FIRST TRUST
First Trust Exchange-Traded Fund IV
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FT Cboe Vest S&P 500(R) Dividend Aristocrats Target Income ETF(R) (KNG)
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Annual Report
For the Year Ended
October 31, 2021
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TABLE OF CONTENTS
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FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
ANNUAL REPORT
OCTOBER 31, 2021
Shareholder Letter........................................................... 1
Fund Performance Overview.................................................... 2
Portfolio Commentary......................................................... 5
Understanding Your Fund Expenses............................................. 7
Portfolio of Investments..................................................... 8
Statement of Assets and Liabilities.......................................... 13
Statement of Operations...................................................... 14
Statements of Changes in Net Assets.......................................... 15
Financial Highlights......................................................... 16
Notes to Financial Statements................................................ 17
Report of Independent Registered Public Accounting Firm...................... 24
Additional Information....................................................... 25
Board of Trustees and Officers............................................... 29
Privacy Policy............................................................... 31
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and/or Cboe Vest(SM) Financial LLC ("Cboe Vest" or the
"Sub-Advisor") and their respective representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the series of First Trust Exchange-Traded Fund IV (the "Trust") described in
this report (FT Cboe Vest S&P 500(R) Dividend Aristocrats Target Income ETF(R);
hereinafter referred to as the "Fund") to be materially different from any
future results, performance or achievements expressed or implied by the
forward-looking statements. When evaluating the information included in this
report, you are cautioned not to place undue reliance on these forward-looking
statements, which reflect the judgment of the Advisor and/or Sub-Advisors and
their respective representatives only as of the date hereof. We undertake no
obligation to publicly revise or update these forward-looking statements to
reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that the Fund will achieve its investment objective. The
Fund is subject to market risk, which is the possibility that the market values
of securities owned by the Fund will decline and that the value of the Fund's
shares may therefore be less than what you paid for them. Accordingly, you can
lose money investing in the Fund. See "Risk Considerations" in the Additional
Information section of this report for a discussion of certain other risks of
investing in the Fund.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.ftportfolios.com or speak with your financial advisor. Investment returns,
net asset value and share price will fluctuate and Fund shares, when sold, may
be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on the Fund's webpage at www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment in
the Fund. It includes details about the Fund and presents data and analysis that
provide insight into the Fund's performance and investment approach.
By reading the portfolio commentary from the portfolio management team of the
Fund, you may obtain an understanding of how the market environment affected the
Fund's performance. The statistical information that follows may help you
understand the Fund's performance compared to that of relevant market
benchmarks.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor and/or Sub-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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FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
OCTOBER 31, 2021
Dear Shareholders:
First Trust is pleased to provide you with the annual report for the FT Cboe
Vest S&P 500(R) Dividend Aristocrats Target Income ETF(R) (the "Fund"), which
contains detailed information about the Fund for the twelve months ended October
31, 2021.
Inflation has arrived, and its entrance was grand, to say the least. The
Consumer Price Index came in at 6.2% year-over-year in October 2021, according
to data from the U.S. Bureau of Labor Statistics. The last time it topped the
6.0% mark was in December 1990 (6.1%), over 30 years ago. As is often the case
with major shifts in the economy and markets, there is debate over what is truly
behind them. For many months, as inflation was trending higher, Federal Reserve
(the "Fed") Chairman Jerome Powell held the view that the rising inflationary
pressures largely stemmed from global supply chain bottlenecks induced by the
coronavirus ("COVID-19") pandemic. Perhaps the best example of this is the
unprecedented backlog of container ships that have dropped anchor outside the
California ports of Los Angeles and Long Beach. Together, these ports service
40% of all the container ships bound for the U.S. In normal times, no ships are
anchored waiting to unload their goods. Shortages of trucks and drivers have
also contributed to the slowdown at the ports.
The takeaway is that goods are not being delivered to warehouses and store
shelves in a timely fashion and that is helping to drive prices higher for
consumers. Simply put, inflation is the byproduct of too much money chasing too
few goods. We'll return to this axiom shortly. Chairman Powell originally
believed the bottlenecks would be remedied relatively quickly as the global
economy reopened and people went back to work. That, in turn, would allow
inflationary pressures to dissipate, which has not happened. Around the end of
October, Chairman Powell finally acknowledged that inflation will likely remain
elevated through mid-2022. This realization is what motivated the Fed to
announce that it would begin to taper its monthly bond buying program
(quantitative easing) starting in November 2021. It has been purchasing roughly
$80 billion of Treasuries and $40 billion of mortgage-backed securities in the
open market every month since June 2020. The Fed will shave $15 billion off that
combined total every month until the buying has ceased, which should be around
mid-2022. If all goes to plan, the next stage in the evolution of the Fed's
monetary policy would involve initiating interest rate hikes.
While the supply chain bottlenecks have clearly played a role in the spike in
inflation by limiting the amount of goods available to consume, the biggest
contributing factor is likely the surge in the U.S. money supply, according to
Brian Wesbury, Chief Economist at First Trust. M2 is a measure of the money
supply that includes cash, checking deposits and liquid assets easily
convertible to cash. The M2 measure of money has exploded by 36% since February
2020, well above the 6% pre-COVID-19 annualized norm. The trillions of dollars
of stimulus distributed by the U.S. government to help backstop the economy
during the pandemic has contributed to higher inflation. On Wednesday, November
10, 2021, President Joe Biden admitted that his $1.9 trillion COVID-19 stimulus
package has done just that. Remember, too much money chasing too few goods leads
to inflation. Keep in mind, President Biden has recently successfully navigated
a $1.2 trillion bipartisan infrastructure bill through Congress and has another
roughly $1.75 trillion Build Back Better Act (social spending) piece of
legislation pending. That means there is at least another $1.2 trillion dollars
flowing into the economy over the next few years, and maybe more.
Data from FactSet indicates that the number of S&P 500(R) Index companies
mentioning inflation on their 2021 third quarter earnings call hit a 10-year
high, according to Business Insider. To date, 285 of the 461 companies that have
reported their results have cited concerns over rising inflation. The Materials,
Consumer Staples and Energy sectors had the highest percentage of companies
mentioned on these earnings calls at 90%, 88% and 86%, respectively. Suffice it
to say, investors should add inflation to the list of criteria to assist them in
positioning their portfolios moving forward.
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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FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
The FT Cboe Vest S&P 500(R) Dividend Aristocrats Target Income ETF(R) (the
"Fund") seeks investment results that correspond generally to the price and
yield (before the Fund's fees and expenses) of an equity index called the Cboe
S&P 500(R) Dividend Aristocrats Target Income Index Monthly Series (the
"Index").
The Fund will normally invest at least 80% of its total assets (including
investment borrowings) in the common stocks and call options that comprise the
Index. The Fund, using an indexing investment approach, attempts to replicate,
before fees and expenses, the performance of the Index. The Index is owned,
developed, maintained and calculated by S&P Opco, LLC (the "Index Provider").
The Index is a rules-based buy-write index designed with the primary goal of
generating an annualized level of income from stock dividends and option
premiums that is approximately 3% over the annual dividend yield of the S&P
500(R) Index and a secondary goal of generating capital appreciation based on
the price returns of the equity securities contained in the Index. The Index's
objective to deliver a target level of income could result in the Fund selling
securities to meet the target, which could make the Fund less tax-efficient than
other ETFs. The Index is composed of two parts: (1) an equal-weighted portfolio
of the stocks contained in the S&P 500 Dividend Aristocrats Index (the
"Aristocrat Stocks") that have options that trade on a national securities
exchange and (2) a rolling series of short (written) call options on each of the
Aristocrat Stocks (the "Covered Calls"). The S&P 500 Dividend Aristocrats Index
includes companies in the S&P 500(R) Index that have increased dividend payments
each year for at least 25 consecutive years and have a float adjusted market-cap
of at least $3 billion as of the rebalancing reference date and have an average
daily value traded of at least $5 million.
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PERFORMANCE
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AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year Ended Inception (3/26/18) Inception (3/26/18)
10/31/21 to 10/31/21 to 10/31/21
FUND PERFORMANCE
NAV 34.14% 13.63% 58.43%
Market Price 34.14% 13.64% 58.45%
INDEX PERFORMANCE
Cboe S&P 500(R) Dividend Aristocrats Target Income
Index Monthly Series 35.23% 14.50% 62.82%
S&P 500 Dividend Aristocrats Index 35.98% 15.16% 66.21%
S&P 500(R) Index 42.91% 18.61% 84.86%
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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 periods indicated. "Cumulative Total
Returns" represent the total change in value of an investment over the periods
indicated.
The Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint of the national best bid and offer price ("NBBO") as of
the time that the Fund's NAV is calculated. Under SEC rules, the NBBO consists
of the highest displayed buy and lowest sell prices among the various exchanges
trading the Fund at the time the Fund's NAV is calculated. Prior to January 1,
2019, the price used was the midpoint between the highest bid and the lowest
offer on the stock exchange on which shares of the Fund were listed for trading
as of the time that the Fund's NAV is calculated. Since shares of the Fund did
not trade in the secondary market until after the Fund's inception, for the
period from inception to the first day of secondary market trading in shares of
the Fund, the NAV of the Fund is used as a proxy for the secondary market
trading price to calculate market returns. NAV and market returns assume that
all distributions have been reinvested in the Fund at NAV and Market Price,
respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike the Fund, the indices do not actually hold a portfolio of
securities and therefore do not incur the expenses incurred by the Fund. These
expenses negatively impact the performance of the Fund. Also, market returns do
not include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The total returns presented reflect the reinvestment of dividends on
securities in the indices. The returns presented do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund shares. The investment return and principal value of shares of the
Fund will vary with changes in market conditions. Shares of the Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. The Fund's past performance is no guarantee of future performance.
Page 2
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
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% OF TOTAL
LONG-TERM
SECTOR CLASSIFICATION INVESTMENTS
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Industrials 20.0%
Consumer Staples 19.8
Materials 12.6
Financials 10.7
Health Care 10.7
Consumer Discretionary 9.3
Real Estate 4.6
Utilities 4.6
Energy 3.1
Information Technology 3.1
Communication Services 1.5
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Total 100.0%
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% OF NET
FUND ALLOCATION ASSETS
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Common Stocks 99.9%
Money Market Funds 0.2
Call Options Written (0.2)
Net Other Assets and Liabilities 0.1
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Total 100.0%
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% OF TOTAL
LONG-TERM
TOP TEN HOLDINGS INVESTMENTS
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A.O. Smith Corp. 1.7%
Nucor Corp. 1.7
Albemarle Corp. 1.7
W.W. Grainger, Inc. 1.6
S&P Global, Inc. 1.6
AbbVie, Inc. 1.6
T. Rowe Price Group, Inc. 1.6
Chubb Ltd. 1.6
Coca-Cola (The) Co. 1.6
Sherwin-Williams (The) Co. 1.6
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Total 16.3%
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Page 3
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MARCH 26, 2018 - OCTOBER 31, 2021
FT Cboe Vest S&P 500(R) Cboe S&P 500(R) Dividend
Dividend Aristocrats Target Aristocrats Target Income S&P 500 Dividend S&P 500(R)
Income ETF(R) Index Monthly Series Aristocrats Index Index
3/26/18 $10,000 $10,000 $10,000 $10,000
4/30/18 9,957 9,962 9,958 9,974
10/31/18 10,285 10,331 10,349 10,313
4/30/19 11,264 11,355 11,449 11,320
10/31/19 11,929 12,076 12,181 11,791
4/30/20 10,550 10,720 10,856 11,418
10/31/20 11,814 12,042 12,225 12,935
4/30/21 15,084 15,444 15,753 16,667
10/31/21 15,843 16,282 16,621 18,486
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 4
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PORTFOLIO COMMENTARY
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FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
ANNUAL REPORT
OCTOBER 31, 2021 (UNAUDITED)
ADVISOR
First Trust Advisors L.P. ("First Trust" or the "Advisor") is the investment
advisor to the FT Cboe Vest S&P 500(R) Dividend Aristocrats Target Income ETF(R)
("KNG" or the "Fund"). First Trust is responsible for the ongoing monitoring of
the Fund's investment portfolio, managing the Fund's business affairs and
providing certain administrative services necessary for the management of the
Fund.
SUB-ADVISOR
Cboe Vest(SM) Financial LLC ("Cboe Vest" or the "Sub-Advisor") serves as the
investment sub-advisor to the Fund. In this capacity, Cboe Vest is responsible
for the selection and ongoing monitoring of the securities in the Fund's
investment portfolio. Cboe Vest, with principal offices at 1765 Greensboro
Station Pl., 9th Floor, McLean, Virginia 22102, was founded in 2012. Cboe Vest
had approximately $4.5 billion under management or committed to management as of
October 31, 2021.
PORTFOLIO MANAGEMENT TEAM
KARAN SOOD, MANAGING DIRECTOR OF CBOE VEST
HOWARD RUBIN, MANAGING DIRECTOR OF CBOE VEST
COMMENTARY
DISCUSSION OF FUND PERFORMANCE
This discussion is for the Fund for the 12-month period ended October 31, 2021
(the "current fiscal period"). The Fund seeks to track the Cboe S&P 500(R)
Dividend Aristocrats Target Income Index Monthly Series (the "SPATI Index" or
the "Benchmark").
MARKET RECAP
The strong global equity market rally that began in late-March of 2020 continued
into the current fiscal period. U.S. equities, as measured by the S&P 500(R)
Index, returned 42.91%. The period was marked by extreme variations in returns
across the eleven primary sectors within the S&P 500(R) Index. The top three
performing sectors were Energy, Financials, and Information Technology which
returned 111.1%, 72.0%, and 46.9%, respectively. The bottom three sectors were
Utilities, Consumer Staples, and Health Care. These bottom performing sectors
returned 10.7%, 19.0%, and 33.8%, respectively.
PERFORMANCE ANALYSIS
During the current fiscal period, the Fund generally held approximately equal
weights in 65 stocks, as well as written call options on almost all of these
stocks. The premiums received from the written call options, plus the dividends
received from the equities, sum to approximately 3.0% in excess of the dividend
yield of the S&P 500(R) Index annually.
For the current fiscal period, the Fund's net asset value ("NAV") performance
was 34.14%, while the performance of the SPATI Index was 35.23%. The
underperformance of 1.09% can be explained by the following factors:
1. Fees and Expenses: Fees and expenses reduced the Fund's performance
by approximately 1.01%.
2. Execution Costs: Commissions, plus slippage due to trading
securities at prices other than mid-market, reduced the Fund's
performance by approximately 0.06%.
3. Fund versus Index Holdings: While the Fund attempts to hold
securities in the same proportion (i.e., weighting) as the Index, at
times the Fund weights may deviate from the Index weights. The
options positions may be "optimized" such that the Fund's option
weights are set to account for any liquidity concerns. That is,
options that trade with wider bid-ask spreads may be excluded from
the Fund holdings to minimize execution costs. For the current
fiscal period we estimate that the difference in weights between the
Fund and the Index had a net -0.02% impact to the Fund's
performance.
Using market prices for the Fund, the Fund's performance for the current fiscal
period was 34.14%.
IMPACT OF FUND HOLDINGS ON PERFORMANCE
The top five performing holdings in the Fund for the current fiscal period were
Albemarle Corp., Nucor Corp., Exxon Mobil Corp., Federal Realty Investment
Trust, and T. Rowe Price Group, Inc., with returns of 171.2%, 138.7%, 111.9%,
82.1%, and 77.9%, respectively.
The bottom five performing holdings in the Fund for the current fiscal period
were The Clorox Co, Hormel Foods Corp., McCormick & Co., Inc., Brown-Forman
Corp., and Colgate-Palmolive Co., with returns of -19.0%, -11.2%, -9.7%, -1.7%,
and -1.2%, respectively.
Page 5
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PORTFOLIO COMMENTARY (CONTINUED)
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FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
ANNUAL REPORT
OCTOBER 31, 2021 (UNAUDITED)
IMPACT OF SECTOR WEIGHTINGS ON PERFORMANCE
For the current fiscal period, the Fund had sector weightings that were in line
with the Benchmark, as the Fund seeks to track the SPATI Index. However, the
Fund's sector weightings were substantially different than the sector weightings
of the S&P 500(R) Index. Relative to the S&P 500(R) Index, the Fund was
significantly overweight the Consumer Staples, Industrials, and Materials
sectors, and was significantly underweight the Information Technology,
Communication Services, and Consumer Discretionary sectors. The net effect of
the Fund's sector weightings relative to those of the S&P 500(R) Index's sector
weightings negatively impacted the Fund's performance relative to that of the
S&P 500(R) Index.
Strong performances from the Fund's holdings within the Materials sector,
coupled with the Fund's relative overweight in this sector, contributed to
relative overperformance for the Fund, versus the S&P 500(R) Index.
Strong performances in the Information Technology and Communication Services
sectors, coupled with the Fund's relative underweights in these sectors,
contributed to relative underperformance for the Fund, versus the S&P 500(R)
Index.
MARKET AND FUND OUTLOOK
The broad U.S. equity market faces a number of challenges going forward.
Important factors that, in our view, will impact performance include how quickly
the U.S. and the world can overcome the coronavirus ("COVID-19") pandemic and
its impacts on the global economy. Supply chain bottlenecks and increasing
levels of inflation need to be monitored carefully. On the other hand, corporate
earnings have been handily outpacing most forecasts and, we believe, this
tailwind should help equity prices going into the next year.
