased options contracts" on the Statement of Operations.
The Fund is required to deposit and maintain margin with respect to put and call
options on futures contracts written by it. Such margin deposits will vary
depending on the nature of the underlying futures contract (and the related
initial margin requirements), the current market value of the option and other
futures positions held by the Fund. The Fund will pledge in a segregated account
at the Fund's custodian, liquid assets, such as cash, U.S. government securities
or other high-grade liquid debt obligations equal in value to the amount due on
the underlying obligation. Such segregated assets will be marked-to-market
daily, and additional assets will be pledged in the segregated account whenever
the total value of the pledged assets falls below the amount due on the
underlying obligation.
The risks associated with the use of options on future contracts include the
risk that the Fund may close out its position as a writer of an option only if a
liquid secondary market exists for such options, which cannot be assured. The
Fund's successful use of options on futures contracts depends on the Advisor's
ability to correctly predict the movement in prices on futures contracts and the
underlying instruments, which may prove to be incorrect. In addition, there may
be imperfect correlation between the instruments being hedged and the futures
contract subject to option.
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FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
OCTOBER 31, 2022
F. INTEREST-ONLY SECURITIES
An interest-only security ("IO Security") is the interest-only portion of a
mortgage-backed security that receives some or all of the interest portion of
the underlying mortgage-backed security and little or no principal. A reference
principal value called a notional value is used to calculate the amount of
interest due to the IO Security. IO Securities are sold at a deep discount to
their notional principal amount. Generally speaking, when interest rates are
falling and prepayment rates are increasing, the value of an IO Security will
fall. Conversely, when interest rates are rising and prepayment rates are
decreasing, generally the value of an IO Security will rise. These securities,
if any, are identified on the Portfolio of Investments.
G. PRINCIPAL-ONLY SECURITIES
A principal-only security ("PO Security") is the principal-only portion of a
mortgage-backed security that does not receive any interest, is priced at a deep
discount to its redemption value and ultimately receives the redemption value.
Generally speaking, when interest rates are falling and prepayment rates are
increasing, the value of a PO Security will rise. Conversely, when interest
rates are rising and prepayment rates are decreasing, generally the value of a
PO Security will fall. These securities, if any, are identified on the Portfolio
of Investments.
H. STRIPPED MORTGAGE-BACKED SECURITIES
Stripped mortgage-backed securities are created by segregating the cash flows
from underlying mortgage loans or mortgage securities to create two or more new
securities, each with a specified percentage of the underlying security's
principal or interest payments. Mortgage-backed securities may be partially
stripped so that each investor class receives some interest and some principal.
When securities are completely stripped, however, all of the interest is
distributed to holders of one type of security known as an IO Security and all
of the principal is distributed to holders of another type of security known as
a PO Security. These securities, if any, are identified on the Portfolio of
Investments.
I. MORTGAGE DOLLAR ROLLS AND TBA TRANSACTIONS
The Fund may invest, without limitation, in mortgage dollar rolls. The Fund
intends to enter into mortgage dollar rolls only with high quality securities
dealers and banks, as determined by the Fund's investment advisor. In a mortgage
dollar roll, the Fund will sell (or buy) mortgage-backed securities for delivery
on a specified date and simultaneously contract to repurchase (or sell)
substantially similar (same type, coupon and maturity) securities on a future
date. Mortgage dollar rolls are recorded as separate purchases and sales in the
Fund. The Fund may also invest in TBA Transactions. A TBA Transaction is a
method of trading mortgage-backed securities. TBA Transactions generally are
conducted in accordance with widely-accepted guidelines which establish commonly
observed terms and conditions for execution, settlement and delivery. In a TBA
Transaction, the buyer and the seller agree on general trade parameters such as
agency, settlement date, par amount and price.
J. AFFILIATED TRANSACTIONS
The Fund invests in securities of affiliated funds. Dividend income and realized
gains and losses, and change in appreciation (depreciation) from affiliated
funds are presented on the Statement of Operations. The Fund's investment
performance and risks are directly related to the investment performance and
risks of the affiliated funds.
Amounts related to these investments at October 31, 2022 and for the fiscal year
then ended are as follows:
CHANGES IN
UNREALIZED REALIZED
SHARES AT VALUE AT APPRECIATION GAIN VALUE AT DIVIDEND
SECURITY NAME 10/31/2022 10/31/2021 PURCHASES SALES (DEPRECIATION) (LOSS) 10/31/2022 INCOME
------------------------------------------------------------------------------------------------------------------------
First Trust Long Duration
Opportunities ETF 24,359 $ 813,538 $ -- $(118,697) $ (146,222) $ (24,888) $ 523,731 $ 10,456
K. DIVIDENDS AND DISTRIBUTION TO SHAREHOLDERS
Dividends from net investment income, if any, are declared and paid monthly by
the Fund, or as the Board of Trustees may determine from time to time.
Distributions of net realized gains earned by the Fund, if any, are distributed
at least annually. The Fund may also designate a portion of the amount paid to
redeeming shareholders as a distribution for tax purposes.
Distributions in cash may be reinvested automatically in additional whole shares
only if the broker through whom the shares were purchased makes such option
available. Such shares will generally be reinvested by the broker based upon the
market price of those shares and investors may be subject to customary brokerage
commissions charged by the broker.
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FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
OCTOBER 31, 2022
Distributions from net investment income and realized capital gains are
determined in accordance with federal income tax regulations, which may differ
from U.S. GAAP. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These permanent differences are primarily due to the varying
treatment of income and gain/loss on portfolio securities held by the Fund and
have no impact on net assets or NAV per share. Temporary differences, which
arise from recognizing certain items of income, expense and gain/loss in
different periods for financial statement and tax purposes, will reverse at some
time in the future.