The Fund generally holds equal weights in stocks within the S&P 500(R) Index
that have increased their dividends for at least 25 consecutive years. These
stocks are considered, in our view, to have management teams that are extremely
prudent and keenly focused on long-term performance, in our opinion. We believe
that the Fund is properly positioned to achieve its investment objective.
Page 6
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
UNDERSTANDING YOUR FUND EXPENSES
OCTOBER 31, 2021 (UNAUDITED)
As a shareholder of FT Cboe Vest S&P 500(R) Dividend Aristocrats Target Income
ETF(R) (the "Fund"), you incur two types of costs: (1) transaction costs; and
(2) ongoing costs, including management fees, distribution and/or service
(12b-1) fees, if any, and other Fund expenses. This Example is intended to help
you understand your ongoing costs of investing in the Fund and to compare these
costs with the ongoing costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended October 31, 2021.
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.
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ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
MAY 1, 2021 OCTOBER 31, 2021 PERIOD PERIOD (a)
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FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
Actual $1,000.00 $1,050.30 0.75% $3.88
Hypothetical (5% return before expenses) $1,000.00 $1,021.42 0.75% $3.82
(a) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (May 1, 2021
through October 31, 2021), multiplied by 184/365 (to reflect the six-month
period).
Page 7
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 2021
SHARES DESCRIPTION VALUE
---------------- -------------------------------------------------------------------------------------------- ----------------
COMMON STOCKS -- 99.9%
AEROSPACE & DEFENSE -- 1.5%
21,465 General Dynamics Corp. (a).................................................................. $ 4,352,029
----------------
AIR FREIGHT & LOGISTICS -- 1.5%
36,555 Expeditors International of Washington, Inc. (a)............................................ 4,505,769
----------------
BANKS -- 1.4%
240,245 People's United Financial, Inc. (a)......................................................... 4,117,799
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BEVERAGES -- 4.6%
64,720 Brown-Forman Corp., Class B (a)............................................................. 4,393,841
82,597 Coca-Cola (The) Co. (a)..................................................................... 4,655,993
28,114 PepsiCo, Inc. (a)........................................................................... 4,543,222
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13,593,056
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BIOTECHNOLOGY -- 1.6%
41,208 AbbVie, Inc. (a)............................................................................ 4,725,321
----------------
BUILDING PRODUCTS -- 1.7%
67,367 A.O. Smith Corp. (a)........................................................................ 4,922,507
----------------
CAPITAL MARKETS -- 4.8%
146,352 Franklin Resources, Inc. (a)................................................................ 4,608,625
9,983 S&P Global, Inc. (a)........................................................................ 4,733,539
21,749 T. Rowe Price Group, Inc. (a)............................................................... 4,716,923
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14,059,087
----------------
CHEMICALS -- 9.4%
15,443 Air Products and Chemicals, Inc. (a)........................................................ 4,629,966
19,426 Albemarle Corp. (a)......................................................................... 4,865,630
20,309 Ecolab, Inc. (a)............................................................................ 4,513,066
14,316 Linde PLC (a)............................................................................... 4,569,667
27,810 PPG Industries, Inc. (a).................................................................... 4,465,452
14,668 Sherwin-Williams (The) Co. (a).............................................................. 4,644,035
----------------
27,687,816
----------------
COMMERCIAL SERVICES & SUPPLIES -- 1.6%
10,537 Cintas Corp. (a)............................................................................ 4,563,575
----------------
CONTAINERS & PACKAGING -- 1.5%
369,851 Amcor PLC (a)............................................................................... 4,464,102
----------------
DISTRIBUTORS -- 1.5%
33,807 Genuine Parts Co. (a)....................................................................... 4,432,436
----------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.5%
176,437 AT&T, Inc. (a).............................................................................. 4,456,799
----------------
ELECTRIC UTILITIES -- 1.5%
53,274 NextEra Energy, Inc. (a).................................................................... 4,545,870
----------------
ELECTRICAL EQUIPMENT -- 1.5%
46,538 Emerson Electric Co. (a).................................................................... 4,514,651
----------------
EQUITY REAL ESTATE INVESTMENT TRUSTS -- 4.6%
13,411 Essex Property Trust, Inc. (a).............................................................. 4,558,801
37,258 Federal Realty Investment Trust (a)......................................................... 4,484,000
62,681 Realty Income Corp. (a)..................................................................... 4,477,304
----------------
13,520,105
----------------
Page 8 See Notes to Financial Statements
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2021
SHARES DESCRIPTION VALUE
---------------- -------------------------------------------------------------------------------------------- ----------------
COMMON STOCKS (CONTINUED)
FOOD & STAPLES RETAILING -- 4.5%
57,161 Sysco Corp. (a)............................................................................. $ 4,395,681
91,783 Walgreens Boots Alliance, Inc. (a).......................................................... 4,315,637
30,318 Walmart, Inc. (a)........................................................................... 4,530,115
----------------
13,241,433
----------------
FOOD PRODUCTS -- 4.5%
67,916 Archer-Daniels-Midland Co. (a).............................................................. 4,362,924
107,055 Hormel Foods Corp. (a)...................................................................... 4,530,568
55,709 McCormick & Co., Inc. (a)................................................................... 4,469,533
----------------
13,363,025
----------------
GAS UTILITIES -- 1.5%
47,824 Atmos Energy Corp. (a)...................................................................... 4,405,547
----------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 6.1%
35,491 Abbott Laboratories (a)..................................................................... 4,574,435
18,201 Becton, Dickinson and Co. (a)............................................................... 4,360,777
36,537 Medtronic PLC (a)........................................................................... 4,379,325
10,678 West Pharmaceutical Services, Inc. (a)...................................................... 4,590,259
----------------
17,904,796
----------------
HEALTH CARE PROVIDERS & SERVICES -- 1.5%
90,728 Cardinal Health, Inc. (a)................................................................... 4,337,706
----------------
HOTELS, RESTAURANTS & LEISURE -- 1.6%
18,862 McDonald's Corp. (a)........................................................................ 4,631,564
----------------
HOUSEHOLD DURABLES -- 1.5%
94,902 Leggett & Platt, Inc. (a)................................................................... 4,446,159
----------------
HOUSEHOLD PRODUCTS -- 6.1%
27,858 Clorox (The) Co. (a)........................................................................ 4,541,133
59,568 Colgate-Palmolive Co. (a)................................................................... 4,538,486
33,805 Kimberly-Clark Corp. (a).................................................................... 4,377,409
31,935 Procter & Gamble (The) Co. (a).............................................................. 4,566,386
----------------
18,023,414
----------------
INDUSTRIAL CONGLOMERATES -- 3.0%
24,875 3M Co. (a).................................................................................. 4,444,665
9,231 Roper Technologies, Inc. (a)................................................................ 4,503,528
----------------
8,948,193
----------------
INSURANCE -- 4.6%
79,544 Aflac, Inc. (a)............................................................................. 4,269,127
23,908 Chubb Ltd. (a).............................................................................. 4,671,145
36,807 Cincinnati Financial Corp. (a).............................................................. 4,469,842
----------------
13,410,114
----------------
IT SERVICES -- 3.1%
20,654 Automatic Data Processing, Inc. (a)......................................................... 4,636,616
35,169 International Business Machines Corp. (a)................................................... 4,399,642
----------------
9,036,258
----------------
MACHINERY -- 7.6%
22,414 Caterpillar, Inc. (a)....................................................................... 4,572,680
26,579 Dover Corp. (a)............................................................................. 4,493,977
20,027 Illinois Tool Works, Inc. (a)............................................................... 4,563,553
See Notes to Financial Statements Page 9
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2021
SHARES DESCRIPTION VALUE
---------------- -------------------------------------------------------------------------------------------- ----------------
COMMON STOCKS (CONTINUED)
MACHINERY (CONTINUED)
59,356 Pentair PLC (a)............................................................................. $ 4,390,563
23,911 Stanley Black & Decker, Inc. (a)............................................................ 4,297,524
----------------
22,318,297
----------------
METALS & MINING -- 1.7%
43,950 Nucor Corp. (a)............................................................................. 4,907,017
----------------
MULTILINE RETAIL -- 1.5%
17,573 Target Corp. (a)............................................................................ 4,562,302
----------------
MULTI-UTILITIES -- 1.5%
59,106 Consolidated Edison, Inc. (a)............................................................... 4,456,592
----------------
OIL, GAS & CONSUMABLE FUELS -- 3.1%
39,870 Chevron Corp................................................................................ 4,564,716
71,251 Exxon Mobil Corp. (a)....................................................................... 4,593,552
----------------
9,158,268
----------------
PHARMACEUTICALS -- 1.5%
27,470 Johnson & Johnson (a)....................................................................... 4,474,314
----------------
SPECIALTY RETAIL -- 1.6%
19,659 Lowe's Cos., Inc. (a)....................................................................... 4,596,667
----------------
TEXTILES, APPAREL & LUXURY GOODS -- 1.6%
63,576 VF Corp. (a)................................................................................ 4,633,419
----------------
TRADING COMPANIES & DISTRIBUTORS -- 1.6%
10,291 W.W. Grainger, Inc. (a)..................................................................... 4,765,865
----------------
TOTAL COMMON STOCKS......................................................................... 294,081,872
(Cost $259,738,130) ----------------
MONEY MARKET FUNDS -- 0.2%
762,197 Dreyfus Government Cash Management Fund, Institutional Shares - 0.03% (b)................... 762,197
(Cost $762,197) ----------------
TOTAL INVESTMENTS -- 100.1%................................................................. 294,844,069
(Cost $260,500,327) (c) ----------------
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
---------------- -------------------------------------------------- ------------ ------------ ------------ ----------------
CALL OPTIONS WRITTEN -- (0.2)%
(15) 3M Co............................................. $ (268,020) $ 180.00 11/22/21 (3,105)
(41) A.O. Smith Corp................................... (299,587) 65.00 11/22/21 (36,080)
(23) Abbott Laboratories............................... (296,447) 115.00 11/22/21 (30,130)
(24) AbbVie, Inc....................................... (275,208) 110.00 11/22/21 (12,960)
(48) Aflac, Inc........................................ (257,616) 55.00 11/22/21 (1,920)
(9) Air Products and Chemicals, Inc................... (269,829) 290.00 11/22/21 (12,375)
(12) Albemarle Corp.................................... (300,564) 230.00 11/22/21 (29,160)
(223) Amcor PLC......................................... (269,161) 12.00 11/22/21 (6,690)
(42) Archer-Daniels-Midland Co......................... (269,808) 65.00 11/22/21 (4,200)
(104) AT&T, Inc......................................... (262,704) 26.00 11/22/21 (1,872)
(29) Atmos Energy Corp................................. (267,148) 95.00 11/22/21 (3,190)
(13) Automatic Data Processing, Inc.................... (291,837) 210.00 11/22/21 (19,890)
(11) Becton, Dickinson and Co.......................... (263,549) 240.00 11/22/21 (7,480)
(39) Brown-Forman Corp................................. (264,771) 70.00 11/22/21 (4,972)
(55) Cardinal Health, Inc.............................. (262,955) 47.50 11/22/21 (11,275)
Page 10 See Notes to Financial Statements
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2021
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
---------------- -------------------------------------------------- ------------ ------------ ------------ ----------------
CALL OPTIONS WRITTEN (CONTINUED)
(13) Caterpillar, Inc.................................. $ (265,213) $ 200.00 11/22/21 $ (9,594)
(15) Chubb Ltd......................................... (293,070) 180.00 11/22/21 (25,350)
(22) Cincinnati Financial Corp......................... (267,168) 120.00 11/22/21 (8,360)
(6) Cintas Corp....................................... (259,860) 410.00 11/22/21 (15,450)
(16) Clorox (The) Co................................... (260,816) 165.00 11/22/21 (6,240)
(49) Coca-Cola (The) Co................................ (276,213) 55.00 11/22/21 (7,791)
(35) Colgate-Palmolive Co.............................. (266,665) 75.00 11/22/21 (7,875)
(36) Consolidated Edison, Inc.......................... (271,440) 75.00 11/22/21 (4,752)
(16) Dover Corp........................................ (270,528) 165.00 11/22/21 (9,440)
(12) Ecolab, Inc....................................... (266,664) 220.00 11/22/21 (6,000)
(28) Emerson Electric Co............................... (271,628) 95.00 11/22/21 (10,248)
(8) Essex Property Trust, Inc......................... (271,944) 330.00 11/22/21 (10,640)
(23) Expeditors International of Washington, Inc....... (283,498) 115.00 11/22/21 (20,240)
(43) Exxon Mobil Corp.................................. (277,221) 62.50 11/22/21 (10,664)
(22) Federal Realty Investment Trust................... (264,770) 125.00 11/22/21 (2,750)
(88) Franklin Resources, Inc........................... (277,112) 30.00 11/22/21 (18,920)
(13) General Dynamics Corp............................. (263,575) 210.00 11/22/21 (1,690)
(21) Genuine Parts Co.................................. (275,331) 130.00 11/22/21 (6,720)
(63) Hormel Foods Corp................................. (266,616) 43.00 11/22/21 (2,520)
(12) Illinois Tool Works, Inc.......................... (273,444) 220.00 11/22/21 (10,332)
(18) International Business Machines Corp.............. (225,180) 145.00 11/22/21 (72)
(17) Johnson & Johnson................................. (276,896) 160.00 11/22/21 (7,650)
(20) Kimberly-Clark Corp............................... (258,980) 135.00 11/22/21 (800)
(58) Leggett & Platt, Inc.............................. (271,730) 45.00 11/22/21 (14,616)
(9) Linde PLC......................................... (287,280) 310.00 11/22/21 (10,890)
(12) Lowe's Cos., Inc.................................. (280,584) 220.00 11/22/21 (19,656)
(34) McCormick & Co., Inc.............................. (272,782) 80.00 11/22/21 (4,930)
(11) McDonald's Corp................................... (270,105) 240.00 11/22/21 (7,590)
(21) Medtronic PLC..................................... (251,706) 130.00 11/22/21 (1,575)
(33) NextEra Energy, Inc............................... (281,589) 82.50 11/22/21 (10,758)
(26) Nucor Corp........................................ (290,290) 100.00 11/22/21 (34,008)
(37) Pentair PLC....................................... (273,689) 70.00 11/22/21 (17,020)
(150) People's United Financial, Inc.................... (257,100) 18.00 11/22/21 (3,000)
(17) PepsiCo, Inc...................................... (274,720) 160.00 11/22/21 (4,760)
(17) PPG Industries, Inc............................... (272,969) 160.00 11/22/21 (5,653)
(19) Procter & Gamble (The) Co......................... (271,681) 145.00 11/22/21 (1,805)
(38) Realty Income Corp................................ (271,434) 70.00 11/22/21 (7,448)
(6) Roper Technologies, Inc........................... (292,722) 470.00 11/22/21 (12,600)
(6) S&P Global, Inc................................... (284,496) 440.00 11/22/21 (22,830)
(9) Sherwin-Williams (The) Co......................... (284,949) 300.00 11/22/21 (16,299)
(15) Stanley Black & Decker, Inc....................... (269,595) 180.00 11/22/21 (6,540)
(32) Sysco Corp........................................ (246,080) 80.00 11/22/21 (2,560)
(13) T. Rowe Price Group, Inc.......................... (281,944) 200.00 11/22/21 (27,300)
(11) Target Corp....................................... (285,582) 250.00 11/22/21 (14,487)
(36) VF Corp........................................... (262,368) 72.50 11/22/21 (7,740)
(6) W.W. Grainger, Inc................................ (277,866) 430.00 11/22/21 (20,760)
(55) Walgreens Boots Alliance, Inc..................... (258,610) 50.00 11/22/21 (990)
(19) Walmart, Inc...................................... (283,898) 140.00 11/22/21 (19,095)
(7) West Pharmaceutical Services, Inc................. (300,916) 400.00 11/22/21 (22,435)
----------------
TOTAL CALL OPTIONS WRITTEN.................................................................. (706,742)
(Premiums received $473,143) (c) ----------------
NET OTHER ASSETS AND LIABILITIES -- 0.1%.................................................... 277,701
----------------
NET ASSETS -- 100.0%........................................................................ $ 294,415,028
================
See Notes to Financial Statements Page 11
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2021
(a) All or a portion of this security is held as collateral for the options
written. At October 31, 2021, the value of these securities amount to
$17,459,721 or 5.9% of net assets.
(b) Rate shown reflects yield as of October 31, 2021.
(c) Aggregate cost for federal income tax purposes is $269,550,343. As of
October 31, 2021, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$31,034,514 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$6,447,530. The net unrealized appreciation was $24,586,984. The amounts
presented are inclusive of derivative contracts.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of October 31,
2021 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
10/31/2021 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
Common Stocks*........................................ $ 294,081,872 $ 294,081,872 $ -- $ --
Money Market Funds.................................... 762,197 762,197 -- --
--------------- --------------- --------------- ---------------
Total Investments..................................... $ 294,844,069 $ 294,844,069 $ -- $ --
=============== =============== =============== ===============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
10/31/2021 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
Call Options Written.................................. $ (706,742) $ (706,742) $ -- $ --
=============== =============== =============== ===============
* See Portfolio of Investments for industry breakout.