The tax character of distributions paid during the fiscal years ended October
31, 2022 and 2021 was as follows:
Distributions paid from: 2022 2021
Ordinary income................................. $ 77,623,014 $ 48,718,452
Capital gains................................... 30,590,238 --
Return of capital............................... -- 90,717,550
As of October 31, 2022, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income................... $ (8,428,878)
Accumulated capital and other gain (loss)....... --
Net unrealized appreciation (depreciation)...... (440,777,800)
L. INCOME TAXES
The Fund intends to continue to qualify as a regulated investment company by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no
provision has been made for federal and state income taxes. However, due to the
timing and amount of distributions, the Fund may be subject to an excise tax of
4% of the amount by which approximately 98% of the Fund's taxable income exceeds
the distributions from such taxable income for the calendar year.
The Fund is subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. The taxable years ended 2019,
2020, 2021, and 2022 remain open to federal and state audit. As of October 31,
2022, management has evaluated the application of these standards to the Fund
and has determined that no provision for income tax is required in the Fund's
financial statements for uncertain tax positions.
The Fund intends to utilize provisions of the federal income tax laws, which
allow it to carry a realized capital loss forward indefinitely following the
year of the loss and offset such loss against any future realized capital gains.
The Fund is subject to certain limitations under U.S. tax rules on the use of
capital loss carryforwards and net unrealized built-in losses. These limitations
apply when there has been a 50% change in ownership. At October 31, 2022, the
Fund had no non-expiring capital loss carryforwards available for federal income
tax purposes.
During the taxable year ended October 31, 2022, the Fund utilized non-expiring
capital loss carryforwards in the amount of $72,543,076.
Certain losses realized during the current fiscal year may be deferred and
treated as occurring on the first day of the following fiscal year for federal
income tax purposes. For the fiscal year ended October 31, 2022, the Fund had no
net late year ordinary or capital losses.
In order to present paid-in capital and accumulated distributable earnings
(loss) (which consists of accumulated net investment income (loss), accumulated
net realized gain (loss) on investments and net unrealized appreciation
(depreciation) on investments) on the Statement of Assets and Liabilities that
more closely represent their tax character, certain adjustments have been made
to paid-in capital, accumulated net investment income (loss) and accumulated net
realized gain (loss) on investments. These adjustments are primarily due to the
difference between book and tax treatments of income and gains on various
investment securities held by the Fund. The results of operations and net assets
were not affected by these adjustments. For the fiscal year ended October 31,
2022, the adjustments for the Fund were as follows:
Accumulated
Accumulated Net Realized
Net Investment Gain (Loss)
Income (Loss) on Investments Paid-in Capital
-------------- -------------- ---------------
$ (24,570,905) $ 24,570,905 $ --
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FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
OCTOBER 31, 2022
As of October 31, 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)
-------------- -------------- --------------- ---------------
$5,303,383,969 $ 9,552,526 $ (450,330,326) $ (440,777,800)
M. EXPENSES
Expenses, other than the investment advisory fee and other excluded expenses,
are paid by the Advisor (see Note 3).
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Fund, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the selection and ongoing monitoring of the securities
in the Fund's portfolio, managing the Fund's business affairs and providing
certain administrative services necessary for the management of the Fund.
Pursuant to the Investment Management Agreement between the Trust and the
Advisor, First Trust manages the investment of the Fund's assets and is
responsible for the Fund's expenses, including the cost of transfer agency,
custody, fund administration, legal, audit and other services, but excluding fee
payments under the Investment Management Agreement, interest, taxes, pro rata
share of fees and expenses attributable to investments in other investment
companies ("acquired fund fees and expenses"), brokerage commissions and other
expenses connected with the execution of portfolio transactions, distribution
and service fees payable pursuant to a Rule 12b-1 plan, if any, and
extraordinary expenses. The Fund has agreed to pay First Trust an annual unitary
management fee equal to 0.65% of its average daily net assets. In addition, the
Fund incurs acquired fund fees and expenses. The total of the unitary management
fee and acquired fund fees and expenses represents the Fund's total annual
operating expenses.
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
the Fund. As custodian, BNYM is responsible for custody of the Fund's assets. As
fund accountant and administrator, BNYM is responsible for maintaining the books
and records of the Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for the Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
a target outcome fund or an index fund.
Additionally, the Lead Independent Trustee and the Chairs of the Audit
Committee, Nominating and Governance Committee and Valuation Committee are paid
annual fees to serve in such capacities, with such compensation allocated pro
rata among each fund in the First Trust Fund Complex based on net assets.
Independent Trustees are reimbursed for travel and out-of-pocket expenses in
connection with all meetings. The Lead Independent Trustee and Committee Chairs
will rotate every three years. The officers and "Interested" Trustee receive no
compensation from the Trust for acting in such capacities.
4. PURCHASES AND SALES OF SECURITIES
The cost of purchases of U.S. Government securities and non-U.S. Government
securities, excluding investments sold short and short-term investments, for the
fiscal year ended October 31, 2022, were $27,411,047,126 and $798,058,564,
respectively. The proceeds from sales and paydowns of U.S. Government securities
and non-U.S. Government securities, excluding investments sold short and
short-term investments, for the fiscal year ended October 31, 2022, were
$28,130,144,567 and $635,949,323, respectively. The cost of purchases to cover
investments sold short and the proceeds of investments sold short were
$24,060,595,419 and $24,205,458,266, respectively.
For the fiscal year ended October 31, 2022, the Fund had no in-kind
transactions.
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FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
OCTOBER 31, 2022
5. DERIVATIVE TRANSACTIONS
The following table presents the types of derivatives held by the Fund at
October 31, 2022, the primary underlying risk exposure and the location of these
instruments as presented on the Statement of Assets and Liabilities.
ASSET DERIVATIVES LIABILITY DERIVATIVES
----------------------------------------- -----------------------------------------
DERIVATIVE RISK STATEMENT OF ASSETS AND STATEMENT OF ASSETS AND
INSTRUMENTS EXPOSURE LIABILITIES LOCATION VALUE LIABILITIES LOCATION VALUE
----------- --------- ---------------------------- ----------- ---------------------------- -----------
Futures Interest Unrealized appreciation on Unrealized depreciation on
rate risk futures contracts* $89,539,723 futures contracts* $ 170,928
Options Interest Options contracts purchased, Options contracts written,
rate risk at value 471,094 at value 3,545,688
* Includes cumulative appreciation/depreciation on futures contracts as reported
in the Portfolio of Investments. Only the current day's variation margin is
presented on the Statement of Assets and Liabilities.