Page 12 See Notes to Financial Statements
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2021
ASSETS:
Investments, at value.................................................. $ 294,844,069
Cash segregated as collateral for open options contracts............... 566
Receivables:
Investment securities sold.......................................... 9,375,927
Dividends........................................................... 451,883
--------------
Total Assets..................................................... 304,672,445
--------------
LIABILITIES:
Options contracts written, at value.................................... 706,742
Payables:
Investment securities purchased..................................... 9,374,011
Investment advisory fees............................................ 176,664
--------------
Total Liabilities................................................ 10,257,417
--------------
NET ASSETS............................................................. $ 294,415,028
==============
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $ 268,990,048
Par value.............................................................. 53,750
Accumulated distributable earnings (loss).............................. 25,371,230
--------------
NET ASSETS............................................................. $ 294,415,028
==============
NET ASSET VALUE, per share............................................. $ 54.77
==============
Number of shares outstanding (unlimited number of shares authorized,
par value $0.01 per share).......................................... 5,375,000
==============
Investments, at cost................................................... $ 260,500,327
==============
Premiums received on options contracts written......................... $ 473,143
==============
See Notes to Financial Statements Page 13
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 2021
INVESTMENT INCOME:
Dividends.............................................................. $ 3,804,485
--------------
Total investment income............................................. 3,804,485
--------------
EXPENSES:
Investment advisory fees............................................... 1,191,261
--------------
Total expenses...................................................... 1,191,261
--------------
NET INVESTMENT INCOME (LOSS)........................................... 2,613,224
--------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments......................................................... (2,606,393)
Written options contracts........................................... 1,128,524
--------------
Net realized gain (loss)............................................... (1,477,869)
--------------
Net change in unrealized appreciation (depreciation) on:
Investments......................................................... 31,146,981
Written options contracts........................................... (301,922)
--------------
Net change in unrealized appreciation (depreciation)................... 30,845,059
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ 29,367,190
--------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ 31,980,414
==============
Page 14 See Notes to Financial Statements
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
STATEMENTS OF CHANGES IN NET ASSETS
YEAR YEAR
ENDED ENDED
10/31/2021 10/31/2020
-------------- ---------------
OPERATIONS:
Net investment income (loss)........................................... $ 2,613,224 $ 1,029,038
Net realized gain (loss)............................................... (1,477,869) (648,972)
Net change in unrealized appreciation (depreciation)................... 30,845,059 (419,026)
-------------- ---------------
Net increase (decrease) in net assets resulting from operations........ 31,980,414 (38,960)
-------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations.................................................. (6,058,854) (2,257,817)
-------------- ---------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold.............................................. 201,715,231 30,068,687
Cost of shares redeemed................................................ -- (4,573,665)
Transaction fees (Note 8).............................................. -- 6,236
-------------- ---------------
Net increase (decrease) in net assets resulting from
shareholder transactions............................................ 201,715,231 25,501,258
-------------- ---------------
Total increase (decrease) in net assets................................ 227,636,791 23,204,481
NET ASSETS:
Beginning of period.................................................... 66,778,237 43,573,756
-------------- ---------------
End of period.......................................................... $ 294,415,028 $ 66,778,237
============== ===============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................................ 1,575,000 975,000
Shares sold............................................................ 3,800,000 700,000
Shares redeemed........................................................ -- (100,000)
-------------- ---------------
Shares outstanding, end of period...................................... 5,375,000 1,575,000
============== ===============
See Notes to Financial Statements Page 15
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED OCTOBER 31, PERIOD
------------------------------------------------ ENDED
2021 2020 2019 10/31/2018 (a)
-------------- -------------- -------------- --------------
Net asset value, beginning of period....... $ 42.40 $ 44.69 $ 40.28 $ 40.00
---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............... 0.73 0.81 (b) 0.74 (b) 0.43 (b)
Net realized and unrealized gain (loss).... 13.57 (1.35) (c) 5.52 0.70 (c)
---------- ---------- ---------- ----------
Total from investment operations........... 14.30 (0.54) 6.26 1.13
---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income...................... (0.58) (1.75) (1.57) (0.40)
Net realized gain.......................... (1.35) -- (0.29) (0.46)
---------- ---------- ---------- ----------
Total distributions........................ (1.93) (1.75) (1.86) (0.86)
---------- ---------- ---------- ----------
CAPITAL SHARE TRANSACTIONS:
Transaction fees (Note 8).................. -- 0.00 (b)(d) 0.01 (b) 0.01 (b)
---------- ---------- ---------- ----------
Net asset value, end of period............. $ 54.77 $ 42.40 $ 44.69 $ 40.28
========== ========== ========== ==========
TOTAL RETURN (e)........................... 34.14% (0.93)% 15.98% 2.84%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)....... $ 294,415 $ 66,778 $ 43,574 $ 19,134
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets.................................. 0.75% 0.75% 0.75% 0.75% (f)
Ratio of net investment income (loss) to
average net assets...................... 1.65% 1.89% 1.75% 1.73% (f)
Portfolio turnover rate (g)................ 62% 86% 83% 50%
(a) Inception date is March 26, 2018, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
(b) Based on average shares outstanding.
(c) Realized and unrealized gains (losses) per share are balancing amounts
necessary to reconcile the change in net asset value per share for the
period and may not reconcile with the aggregate gains and losses in the
Statement of Operations due to share transactions for the period.
(d) Amount is less than $0.01.
(e) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year.
(f) Annualized.
(g) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
Page 16 See Notes to Financial Statements
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
OCTOBER 31, 2021
1. ORGANIZATION
First Trust Exchange-Traded Fund IV (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on September 15,
2010, and is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of ten funds that are offering shares. This report
covers the FT Cboe Vest S&P 500(R) Dividend Aristocrats Target Income ETF(R)
(the "Fund"), which trades under the ticker "KNG" on the Cboe BZX Exchange, Inc.
("Cboe BZX"). The Fund represents a separate series of shares of beneficial
interest in the Trust. Unlike conventional mutual funds, the Fund issues and
redeems shares on a continuous basis, at net asset value ("NAV"), only in large
blocks of shares known as "Creation Units."
The Fund's investment objective seeks investment results that correspond
generally to the price and yield (before the Fund's fees and expenses) of an
equity index called the Cboe S&P 500(R) Dividend Aristocrats Target Income Index
Monthly Series (the "Index"). The Fund will normally invest at least 80% of its
total assets (including investment borrowings) in the common stocks and call
options that comprise the Index. The Index's primary goal is to generate an
annualized level of income from stock dividends and option premiums that is
approximately 3% over the annual dividend yield of the S&P 500(R) Index and the
Index's secondary goal is to generate capital appreciation based on the price
returns of the equity securities contained in the Index.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund is considered an investment company and follows accounting and
reporting guidance under Financial Accounting Standards Board Accounting
Standards Codification Topic 946, "Financial Services-Investment Companies." The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of the financial statements. The preparation of
the financial statements in accordance with accounting principles generally
accepted in the United States of America ("U.S. GAAP") requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
The Fund's NAV is determined daily as of the close of regular trading on the New
York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the
NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV
is determined as of that time. The Fund's NAV is calculated by dividing the
value of all assets of the Fund (including accrued interest and dividends), less
all liabilities (including accrued expenses and dividends declared but unpaid),
by the total number of shares outstanding.
The Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are primarily obtained from
third-party pricing services. Fair value prices represent any prices not
considered market value prices and are either obtained from a third-party
pricing service or are determined by the Pricing Committee of the Fund's
investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor")
in accordance with valuation procedures adopted by the Trust's Board of
Trustees, and in accordance with provisions of the 1940 Act. Investments valued
by the Advisor's Pricing Committee, if any, are footnoted as such in the
footnotes to the Portfolio of Investments. The Fund's investments are valued as
follows:
Common stocks and other equity securities listed on any national or
foreign exchange (excluding The Nasdaq Stock Market LLC ("Nasdaq") and the
London Stock Exchange Alternative Investment Market ("AIM")) are valued at
the last sale price on the exchange on which they are principally traded
or, for Nasdaq and AIM securities, the official closing price. Securities
traded on more than one securities exchange are valued at the last sale
price or official closing price, as applicable, at the close of the
securities exchange representing the principal market for such securities.
Exchange-traded options contracts are valued at the closing price in the
market where such contracts are principally traded. If no closing price is
available, exchange-traded options contracts are fair valued at the mean
of their most recent bid and asked price, if available, and otherwise at
their closing bid price.
Securities traded in an over-the-counter market are fair valued at the
mean of their most recent bid and asked price, if available, and otherwise
at their closing bid price.