The following table presents the amount of net realized gain (loss) and change
in net unrealized appreciation (depreciation) recognized for the fiscal year
ended October 31, 2022, on derivative instruments, as well as the primary
underlying risk exposure associated with the instruments.
STATEMENT OF OPERATIONS LOCATION INTEREST RATE RISK
----------------------------------------------------------------------------------
Net realized gain (loss) on:
Futures contracts $ 178,120,025
Purchased options contracts (2,170,216)
Written options contracts 18,015,565
Net change in unrealized appreciation (depreciation) on:
Futures contracts 74,921,071
Purchased options contracts 38,091
Written options contracts 7,006
For the fiscal year ended October 31, 2022, the notional value of futures
contracts opened and closed were $20,782,845,989 and $23,711,657,265,
respectively.
During the fiscal year ended October 31, 2022, the premiums for purchased
options contracts opened were $3,066,965 and the premiums for purchased options
contracts closed, exercised and expired were $2,633,962.
During the fiscal year ended October 31, 2022, the premiums for written options
contracts opened were $27,292,408 and the premiums for written options contracts
closed, exercised and expired were $28,828,222.
The Fund does not have the right to offset financial assets and financial
liabilities related to futures and options contracts on the Statement of Assets
and Liabilities.
6. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
The Fund generally issues and redeems its shares in primary market transactions
through a creation and redemption mechanism and does not sell or redeem
individual shares. Instead, financial entities known as "Authorized
Participants" have contractual arrangements with the Fund or one of the Fund's
service providers to purchase and redeem Fund shares directly with the Fund in
large blocks of shares known as "Creation Units." Prior to the start of trading
on every business day, the Fund publishes through the National Securities
Clearing Corporation ("NSCC") the "basket" of securities, cash or other assets
that it will accept in exchange for a Creation Unit of the Fund's shares. An
Authorized Participant that wishes to effectuate a creation of the Fund's shares
deposits with the Fund the "basket" of securities, cash or other assets
identified by the Fund that day, and then receives the Creation Unit of the
Fund's shares in return for those assets. After purchasing a Creation Unit, the
Authorized Participant may continue to hold the Fund's shares or sell them in
the secondary market. The redemption process is the reverse of the purchase
process: the Authorized Participant redeems a Creation Unit of the Fund's shares
for a basket of securities, cash or other assets. The combination of the
creation and redemption process with secondary market trading in the Fund's
shares and underlying securities provides arbitrage opportunities that are
designed to help keep the market price of the Fund's shares at or close to the
NAV per share of the Fund.
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FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
OCTOBER 31, 2022
The Fund imposes fees in connection with the purchase of Creation Units. These
fees may vary based upon various fact-based circumstances, including, but not
limited to, the composition of the securities included in the Creation Unit or
the countries in which the transactions are settled. The price for each Creation
Unit will equal the daily NAV per share of the Fund times the number of shares
in a Creation Unit, plus the fees described above and, if applicable, any
operational processing and brokerage costs, transfer fees, stamp taxes and part
or all of the spread between the expected bid and offer side of the market
related to the securities comprising the creation basket.
The Fund also imposes fees in connection with the redemption of Creation Units.
These fees may vary based upon various fact-based circumstances, including, but
not limited to, the composition of the securities included in the Creation Unit
or the countries in which the transactions are settled. The price received for
each Creation Unit will equal the daily NAV per share of the Fund times the
number of shares in a Creation Unit, minus the fees described above and, if
applicable, any operational processing and brokerage costs, transfer fees, stamp
taxes and part or all of the spread between the expected bid and offer side of
the market related to the securities comprising the redemption basket. Investors
who use the services of a broker or other such intermediary in addition to an
Authorized Participant to effect a redemption of a Creation Unit may also be
assessed an amount to cover the cost of such services. The redemption fee
charged by the Fund will comply with Rule 22c-2 of the 1940 Act which limits
redemption fees to no more than 2% of the value of the shares redeemed.
7. DISTRIBUTION PLAN
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Fund is
authorized to pay an amount up to 0.25% of its average daily net assets each
year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the
Fund, for amounts expended to finance activities primarily intended to result in
the sale of Creation Units or the provision of investor services. FTP may also
use this amount to compensate securities dealers or other persons that are
Authorized Participants for providing distribution assistance, including
broker-dealer and shareholder support and educational and promotional services.
No 12b-1 fees are currently paid by the Fund, and pursuant to a contractual
arrangement, no 12b-1 fees will be paid any time before March 31, 2024.
8. INDEMNIFICATION
The Trust, on behalf of the Fund, has a variety of indemnification obligations
under contracts with its service providers. The Trust's maximum exposure under
these arrangements is unknown. However, the Trust has not had prior claims or
losses pursuant to these contracts and expects the risk of loss to be remote.
9. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Fund through
the date the financial statements were issued, and has determined that there was
the following subsequent event:
At a meeting on October 24, 2022, the Board of Trustees approved a breakpoint
pricing arrangement for each of the series of the Trust, including the Fund.
Pursuant to this arrangement, which is effective as of November 1, 2022, the
management fee the Fund pays to First Trust, as investment manager, will be
discounted as the Fund's net assets reach certain predefined levels.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED
FUND IV:
OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS
We have audited the accompanying statement of assets and liabilities of First
Trust Low Duration Opportunities ETF (the "Fund"), a series of the First Trust
Exchange-Traded Fund IV, including the portfolio of investments, as of October
31, 2022, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, the financial highlights for each of the five years in the period then
ended, and the related notes. In our opinion, the financial statements and
financial highlights present fairly, in all material respects, the financial
position of the Fund as of October 31, 2022, and the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended in conformity with accounting principles
generally accepted in the United States of America.