Shares of open-end funds are valued at fair value which is based on NAV
per share.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Trust's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities
which may not be publicly sold without registration under the Securities Act of
Page 17
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FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
OCTOBER 31, 2021
1933, as amended) for which a third-party pricing service is unable to provide a
market price; securities whose trading has been formally suspended; a security
whose market or fair value price is not available from a pre-established pricing
source; a security with respect to which an event has occurred that is likely to
materially affect the value of the security after the market has closed but
before the calculation of the Fund's NAV or make it difficult or impossible to
obtain a reliable market quotation; and a security whose price, as provided by
the third-party pricing service, does not reflect the security's fair value. As
a general principle, the current fair value of a security would appear to be the
amount which the owner might reasonably expect to receive for the security upon
its current sale. When fair value prices are used, generally they will differ
from market quotations or official closing prices on the applicable exchanges. A
variety of factors may be considered in determining the fair value of such
securities, including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or third-party pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or
the appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might
affect the value of the security.
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, 2021, is
included with the Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income is recorded
daily on the accrual basis. Amortization of premiums and accretion of discounts
are recorded using the effective interest method.
Distributions received from the Fund's investments in real estate investment
trusts ("REITs") may be comprised of return of capital, capital gains and
income. The actual character of the amounts received during the year is not
known until after the REITs' fiscal year end. The Fund records the character of
distributions received from the REITs during the year based on estimates
available. The characterization of distributions received by the Fund may be
subsequently revised based on information received by the REITs after their tax
reporting periods conclude.
C. OPTIONS CONTRACTS
The Fund will employ a "partial covered call strategy," meaning that covered
calls will be written on a notional value of no more than 20% of the value of
each underlying stock contained in the S&P 500 Dividend Aristocrats Index (the
"Aristocrat Stocks"), such that the short position in each call option is
"covered" by a portion of the corresponding Aristocrat Stock held by the Fund to
generate income. A written (sold) call option gives the seller the obligation to
sell shares of the underlying asset at a specified price ("strike price") at a
specified date ("expiration date"). The writer (seller) of the call option
receives an amount (premium) for writing (selling) the option. In the event
Page 18
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FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
OCTOBER 31, 2021
the underlying asset appreciates above the strike price as of the expiration
date, the writer (seller) of the call option will have to pay the difference
between the value of the underlying asset and the strike price (which loss is
offset by the premium initially received), and in the event the underlying asset
declines in value, the call option may end up worthless and the writer (seller)
of the call option retains the premium.
When the Fund writes (sells) an option, an amount equal to the premium received
by the Fund is included in "Options contracts written, at value" on the
Statement of Assets and Liabilities. Options are marked-to-market daily and
their value is affected by changes in the value of the underlying security,
changes in interest rates, changes in the actual or perceived volatility of the
securities markets and the underlying securities, and the remaining time to the
option's expiration. The value of options may also be adversely affected if the
market for the options becomes less liquid or the trading volume diminishes.
Premiums received from writing options that expire unexercised are treated by
the Fund on the expiration date as realized gains from options written. The
difference between the premium and the amount paid on effecting a closing
purchase transaction, including brokerage commissions, is also treated as a
realized gain, or, if the premium is less than the amount paid for the closing
purchase transaction, as a realized loss. If a call option is exercised, the
premium is added to the proceeds from the sale of the underlying security in
determining whether the Fund has realized a gain or loss. Any gain or loss on
written options would be included in "Net realized gain (loss) on written
options contracts" on the Statement of Operations. The Fund, as a writer of an
option, bears the market risk of an unfavorable change in the price of the
security underlying the written option.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income, if any, are declared and paid quarterly by
the Fund, or as the Board of Trustees may determine from time to time.
Distributions of net realized gains earned by the Fund, if any, are distributed
at least annually.
Distributions from net investment income and realized capital gains are
determined in accordance with federal income tax regulations, which may differ
from U.S. GAAP. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These permanent differences are primarily due to the varying
treatment of income and gain/loss on significantly modified portfolio securities
held by the Fund and have no impact on net assets or NAV per share. Temporary
differences, which arise from recognizing certain items of income, expense and
gain/loss in different periods for financial statement and tax purposes, will
reverse at some time in the future.
The tax character of distributions paid during the fiscal years ended October
31, 2021 and 2020 was as follows:
Distributions paid from: 2021 2020
Ordinary income................................. $ 5,267,572 $ 1,542,140
Capital gains................................... 791,282 715,677
Return of capital............................... -- --
As of October 31, 2021, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income................... $ 784,246
Accumulated capital and other gain (loss)....... --
Net unrealized appreciation (depreciation)...... 24,586,984
E. INCOME TAXES
The Fund intends to continue to qualify as a regulated investment company by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no
provision has been made for federal and state income taxes. However, due to the
timing and amount of distributions, the Fund may be subject to an excise tax of
4% of the amount by which approximately 98% of the Fund's taxable income exceeds
the distributions from such taxable income for the calendar year.
The Fund is subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. The taxable years ended 2018,
2019, 2020, and 2021 remain open to federal and state audit. As of October 31,
2021, 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, 2021, the
Fund had no capital loss carryforwards for federal income tax purposes.
Page 19
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
OCTOBER 31, 2021
Certain losses realized during the current fiscal year may be deferred and
treated as occurring on the first day of the following fiscal year for federal
income tax purposes. For the fiscal year ended October 31, 2021, the Fund had no
net late year ordinary or capital losses.
In order to present paid-in capital and accumulated distributable earnings
(loss) (which consists of accumulated net investment income (loss), accumulated
net realized gain (loss) on investments and net unrealized appreciation
(depreciation) on investments) on the Statement of Assets and Liabilities that
more closely represent their tax character, certain adjustments have been made
to paid-in capital, accumulated net investment income (loss) and accumulated net
realized gain (loss) on investments. These adjustments are primarily due to the
difference between book and tax treatments of income and gains on various
investment securities held by the Fund and in-kind transactions. The results of
operations and net assets were not affected by these adjustments. For the fiscal
year ended October 31, 2021, there were no tax adjustments made to accumulated
distributable earnings (loss) accounts due to differences between book and tax
treatments.
F. EXPENSES
Expenses, other than the investment advisory fee and other excluded expenses,
are paid by the Advisor (see Note 3).
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Fund, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the selection and ongoing monitoring of the securities
in the Fund's portfolio, managing the Fund's business affairs and providing
certain administrative services necessary for the management of the Fund.
First Trust is responsible for the expenses of the Fund including the cost of
transfer agency, sub-advisory, custody, fund administration, legal, audit and
other services and license fees (if any), but excluding fee payments under the
Investment Management Agreement, interest, taxes, acquired fund fees and
expenses, if any, brokerage commissions and other expenses connected with the
execution of portfolio transactions, distribution and service fees payable
pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses. The Fund has
agreed to pay First Trust an annual management fee equal to 0.75% of its average
daily net assets.
Cboe Vest(SM) Financial LLC ("Cboe Vest"), an affiliate of First Trust, serves
as the Fund's sub-advisor and manages the Fund's portfolio subject to First
Trust's supervision. Pursuant to the Investment Management Agreement, between
the Trust, on behalf of the Fund, and the Advisor, and the Investment
Sub-Advisory Agreement among the Trust, on behalf of the Fund, the Advisor and
Cboe Vest, First Trust will supervise Cboe Vest and its management of the
investment of the Fund's assets and will pay Cboe Vest for its services as the
Fund's sub-advisory fee equal to 0.20% of the average daily net assets of the
Fund, less Cboe Vest's share of the Fund's expenses. Cboe Vest's fee is paid by
the Advisor out of its management fee.
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
the Fund. As custodian, BNYM is responsible for custody of the Fund's assets. As
fund accountant and administrator, BNYM is responsible for maintaining the books
and records of the Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for the Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
defined-outcome fund or is an index fund.
Additionally, the Lead Independent Trustee and the Chairs of the Audit
Committee, Nominating and Governance Committee and Valuation Committee are paid
annual fees to serve in such capacities, with such compensation allocated pro
rata among each fund in the First Trust Fund Complex based on net assets.
Independent Trustees are reimbursed for travel and out-of-pocket expenses in
connection with all meetings. The Lead Independent Trustee and Committee Chairs
rotate every three years. The officers and "Interested" Trustee receive no
compensation from the Trust for acting in such capacities.
4. REORGANIZATION
On March 1, 2021, the Board of Trustees of Cboe Vest S&P 500(R) Dividend
Aristocrats Target Income ETF(R) ("Target Fund"), an index based exchange-traded
fund ("ETF") managed by Cboe VestSM Financial LLC, approved a reorganization
into FT Cboe Vest S&P 500(R) Dividend Aristocrats Target Income ETF(R) (the
"Acquiring Fund" or "KNG"), an index based ETF managed by First Trust.
Page 20
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
OCTOBER 31, 2021
The reorganization resulted in a shift in the management responsibility for the
Target Fund. Other than the management responsibility, the primary
characteristics of Target Fund and the Acquiring Fund are materially the same.