BASIS FOR OPINION
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on the Fund's
financial statements and financial highlights based on our audits. We are a
public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to
the Fund in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement, whether due to error or fraud. The Fund is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. As part of our audits, we are required to
obtain an understanding of internal control over financial reporting but not for
the purpose of expressing an opinion on the effectiveness of the Fund's internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material
misstatement of the financial statements and financial highlights, whether due
to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements and financial highlights. Our audits
also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of October 31, 2022, by correspondence with
the custodian and brokers; when replies were not received from brokers, we
performed other auditing procedures. We believe that our audits provide a
reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Chicago, Illinois
December 22, 2022
We have served as the auditor of one or more First Trust investment companies
since 2001.
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FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
OCTOBER 31, 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 the Fund voted proxies relating to
its portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Fund's website at www.ftportfolios.com; and (3) on the Securities and
Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
The Fund files portfolio holdings information for each month in a fiscal quarter
within 60 days after the end of the relevant fiscal quarter on Form N-PORT.
Portfolio holdings information for the third month of each fiscal quarter will
be publicly available on the SEC's website at www.sec.gov. The Fund's complete
schedule of portfolio holdings for the second and fourth quarters of each fiscal
year is included in the semi-annual and annual reports to shareholders,
respectively, and is filed with the SEC on Form N-CSR. The semi-annual and
annual report for the Fund is available to investors within 60 days after the
period to which it relates. The Fund's Forms N-PORT and Forms N-CSR are
available on the SEC's website listed above.
FEDERAL TAX INFORMATION
Distributions paid to foreign shareholders during the Fund's fiscal year ended
October 31, 2022 that were properly designated by the Fund as "interest-related
dividends" or "short-term capital gain dividends," may not be subject to federal
income tax provided that the income was earned directly by such foreign
shareholders.
For the year ended October 31, 2022, the amount of long-term capital gain
distributions designated by the Fund was $30,590,238 which is taxable at the
applicable capital gains tax rates for federal income tax purposes.
Of the ordinary income (including short-term capital gain) distributions made by
the Fund during the fiscal year ended October 31, 2022, none qualify for the
corporate dividends received deduction available to corporate shareholders or as
qualified dividend income.
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE
APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS
RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW
APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT
IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY
FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE,
RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT
WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO
REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
CONCENTRATION RISK. To the extent that a fund is able to invest a 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
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FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
OCTOBER 31, 2022 (UNAUDITED)
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.
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
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FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
OCTOBER 31, 2022 (UNAUDITED)
provide any representation or warranty in relation to the quality, accuracy or
completeness of data in the Index, and it does not guarantee that the Index will
be calculated in accordance with its stated methodology. Losses or costs
associated with any Index Provider errors generally will be borne by the fund
and its shareholders.
INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of
other investment vehicles, the fund will incur additional fees and expenses that
would not be present in a direct investment in those investment vehicles.
Furthermore, the fund's investment performance and risks are directly related to
the investment performance and risks of the investment vehicles in which the
fund invests.
LIBOR RISK. To the extent a fund invests in floating or variable rate
obligations that use the London Interbank Offered Rate ("LIBOR") as a reference
interest rate, it is subject to LIBOR Risk. The United Kingdom's Financial
Conduct Authority, which regulates LIBOR has ceased making LIBOR available as a
reference rate over a phase-out period that began December 31, 2021. There is no
assurance that any alternative reference rate, including the Secured Overnight
Financing Rate ("SOFR") will be similar to or produce the same value or economic
equivalence as LIBOR or that instruments using an alternative rate will have the
same volume or liquidity. The unavailability or replacement of LIBOR may affect
the value, liquidity or return on certain fund investments and may result in
costs incurred in connection with closing out positions and entering into new
trades. Any potential effects of the transition away from LIBOR on the fund or
on certain instruments in which the fund invests can be difficult to ascertain,
and they may vary depending on a variety of factors, and they could result in
losses to the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. Market risk is the risk that a particular security, or shares of a
fund in general, may fall in value. Securities held by a fund, as well as shares
of a fund itself, are subject to market fluctuations caused by factors such as
general economic conditions, political events, regulatory or market
developments, changes in interest rates and perceived trends in securities
prices. Shares of a fund could decline in value or underperform other
investments as a result of the risk of loss associated with these market
fluctuations. In addition, local, regional or global events such as war, acts of
terrorism, spread of infectious diseases or other public health issues,
recessions, or other events could have a significant negative impact on a fund
and its investments. Such events may affect certain geographic regions,
countries, sectors and industries more significantly than others. In February
2022, Russia invaded Ukraine which has caused and could continue to cause
significant market disruptions and volatility within the markets in Russia,
Europe, and the United States. The hostilities and sanctions resulting from
those hostilities could have a significant impact on certain fund investments as
well as fund performance. The COVID-19 global pandemic and the ensuing policies
enacted by governments and central banks have caused and may continue to cause
significant volatility and uncertainty in global financial markets. While the
U.S. has resumed "reasonably" normal business activity, many countries continue
to impose lockdown measures. Additionally, there is no guarantee that vaccines
will be effective against emerging variants of the disease. These events also
adversely affect the prices and liquidity of a fund's portfolio securities or
other instruments and could result in disruptions in the trading markets. Any of
such circumstances could have a materially negative impact on the value of a
fund's shares and result in increased market volatility. During any such events,
a fund's shares may trade at increased premiums or discounts to their net asset
value and the bid/ask spread on a fund's shares may widen.
NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities,
it is subject to additional risks not associated with securities of domestic
issuers. Non-U.S. securities are subject to higher volatility than securities of
domestic issuers due to: possible adverse political, social or economic
developments; restrictions on foreign investment or exchange of securities;
capital controls; lack of liquidity; currency exchange rates; excessive
taxation; government seizure of assets; the imposition of sanctions by foreign
governments; different legal or accounting standards; and less government
supervision and regulation of exchanges in foreign countries. Investments in
non-U.S. securities may involve higher costs than investments in U.S.
securities, including higher transaction and custody costs, as well as
additional taxes imposed by non-U.S. governments. These risks may be heightened
for securities of companies located, or with significant operations, in emerging
market countries.
OPERATIONAL RISK. Each fund is subject to risks arising from various operational
factors, including, but not limited to, human error, processing and
communication errors, errors of a fund's service providers, counterparties or
other third-parties, failed or inadequate processes and technology or systems
failures. Each fund relies on third-parties for a range of services, including
custody. Any delay or failure relating to engaging or maintaining such service
providers may affect a fund's ability to meet its investment objective. Although
the funds and the funds' investment advisor seek to reduce these operational
risks through controls and procedures, there is no way to completely protect
against such risks.
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FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
OCTOBER 31, 2022 (UNAUDITED)
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
PREFERRED SECURITIES RISK. Preferred securities combine some of the
characteristics of both common stocks and bonds. Preferred securities are
typically subordinated to bonds and other debt securities in a company's capital
structure in terms of priority to corporate income, subjecting them to greater
credit risk than those debt securities. Generally, holders of preferred
securities have no voting rights with respect to the issuing company unless
preferred dividends have been in arrears for a specified number of periods, at
which time the preferred security holders may obtain limited rights. In certain
circumstances, an issuer of preferred securities may defer payment on the
securities and, in some cases, redeem the securities prior to a specified date.
Preferred securities may also be substantially less liquid than other
securities, including common stock.
VALUATION RISK. The valuation of certain securities may carry more risk than
that of common stock. Uncertainties in the conditions of the financial markets,
unreliable reference data, lack of transparency and inconsistency of valuation
models and processes may lead to inaccurate asset pricing. A fund may hold
investments in sizes smaller than institutionally sized round lot positions
(sometimes referred to as odd lots). However, third-party pricing services
generally provide evaluations on the basis of institutionally-sized round lots.
If a fund sells certain of its investments in an odd lot transaction, the sale
price may be less than the value at which such securities have been held by the
fund. Odd lots often trade at lower prices than institutional round lots. There
is no assurance that the fund will be able to sell a portfolio security at the
price established by the pricing service, which could result in a loss to the
fund.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
ADVISORY AGREEMENT
BOARD CONSIDERATIONS REGARDING APPROVAL OF CONTINUATION OF INVESTMENT MANAGEMENT
AGREEMENT
The Board of Trustees of First Trust Exchange-Traded Fund IV (the "Trust"),
including the Independent Trustees, unanimously approved the continuation of the
Investment Management Agreement (the "Agreement") with First Trust Advisors L.P.
(the "Advisor") on behalf of the First Trust Low Duration Opportunities ETF (the
"Fund"). The Board approved the continuation of the Agreement for a one-year
period ending June 30, 2023 at a meeting held on June 12-13, 2022. The Board
determined that the continuation of the Agreement is in the best interests of
the Fund in light of the nature, extent and quality of the services provided and
such other matters as the Board considered to be relevant in the exercise of its
business judgment.
To reach this determination, the Board considered its duties under the
Investment Company Act of 1940, as amended (the "1940 Act"), as well as under
the general principles of state law, in reviewing and approving advisory
contracts; the requirements of the 1940 Act in such matters; the fiduciary duty
of investment advisors with respect to advisory agreements and compensation; the
standards used by courts in determining whether investment company boards have
fulfilled their duties; and the factors to be considered by the Board in voting
on such agreements. At meetings held on April 18, 2022 and June 12-13, 2022, the
Board, including the Independent Trustees, reviewed materials provided by the
Advisor responding to requests for information from counsel to the Independent
Trustees, submitted on behalf of the Independent Trustees, that, among other
things, outlined: the services provided by the Advisor to the Fund (including
the relevant personnel responsible for these services and their experience); the
unitary fee rate payable by the Fund as compared to fees charged to a peer group
of funds (the "Expense Group") and a broad peer universe of funds (the "Expense
Universe"), each assembled by Broadridge Financial Solutions, Inc.
("Broadridge"), an independent source, and as compared to fees charged to other
clients of the Advisor, including other exchange-traded funds ("ETFs") managed
by the Advisor; the expense ratio of the Fund as compared to expense ratios of
the funds in the Fund's Expense Group and Expense Universe; performance
information for the Fund, including comparisons of the Fund's performance to
that of one or more relevant benchmark indexes and to that of a performance
group of funds and a broad performance universe of funds (the "Performance
Universe"), each assembled by Broadridge; the nature of expenses incurred in
providing services to the Fund and the potential for the Advisor to realize
economies of scale, if any; profitability and other financial data for the
Advisor; any indirect benefits to the Advisor and its affiliate, First Trust
Portfolios L.P. ("FTP"); and information on the Advisor's compliance program.
The Board reviewed initial materials with the Advisor at the meeting held on
April 18, 2022, prior to which the Independent Trustees and their counsel met
separately to discuss the information provided by the Advisor. Following the
April meeting, counsel to the Independent Trustees, on behalf of the Independent
Trustees, requested certain clarifications and supplements to the materials
provided, and the information provided in response to those requests was
considered at an executive session of the Independent Trustees and their counsel
held prior to the June 12-13, 2022 meeting, as well as at the June meeting. The
Board applied its business judgment to determine whether the arrangement between
the Trust and the Advisor continues to be a reasonable business arrangement from
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FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
OCTOBER 31, 2022 (UNAUDITED)
the Fund's perspective. The Board determined that, given the totality of the
information provided with respect to the Agreement, the Board had received
sufficient information to renew the Agreement. The Board considered that
shareholders chose to invest or remain invested in the Fund knowing that the
Advisor manages the Fund and knowing the Fund's unitary fee.
In reviewing the Agreement, the Board considered the nature, extent and quality
of the services provided by the Advisor under the Agreement. The Board
considered that the Advisor is responsible for the overall management and
administration of the Trust and the Fund and reviewed all of the services
provided by the Advisor to the Fund, as well as the background and experience of
the persons responsible for such services. The Board noted that the Fund is an
actively-managed ETF and noted that the Advisor's Securitized Products Group is
responsible for the day-to-day management of the Fund's investments. The Board
considered the background and experience of the members of the Securitized
Products Group and noted the Board's prior meetings with members of the Group.