The Acquiring Fund's investment objective, investment strategies, policies and
risks are identical in all material respects to those of the Target Fund.
Under the terms of the Reorganization, which was tax-free, the assets of Target
Fund were transferred to, and the liabilities of Target Fund were assumed by
KNG. The shareholders of the Target Fund received shares of KNG with a value
equal to the aggregate net asset value of the shares of the Target Fund held by
them.
5. PURCHASES AND SALES OF SECURITIES
For the fiscal year ended October 31, 2021, the cost of purchases and proceeds
from sales of investments, excluding short-term investments and in-kind
transactions, were $100,389,927 and $98,842,871, respectively.
For the fiscal year ended October 31, 2021, the cost of in-kind purchases and
proceeds from in-kind sales were $199,069,547 and $0, respectively.
6. DERIVATIVE TRANSACTIONS
The following table presents the types of derivatives held by the Fund at
October 31, 2021, the primary underlying risk exposure and the location of these
instruments as presented on the Statements 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
----------- ----------- ---------------------------- ---------- -------------------------- ----------
Options contracts written,
Options Equity Risk -- $ -- at value $ 706,742
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, 2021, on derivative instruments, as well as the primary
underlying risk exposure associated with the instruments.
STATEMENT OF OPERATIONS LOCATION
-------------------------------------------------------------------------------
EQUITY RISK EXPOSURE
Net realized gain (loss) on written options contracts $ 1,128,524
Net change in unrealized appreciation (depreciation) on
written options contracts (301,922)
During the fiscal year ended October 31, 2021, the premiums for written options
contracts opened were $3,171,958 and the premiums for written options contracts
closed, exercised and expired were $2,818,784.
7. OFFSETTING ASSETS AND LIABILITIES
The Fund is subject to a Master Netting Arrangement, which governs the terms of
certain transactions with select counterparties. The Master Netting Arrangement
allows the Fund to close out and net its total exposure to a counterparty in the
event of a default with respect to all the transactions governed under a single
agreement with a counterparty. The Master Netting Arrangement also specifies
collateral posting arrangements at pre-arranged exposure levels. Under the
Master Netting Arrangement, collateral is routinely transferred if the total net
exposure to certain transactions (net of existing collateral already in place)
governed under the relevant Master Netting Arrangement with a counterparty in a
given account exceeds a specified threshold depending on the counterparty and
type of Master Netting Arrangement.
Page 21
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
OCTOBER 31, 2021
The following is a summary of the Assets and Liabilities subject to offsetting
in the Fund as of the end of the reporting period:
NET AMOUNT GROSS AMOUNT NOT OFFSET
GROSS AMOUNT OF LIABILITIES IN THE STATEMENT OF
GROSS OFFSET IN THE PRESENTED IN THE ASSETS AND LIABILITIES
AMOUNT OF STATEMENT OF STATEMENT OF --------------------------------
DESCRIPTION/ RECOGNIZED ASSETS AND ASSETS AND FINANCIAL CASH COLLATERAL NET
COUNTERPARTY LIABILITIES LIABILITIES LIABILITIES INSTRUMENTS PLEDGED AMOUNT
---------------------------- -------------- -------------- ---------------- -------------- --------------- ------------
Written Options
Societe Generale $ 706,742 $ -- $ 706,742 $ (706,742) $ -- $ --
In some instances, the collateral amounts disclosed in the tables were adjusted
due to the requirement to limit the collateral amounts to avoid the effect of
overcollateralization. Actual collateral received/pledged may be more than the
amounts disclosed herein.
8. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
The Fund generally issues and redeems its shares in primary market transactions
through a creation and redemption mechanism and does not sell or redeem
individual shares. Instead, financial entities known as "Authorized
Participants" have contractual arrangements with the Fund's service providers to
purchase and redeem Fund shares directly with the Fund in large blocks of shares
known as "Creation Units." Prior to the start of trading on every business day,
the Fund publishes through the National Securities Clearing Corporation ("NSCC")
the "basket" of securities, cash or other assets that it will accept in exchange
for a Creation Unit of the Fund's shares. An Authorized Participant that wishes
to effectuate a creation of the Fund's shares deposits with the Fund the
"basket" of securities, cash or other assets identified by the Fund that day,
and then receives the Creation Unit of the Fund's shares in return for those
assets. After purchasing a Creation Unit, the Authorized Participant may
continue to hold the Fund's shares or sell them in the secondary market. The
redemption process is the reverse of the purchase process: the Authorized
Participant redeems a Creation Unit of the Fund's shares for a basket of
securities, cash or other assets. The combination of the creation and redemption
process with secondary market trading in the Fund's shares and underlying
securities provides arbitrage opportunities that are designed to help keep the
market price of the Fund's shares at or close to the NAV per share of the Fund.
The Fund imposes fees in connection with the purchase of Creation Units. These
fees may vary based upon various fact-based circumstances, including, but not
limited to, the composition of the securities included in the Creation Unit or
the countries in which the transactions are settled. The price for each Creation
Unit will equal the daily NAV per share of the Fund times the number of shares
in a Creation Unit, plus the fees described above and, if applicable, any
operational processing and brokerage costs, transfer fees, stamp taxes and part
or all of the spread between the expected bid and offer side of the market
related to the securities comprising the creation basket.
The Fund also imposes fees in connection with the redemption of Creation Units.
These fees may vary based upon various fact-based circumstances, including, but
not limited to, the composition of the securities included in the Creation Unit
or the countries in which the transactions are settled. The price received for
each Creation Unit will equal the daily NAV per share of the Fund times the
number of shares in a Creation Unit, minus the fees described above and, if
applicable, any operational processing and brokerage costs, transfer fees, stamp
taxes and part or all of the spread between the expected bid and offer side of
the market related to the securities comprising the redemption basket. Investors
who use the services of a broker or other such intermediary in addition to an
Authorized Participant to effect a redemption of a Creation Unit may also be
assessed an amount to cover the cost of such services. The redemption fee
charged by the Fund will comply with Rule 22c-2 of the 1940 Act which limits
redemption fees to no more than 2% of the value of the shares redeemed.
9. 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, 2023.
Page 22
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
OCTOBER 31, 2021
10. 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.
11. OTHER MATTERS
By operation of law, the Fund now operates as a diversified open-end management
investment company as defined in Section 5(b) of the 1940 Act.
12. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Fund through
the date the financial statements were issued, and has determined that there was
the following subsequent event:
On November 18, 2021, First Trust Limited Duration Investment Grade Corporate
ETF, an additional series of the Trust, began trading under the symbol "FSIG" on
NYSE Arca, Inc.
Page 23
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED
FUND IV:
OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS
We have audited the accompanying statement of assets and liabilities of FT Cboe
Vest S&P 500(R) Dividend Aristocrats Target Income ETF(R) (the "Fund"), a series
of the First Trust Exchange-Traded Fund IV, including the portfolio of
investments, as of October 31, 2021, the related statement of operations, the
statement of changes in net assets, and the financial highlights for the year
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, 2021, and the results of its operations,
the statement of changes in net assets and the financial highlights for the year
then ended, in conformity with accounting principles generally accepted in the
United States of America. The statement of changes in net assets for the year
ended October 31, 2020 and the financial highlights for the years ended October
31, 2020 and 2019 and for the period from March 26, 2018 (commencement of
operations) through October 31, 2018 were audited by other auditors whose report
dated December 23, 2020, expressed an unqualified opinion on such statement of
changes in net assets and financial highlights.
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, 2021, 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, 2021
We have served as the auditor of one or more First Trust investment companies
since 2001.
Page 24
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
OCTOBER 31, 2021 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine
how to vote proxies and information on how the Fund voted proxies relating to
its portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Fund's website at www.ftportfolios.com; and (3) on the Securities and
Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
The Fund files portfolio holdings information for each month in a fiscal quarter
within 60 days after the end of the relevant fiscal quarter on Form N-PORT.
Portfolio holdings information for the third month of each fiscal quarter will
be publicly available on the SEC's website at www.sec.gov. The Fund's complete
schedule of portfolio holdings for the second and fourth quarters of each fiscal
year is included in the semi-annual and annual reports to shareholders,
respectively, and is filed with the SEC on Form N-CSR. The semi-annual and
annual report for the Fund is available to investors within 60 days after the
period to which it relates. The Fund's Forms N-PORT and Forms N-CSR are
available on the SEC's website listed above.
FEDERAL TAX INFORMATION
For the taxable year ended October 31, 2021, the following percentages of income
dividend paid by the Fund qualified for the dividends received deduction
available to corporations and is hereby designated as qualified dividend income:
Dividends Received Deduction Qualified Dividend Income
---------------------------- -------------------------
66.34% 70.71%
For the fiscal year ended October 31, 2021, the amount of long-term capital gain
distributions designated by the Fund was $791,282, which is taxable at the
applicable capital gain tax rates for federal income tax purposes.