The Board considered the Advisor's statement that it applies the same oversight
model internally with its Securitized Products Group as it uses for overseeing
external sub-advisors, including portfolio risk monitoring and performance
review. In reviewing the services provided, the Board noted the compliance
program that had been developed by the Advisor and considered that it includes a
robust program for monitoring the Advisor's and the Fund's compliance with the
1940 Act, as well as the Fund's compliance with its investment objectives,
policies and restrictions. The Board also considered a report from the Advisor
with respect to its risk management functions related to the operation of the
Fund. Finally, as part of the Board's consideration of the Advisor's services,
the Advisor, in its written materials and at the April 18, 2022 meeting,
described to the Board the scope of its ongoing investment in additional
personnel and infrastructure to maintain and improve the quality of services
provided to the Fund and the other funds in the First Trust Fund Complex. In
light of the information presented and the considerations made, the Board
concluded that the nature, extent and quality of the services provided to the
Trust and the Fund by the Advisor under the Agreement have been and are expected
to remain satisfactory and that the Advisor has managed the Fund consistent with
its investment objectives, policies and restrictions.
The Board considered the unitary fee rate payable by the Fund under the
Agreement for the services provided. The Board considered that as part of the
unitary fee the Advisor is responsible for the Fund's expenses, including the
cost of transfer agency, custody, fund administration, legal, audit and other
services and license fees, if any, but excluding the fee payment under the
Agreement and interest, taxes, brokerage commissions and other expenses
connected with the execution of portfolio transactions, distribution and service
fees pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses, if any.
The Board received and reviewed information showing the fee rates and expense
ratios of the peer funds in the Expense Group, as well as advisory and unitary
fee rates charged by the Advisor to other fund (including ETFs) and non-fund
clients, as applicable. Because the Fund pays a unitary fee, the Board
determined that expense ratios were the most relevant comparative data point.
Based on the information provided, the Board noted that the unitary fee rate for
the Fund was above the median total (net) expense ratio of the peer funds in the
Expense Group. With respect to the Expense Group, the Board, at the April 18,
2022 meeting, discussed with Broadridge its methodology for assembling peer
groups and discussed with the Advisor limitations in creating peer groups for
actively-managed ETFs, including that the Expense Group contained both
actively-managed ETFs and open-end mutual funds, and different business models
that may affect the pricing of services among ETF sponsors. The Board took these
limitations and differences into account in considering the peer data. With
respect to fees charged to other non-ETF clients, the Board considered
differences between the Fund and other non-ETF clients that limited their
comparability. In considering the unitary fee rate overall, the Board also
considered the Advisor's statement that it seeks to meet investor needs through
innovative and value-added investment solutions and the Advisor's demonstrated
long-term commitment to the Fund and the other funds in the First Trust Fund
Complex.
The Board considered performance information for the Fund. The Board noted the
process it has established for monitoring the Fund's performance and portfolio
risk on an ongoing basis, which includes quarterly performance reporting from
the Advisor for the Fund. The Board determined that this process continues to be
effective for reviewing the Fund's performance. The Board received and reviewed
information comparing the Fund's performance for periods ended December 31, 2021
to the performance of the funds in the Performance Universe and to that of a
benchmark index. Based on the information provided, the Board noted that the
Fund outperformed the Performance Universe median and the benchmark index for
the one-year period ended December 31, 2021 and underperformed the Performance
Universe median and the benchmark index for the three- and five-year periods
ended December 31, 2021.
On the basis of all the information provided on the unitary fee and performance
of the Fund and the ongoing oversight by the Board, the Board concluded that the
unitary fee for the Fund continues to be reasonable and appropriate in light of
the nature, extent and quality of the services provided by the Advisor to the
Fund under the Agreement.
The Board considered information and discussed with the Advisor whether there
were any economies of scale in connection with providing advisory services to
the Fund and noted the Advisor's statement that it believes that its expenses
relating to providing advisory services to the Funds will likely increase during
the next twelve months as the Advisor continues to build infrastructure and add
new staff. The Board noted that any reduction in fixed costs associated with the
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
OCTOBER 31, 2022 (UNAUDITED)
management of the Fund would benefit the Advisor, but that the unitary fee
structure provides a level of certainty in expenses for the Fund. The Board
considered the revenues and allocated costs (including the allocation
methodology) of the Advisor in serving as investment advisor to the Fund for the
twelve months ended December 31, 2021 and the estimated profitability level for
the Fund calculated by the Advisor based on such data, as well as complex-wide
and product-line profitability data, for the same period. The Board noted the
inherent limitations in the profitability analysis and concluded that, based on
the information provided, the Advisor's profitability level for the Fund was not
unreasonable. In addition, the Board considered indirect benefits described by
the Advisor that may be realized from its relationship with the Fund. The Board
considered that the Advisor had identified as an indirect benefit to the Advisor
and FTP their exposure to investors and brokers who, absent their exposure to
the Fund, may have had no dealings with the Advisor or FTP, and noted that the
Advisor does not utilize soft dollars in connection with the Fund. The Board
concluded that the character and amount of potential indirect benefits to the
Advisor were not unreasonable.
Based on all of the information considered and the conclusions reached, the
Board, including the Independent Trustees, unanimously determined that the terms
of the Agreement continue to be fair and reasonable and that the continuation of
the Agreement is in the best interests of the Fund. No single factor was
determinative in the Board's analysis.
BOARD CONSIDERATIONS REGARDING APPROVAL OF AMENDMENT TO THE INVESTMENT
MANAGEMENT AGREEMENT
The Board of Trustees of First Trust Exchange-Traded Fund IV (the "Trust"),
including the Independent Trustees, unanimously approved the amendment (the
"Amendment") of the Investment Management Agreement (the "Agreement") with First
Trust Advisors L.P. (the "Advisor") on behalf of the First Trust Low Duration
Opportunities ETF (the "Fund").
The Board approved the Amendment at a meeting held on October 24, 2022. As part
of the review process, the Board reviewed information and had preliminary
discussions with the Advisor regarding the proposed Amendment at meetings held
on April 18, 2022, June 12-13, 2022 and September 18-19, 2022. Following those
preliminary discussions, the Board requested and received information from the
Advisor regarding the proposed Amendment, and that information was considered at
an executive session of the Independent Trustees and their counsel held prior to
the October 24, 2022 meeting, as well as at the October meeting.
In reviewing the Amendment, the Board considered that the purpose of the
Amendment is to modify the unitary fee rate for the Fund under the Agreement by
introducing a breakpoint schedule pursuant to which the unitary fee rate paid by
the Fund to the Advisor will be reduced as assets of the Fund meet certain
thresholds. The Board noted the Advisor's representations that the quality and
quantity of the services provided to the Fund by the Advisor under the Agreement
will not be reduced or modified as a result of the Amendment, and that the
obligations of the Advisor under the Agreement will remain the same in all
respects.
The Board noted that it, including the Independent Trustees, last approved the
continuation of the Agreement for a one-year period ending June 30, 2023 at a
meeting held on June 12-13, 2022. The Board noted that in connection with such
approval it had determined, based upon the information provided, that the terms
of the Agreement were fair and reasonable and that the continuation of the
Agreement was in the best interests of the Fund in light of the nature, extent
and quality of the services provided and such other matters as the Board
considered to be relevant in the exercise of its business judgment.
Based on all of the information considered, the Board, including the Independent
Trustees, unanimously determined that the terms of the Amendment are fair and
reasonable and that the Amendment is in the best interests of the Fund.
REMUNERATION
First Trust Advisors L.P. ("First Trust") is authorised and regulated by the
U.S. Securities and Exchange Commission and is entitled to market shares of
certain funds it manages, including First Trust Low Duration Opportunities ETF
(the "Fund"), in certain member states in the European Economic Area in
accordance with the cooperation arrangements in Article 42 of the Alternative
Investment Fund Managers Directive (the "Directive"). First Trust is required
under the Directive to make disclosures in respect of remuneration. The
following disclosures are made in line with First Trust's interpretation of
currently available regulatory guidance on remuneration disclosures.
During the year ended December 31, 2021, the amount of remuneration paid (or to
be paid) by First Trust Advisors L.P. in respect of the Fund is $6,866,264. This
figure is comprised of $358,261 paid (or to be paid) in fixed compensation and
$6,508,003 paid (or to be paid) in variable compensation. There were a total of
26 beneficiaries of the remuneration described above. Those amounts include
$1,832,092 paid (or to be paid) to senior management of First Trust Advisors
L.P. and $5,034,172 paid (or to be paid) to other employees whose professional
activities have a material impact on the risk profiles of First Trust Advisors
L.P. or the Fund (collectively, "Code Staff").
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
OCTOBER 31, 2022 (UNAUDITED)
Code Staff included in the aggregated figures disclosed above are rewarded in
line with First Trust's remuneration policy (the "Remuneration Policy") which is
determined and implemented by First Trust's senior management. The Remuneration
Policy reflects First Trust's ethos of good governance and encapsulates the
following principal objectives:
i. to provide a clear link between remuneration and performance of
First Trust and to avoid rewarding for failure;
ii. to promote sound and effective risk management consistent with the
risk profiles of the funds managed by First Trust; and
iii. to remunerate staff in line with the business strategy, objectives,
values and interests of First Trust and the funds managed by First
Trust in a manner that avoids conflicts of interest.
First Trust assesses various risk factors which it is exposed to when
considering and implementing remuneration for Code Staff and considers whether
any potential award to such person(s) would give rise to a conflict of interest.
First Trust does not reward failure, or consider the taking of risk or failure
to take risk in its remuneration of Code Staff.
First Trust assesses performance for the purposes of determining payments in
respect of performance-related remuneration of Code Staff by reference to a
broad range of measures including (i) individual performance (using financial
and non-financial criteria), and (ii) the overall performance of First Trust.
Remuneration is not based upon the performance of the Fund.
The elements of remuneration are balanced between fixed and variable and the
senior management sets fixed salaries at a level sufficient to ensure that
variable remuneration incentivises and rewards strong individual performance but
does not encourage excessive risk taking.
No individual is involved in setting his or her own remuneration.
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BOARD OF TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
OCTOBER 31, 2022 (UNAUDITED)
The following tables identify the Trustees and Officers of the Trust. Unless
otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite
400, Wheaton, IL 60187.
The Trust's statement of additional information includes additional information
about the Trustees and is available, without charge, upon request, by calling
(800) 988-5891.
NUMBER OF OTHER
PORTFOLIOS IN TRUSTEESHIPS OR
TERM OF OFFICE THE FIRST TRUST DIRECTORSHIPS
NAME, AND YEAR FIRST FUND COMPLEX HELD BY TRUSTEE
YEAR OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST
POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
------------------------------------------------------------------------------------------------------------------------------------
Richard E. Erickson, Trustee o Indefinite Term Physician, Edward-Elmhurst Medical 223 None
(1951) Group; Physician and Officer,
o Since Inception Wheaton Orthopedics (1990 to 2021)
Thomas R. Kadlec, Trustee o Indefinite Term Retired; President, ADM Investors 223 Director, National Futures
(1957) Services, Inc. (Futures Commission Association and ADMIS
o Since Inception Merchant) (2010 to July 2022) Singapore Ltd.; Formerly,
Director of ADM Investor
Services, Inc., ADM
Investor Services
International, ADMIS
Hong Kong Ltd., and
Futures Industry
Association
Denise M. Keefe, Trustee o Indefinite Term Executive Vice President, Advocate 223 Director and Board Chair
(1964) Aurora Health and President, Advocate of Advocate Home Health
o Since 2021 Aurora Continuing Health Division Services, Advocate Home
(Integrated Healthcare System) Care Products and
Advocate Hospice;
Director and Board Chair of
Aurora At Home (since
2018); Director of
Advocate Physician
Partners Accountable Care
Organization; Director and
Board Chair of RML Long
Term Acute Care
Hospitals; and Director of
Senior Helpers (since
2021)
Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises 223 Formerly, Director of Trust
(1956) (Financial and Management Consulting) Company of Illinois
o Since Inception
Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (2018 to Present), 223 None
(1954) Managing Director and Chief Operating
o Since Inception Officer (2015 to 2018), Pelita
Harapan Educational Foundation
(Educational Products and Services)
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 223 None
Chairman of the Board Advisors L.P. and First Trust
o Since Inception Portfolios L.P., (1955)
Chairman of the Board of Directors,
BondWave LLC (Software Development
Company) and Stonebridge Advisors LLC
(Investment Advisor)
-----------------------------
(1) Mr. Bowen is deemed an "interested person" of the Trust due to his
position as Chief Executive Officer of First Trust Advisors L.P.,
investment advisor of the Trust.