A portion of the Fund's 2021 ordinary dividends (including short-term capital
gains) paid to shareholders during the fiscal year ended October 31, 2021, may
be eligible for the Qualified Business Income Deduction (QBI) under Internal
Revenue Code of 1986, as amended, Section 199A for the aggregate dividends Fund
received from the underlying Real Estate Investment Trusts (REITs) it invests
in.
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE
APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS
RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW
APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT
IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY
FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE,
RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT
WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO
REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
CONCENTRATION RISK. To the extent that a fund is able to invest a 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.
Page 25
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ADDITIONAL INFORMATION (CONTINUED)
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FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
OCTOBER 31, 2021 (UNAUDITED)
DEFINED OUTCOME FUNDS RISK. To the extent a fund's investment strategy is
designed to deliver returns tied to the price performance of an underlying ETF,
an investor may not realize the returns the fund seeks to achieve if that
investor does not hold shares for the entire target outcome period. In the event
an investor purchases shares after the first day of the target outcome period or
sells shares prior to the end of the target outcome period, the buffer that the
fund seeks to provide against a decline in the value of the underlying ETF may
not be available, the enhanced returns that the fund seeks to provide (if any)
may not be available and the investor may not participate in a gain in the value
of the underlying ETF up to the cap for the investor's investment period.
Additionally, the fund will not participate in gains of the underlying ETF above
the cap and a shareholder may lose their entire investment. If the fund seeks
enhanced returns, there are certain time periods when the value of the fund may
fall faster than the value of the underlying ETF, and it is very unlikely that,
on any given day during which the underlying ETF share price increases in value,
the fund's share price will increase at the same rate as the enhanced returns
sought by the fund, which is designed for an entire target outcome period.
Trading flexible exchange options involves risks different from, or possibly
greater than, the risks associated with investing directly in securities, such
as less liquidity and correlation and valuation risks. A fund may experience
substantial downside from specific flexible exchange option positions and
certain positions may expire worthless.
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
Page 26
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
OCTOBER 31, 2021 (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, will cease making LIBOR available as a
reference rate over a phase-out period that will begin immediately after
December 31, 2021. The unavailability or replacement of LIBOR may affect the
value, liquidity or return on certain fund investments and may result in costs
incurred in connection with closing out positions and entering into new trades.
Any potential effects of the transition away from LIBOR on the fund or on
certain instruments in which the fund invests can be difficult to ascertain, and
they may vary depending on a variety of factors, and they could result in losses
to the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are
subject to market fluctuations caused by factors such as general economic
conditions, political events, regulatory or market developments, changes in
interest rates and perceived trends in securities prices. Shares of a fund could
decline in value or underperform other investments as a result of the risk of
loss associated with these market fluctuations. In addition, local, regional or
global events such as war, acts of terrorism, spread of infectious diseases or
other public health issues, recessions, or other events could have a significant
negative impact on a fund and its investments. Such events may affect certain
geographic regions, countries, sectors and industries more significantly than
others. The outbreak of the respiratory disease designated as COVID-19 in
December 2019 has caused significant volatility and declines in global financial
markets, which have caused losses for investors. While the development of
vaccines has slowed the spread of the virus and allowed for the resumption of
"reasonably" normal business activity in the United States, many countries
continue to impose lockdown measures in an attempt to slow the spread.
Additionally, there is no guarantee that vaccines will be effective against
emerging variants of the disease.
NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities,
it is subject to additional risks not associated with securities of domestic
issuers. Non-U.S. securities are subject to higher volatility than securities of
domestic issuers due to: possible adverse political, social or economic
developments; restrictions on foreign investment or exchange of securities;
capital controls; lack of liquidity; currency exchange rates; excessive
taxation; government seizure of assets; the imposition of sanctions by foreign
governments; different legal or accounting standards; and less government
supervision and regulation of exchanges in foreign countries. Investments in
non-U.S. securities may involve higher costs than investments in U.S.
securities, including higher transaction and custody costs, as well as
additional taxes imposed by non-U.S. governments. These risks may be heightened
for securities of companies located, or with significant operations, in emerging
market countries.
OPERATIONAL RISK. Each fund is subject to risks arising from various operational
factors, including, but not limited to, human error, processing and
communication errors, errors of a fund's service providers, counterparties or
other third-parties, failed or inadequate processes and technology or systems
failures. Each fund relies on third-parties for a range of services, including
custody. Any delay or failure relating to engaging or maintaining such service
providers may affect a fund's ability to meet its investment objective. Although
the funds and the funds' investment advisor seek to reduce these operational
risks through controls and procedures, there is no way to completely protect
against such risks.
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
Page 27
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
OCTOBER 31, 2021 (UNAUDITED)
BOARD OF TRUSTEES
Effective November 1, 2021, Denise M. Keefe was appointed as a Trustee of the
Trust. Ms. Keefe is Executive Vice President of Advocate Aurora Health and
President of Advocate Aurora Continuing Health Division (together, "Advocate"),
one of the largest integrated healthcare systems in the U.S. serving Illinois
and Wisconsin. Ms. Keefe has been employed by Advocate since 1993 and is
responsible for the Continuing Health Division's strategic direction, fiscal
management, business development, revenue enhancement, operational efficiencies,
and human resource management of 4,000 employees. Ms. Keefe also currently
serves on the boards of several organizations within the Advocate Aurora
Continuing Health Division and other health care organizations, including RML
Long Term Acute Care Hospitals (since 2014) and Senior Helpers (since 2021).
Prior thereto, Ms. Keefe was Corporate Vice President, Marketing and Business
Development for the Visiting Nurse Association of Chicago (1989 - 1992) and a
former Board Member of Sherman West Court Skilled Nursing Facility.
Page 28
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BOARD OF TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
OCTOBER 31, 2021 (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
THE FIRST TRUST DIRECTORSHIPS
NAME, TERM OF OFFICE AND FUND COMPLEX HELD BY TRUSTEE
YEAR OF BIRTH AND YEAR FIRST ELECTED PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST
POSITION WITH THE TRUST OR APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
------------------------------------------------------------------------------------------------------------------------------------
Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 215 None
(1951) Limited Partner, Gundersen Real Estate
o Since Inception Limited Partnership (June 1992 to
December 2016)
Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 215 Director of ADM
(1957) (Futures Commission Merchant) Investor Services,
o Since Inception Inc., ADM
Investor Services
International,
Futures Industry
Association, and
National Futures
Association
Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 215 Director of Trust
(1956) and Management Consulting) Company of
o Since Inception Illinois
Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 215 None
(1954) Managing Director and Chief Operating
o Since Inception Officer (January 2015 to August 2018),
Pelita Harapan Educational Foundation
(Educational Products and Services)
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 215 None
Chairman of the Board Advisors L.P. and First Trust (1955)
o Since Inception Portfolios L.P.; 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.
Page 29
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BOARD OF TRUSTEES AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
OCTOBER 31, 2021 (UNAUDITED)
NAME AND POSITION AND OFFICES TERM OF OFFICE AND PRINCIPAL OCCUPATIONS
YEAR OF BIRTH WITH TRUST LENGTH OF SERVICE DURING PAST 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS(2)
------------------------------------------------------------------------------------------------------------------------------------
James M. Dykas President and Chief o Indefinite Term Managing Director and Chief Financial Officer
(1966) Executive Officer (January 2016 to Present), Controller (January 2011
o Since January 2016 to January 2016), Senior Vice President (April 2007
to January 2016), First Trust Advisors L.P. and First
Trust Portfolios L.P.; Chief Financial Officer
(January 2016 to Present), BondWave LLC
(Software Development Company) and Stonebridge
Advisors LLC (Investment Advisor)
Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President (July 2016 to Present), Vice
(1972) Officer and Chief Accounting President (April 2012 to July 2016), First Trust
Officer o Since January 2016 Advisors L.P. and First Trust Portfolios L.P.
W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and First
(1960) Legal Officer Trust Portfolios L.P.; Secretary and General
o Since Inception Counsel, BondWave LLC; Secretary, Stonebridge
Advisors LLC
Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and
(1970) First Trust Portfolios L.P.
o Since Inception
Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P.
(1966) and Assistant Secretary and First Trust Portfolios L.P.
o Since Inception
Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. 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.
Page 30
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PRIVACY POLICY
--------------------------------------------------------------------------------
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
OCTOBER 31, 2021 (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 2021
Page 31
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FIRST TRUST
First Trust Exchange-Traded Fund IV
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
INVESTMENT SUB-ADVISOR
Cboe Vest(SM) Financial LLC
1765 Greensboro Station Pl, 9th Floor
McLean, VA 22102
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
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