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BOARD OF TRUSTEES AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
OCTOBER 31, 2022 (UNAUDITED)
POSITION AND TERM OF OFFICE
NAME AND OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS
YEAR OF BIRTH WITH TRUST SERVICE DURING PAST 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS(2)
------------------------------------------------------------------------------------------------------------------------------------
James M. Dykas President and Chief o Indefinite Term Managing Director and Chief Financial Officer, First
(1966) Executive Officer Trust Advisors L.P. and First Trust Portfolios L.P.;
o Since 2016 Chief Financial Officer, BondWave LLC (Software
Development Company) and Stonebridge Advisors
LLC (Investment Advisor)
Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President, First Trust Advisors L.P. and
(1972) Officer and Chief Accounting First Trust Portfolios L.P.
Officer o Since 2016
W. Scott Jardine Secretary and Chief Legal o Indefinite Term General Counsel, First Trust Advisors L.P. and First
(1960) Officer Trust Portfolios L.P.; Secretary and General Counsel,
o Since Inception BondWave LLC; Secretary, Stonebridge Advisors LLC
Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and First
(1970) Trust Portfolios L.P.
o Since Inception
Kristi A. Maher Chief Compliance Officer and o Indefinite Term Deputy General Counsel, First Trust Advisors L.P. and
(1966) Assistant Secretary First Trust Portfolios L.P.
o Since Inception
Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. and
(1966) First Trust Portfolios L.P.
o Since Inception
Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. and
(1970) First Trust Portfolios L.P.
o Since Inception
-----------------------------
(2) The term "officer" means the president, vice president, secretary,
treasurer, controller or any other officer who performs a policy making
function.
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PRIVACY POLICY
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
OCTOBER 31, 2022 (UNAUDITED)
PRIVACY POLICY
First Trust values our relationship with you and considers your privacy an
important priority in maintaining that relationship. We are committed to
protecting the security and confidentiality of your personal information.
SOURCES OF INFORMATION
We collect nonpublic personal information about you from the following sources:
o Information we receive from you and your broker-dealer, investment
professional or financial representative through interviews,
applications, agreements or other forms;
o Information about your transactions with us, our affiliates or
others;
o Information we receive from your inquiries by mail, e-mail or
telephone; and
o Information we collect on our website through the use of "cookies."
For example, we may identify the pages on our website that your
browser requests or visits.
INFORMATION COLLECTED
The type of data we collect may include your name, address, social security
number, age, financial status, assets, income, tax information, retirement and
estate plan information, transaction history, account balance, payment history,
investment objectives, marital status, family relationships and other personal
information.
DISCLOSURE OF INFORMATION
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. In addition to using
this information to verify your identity (as required under law), the permitted
uses may also include the disclosure of such information to unaffiliated
companies for the following reasons:
o In order to provide you with products and services and to effect
transactions that you request or authorize, we may disclose your
personal information as described above to unaffiliated financial
service providers and other companies that perform administrative or
other services on our behalf, such as transfer agents, custodians
and trustees, or that assist us in the distribution of investor
materials such as trustees, banks, financial representatives, proxy
services, solicitors and printers.
o We may release information we have about you if you direct us to do
so, if we are compelled by law to do so, or in other legally limited
circumstances (for example to protect your account from fraud).
In addition, in order to alert you to our other financial products and services,
we may share your personal information within First Trust.
USE OF WEBSITE ANALYTICS
We currently use third party analytics tools, Google Analytics and AddThis, to
gather information for purposes of improving First Trust's website and marketing
our products and services to you. These tools employ cookies, which are small
pieces of text stored in a file by your web browser and sent to websites that
you visit, to collect information, track website usage and viewing trends such
as the number of hits, pages visited, videos and PDFs viewed and the length of
user sessions in order to evaluate website performance and enhance navigation of
the website. We may also collect other anonymous information, which is generally
limited to technical and web navigation information such as the IP address of
your device, internet browser type and operating system for purposes of
analyzing the data to make First Trust's website better and more useful to our
users. The information collected does not include any personal identifiable
information such as your name, address, phone number or email address unless you
provide that information through the website for us to contact you in order to
answer your questions or respond to your requests. To find out how to opt-out of
these services click on: Google Analytics and AddThis.
CONFIDENTIALITY AND SECURITY
With regard to our internal security procedures, First Trust restricts access to
your nonpublic personal information to those First Trust employees who need to
know that information to provide products or services to you. We maintain
physical, electronic and procedural safeguards to protect your nonpublic
personal information.
POLICY UPDATES AND INQUIRIES
As required by federal law, we will notify you of our privacy policy annually.
We reserve the right to modify this policy at any time, however, if we do change
it, we will tell you promptly. For questions about our policy, or for additional
copies of this notice, please go to www.ftportfolios.com, or contact us at
1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust
Advisors).
March 2022
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FIRST TRUST
First Trust Exchange-Traded Fund IV
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
320 South Canal Street
Chicago, IL 60606
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