FIRST TRUST
First Trust Exchange-Traded Fund IV
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First Trust North American
Energy Infrastructure Fund (EMLP)
First Trust EIP Carbon Impact ETF (ECLN)
FT Energy Income Partners Strategy ETF (EIPX)
Semi-Annual Report
For the Period Ended
April 30, 2023
Energy Income Partners, LLC
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TABLE OF CONTENTS
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FIRST TRUST EXCHANGE-TRADED FUND IV
SEMI-ANNUAL REPORT
APRIL 30, 2023
Shareholder Letter........................................................... 1
Fund Performance Overview
First Trust North American Energy Infrastructure Fund (EMLP).............. 2
First Trust EIP Carbon Impact ETF (ECLN).................................. 4
FT Energy Income Partners Strategy ETF (EIPX)............................. 6
Notes to Fund Performance Overview........................................... 8
Portfolio Management......................................................... 9
Understanding Your Fund Expenses............................................. 10
Portfolio of Investments
First Trust North American Energy Infrastructure Fund (EMLP).............. 11
First Trust EIP Carbon Impact ETF (ECLN).................................. 13
FT Energy Income Partners Strategy ETF (EIPX)............................. 15
Statements of Assets and Liabilities......................................... 17
Statements of Operations..................................................... 18
Statements of Changes in Net Assets.......................................... 19
Financial Highlights......................................................... 21
Notes to Financial Statements................................................ 23
Additional Information....................................................... 30
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and/or Energy Income Partners, LLC ("EIP" or the
"Sub-Advisor") and their respective representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
any series of First Trust Exchange-Traded Fund IV (the "Trust") described in
this report (each such series is referred to as a "Fund" and collectively, as
the "Funds") to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. When
evaluating the information included in this report, you are cautioned not to
place undue reliance on these forward-looking statements, which reflect the
judgment of the Advisor and/or Sub-Advisor and their respective representatives
only as of the date hereof. We undertake no obligation to publicly revise or
update these forward-looking statements to reflect events and circumstances that
arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that any Fund described in this report will achieve its
investment objective. Each Fund is subject to market risk, which is the
possibility that the market values of securities owned by the Fund will decline
and that the value of the Fund's shares may therefore be less than what you paid
for them. Accordingly, you can lose money investing in a Fund. See "Risk
Considerations" in the Additional Information section of this report for a
discussion of certain other risks of investing in the Funds.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.ftportfolios.com or speak with your financial advisor. Investment returns,
net asset value and share price will fluctuate and Fund shares, when sold, may
be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on each Fund's webpage at www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment. It
includes details about each Fund and presents data and analysis that provide
insight into each Fund's performance and investment approach.
The statistical information that follows may help you understand each Fund's
performance compared to that of relevant market benchmarks.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor and/or Sub-Advisor are just that: informed opinions. They should not be
considered to be promises or advice. The opinions, like the statistics, cover
the period through the date on the cover of this report. The material risks of
investing in each Fund are spelled out in the prospectus, the statement of
additional information, and other Fund regulatory filings.
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SHAREHOLDER LETTER
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FIRST TRUST EXCHANGE-TRADED FUND IV
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
APRIL 30, 2023
Dear Shareholders:
First Trust is pleased to provide you with the semi-annual report for certain
series of the First Trust Exchange-Traded Fund IV (the "Funds"), which contains
detailed information about the Funds for the six months ended April 30, 2023.
Please note that the FT Energy Income Partners Strategy ETF was incepted on
November 2, 2022, and so the information in this letter and the semi-annual
report prior to that date does not apply to this Fund.
It pleases me to write that on May 5, 2023, the World Health Organization
officially declared that the coronavirus ("COVID-19") pandemic no longer
qualified as a global health emergency. While the virus officially no longer
poses an immediate threat, its full impact on the world economy remains to be
seen, in my opinion. Recall, if you will, those early days of the pandemic;
companies sent workers home, consumers were afraid or unwilling to leave their
homes, supply chains dried up, and grocery shelves were left bare. Hoping to
provide relief to their constituents and to bolster economic activity,
governments across the globe funneled trillions of dollars in stimulus directly
into the hands of their citizens. Unfortunately, economist Milton Friedman's
age-old economic adage "there's no such thing as a free lunch" still holds. As a
result of the U.S. government stimulus, gross domestic product rebounded
quickly, but so did inflation.
As many investors are aware, the Federal Reserve (the "Fed") has been locked in
a battle with stubbornly high inflation for several years now. Inflation, as
measured by the trailing 12-month rate of change in the Consumer Price Index
("CPI"), surged from 1.4% on December 31, 2020, to 9.1% as of June 30, 2022.
Since then, the trailing rate on the CPI has come down, but remains elevated. On
April 30, 2023, the CPI stood at 4.9%, well above the Fed's goal of 2.0%.
Surging prices have not been restricted to the U.S. Headline inflation rates in
each of the countries that make up the so-called Group of Ten (G-10) stand above
the targets set by their central banks, according to data from Bloomberg.
From the Fed's perspective, monetary policy is the most efficient means to
combat rising prices. From December 31, 2020 through May 3, 2023, the Fed
increased the Federal Funds target rate (upper bound) a total of ten times,
raising the rate from 0.25% to 5.25%. As mentioned, tighter monetary policy
resulted in a decrease in the CPI, but there have been casualties in the Fed's
battle with rising prices. The most recent banking turmoil is one example.
Another is the spike in mortgage rates. According to Bankrate, the national
average for a 30-year mortgage stood at just 2.87% on December 31, 2020. As of
May 1, 2023, the average 30-year mortgage rate had surged to 6.88%. Not all the
news is negative, however. Driven by a strong U.S. labor market, consumer
spending remained robust in April 2023. Notably, American corporations added
253,000 jobs during the month, and the unemployment rate stood at a 53-year low.
Bob Carey, Chief Market Strategist at First Trust, recently summed up the
current situation, noting that "we're not out of the woods yet." That said, even
the most difficult situations don't last forever. In my opinion, like the
COVID-19 pandemic, inflation, and the tighter monetary policy it ushered in,
will pass with time.
Thank you for giving First Trust the opportunity to play a role in your
financial future. We value our relationship with you and will report on the
Funds again in six months.
Sincerely,
/s/ James A. Bowen,
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 1
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FUND PERFORMANCE OVERVIEW (UNAUDITED)
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FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
The First Trust North American Energy Infrastructure Fund (the "Fund") is an
actively managed exchange-traded fund. The Fund's investment objective is to
seek total return. The Fund will invest, under normal market conditions, at
least 80% of its net assets (including investment borrowings) in equity
securities of companies deemed by Energy Income Partners, LLC ("EIP" or the
"Sub-Advisor") to be engaged in the energy infrastructure sector. These
companies principally include U.S. and Canadian natural gas and electric
utilities, corporations operating energy infrastructure assets such as pipelines
or renewable energy production, utilities, publicly-traded master limited
partnerships or limited liability companies taxed as partnerships ("MLPs"), MLP
affiliates, and other companies that derive the majority of their revenues from
operating or providing services in support of infrastructure assets such as
pipelines, power transmission and petroleum and natural gas storage in the
petroleum, natural gas and power generation industries (collectively, "energy
infrastructure companies"). The Fund will invest principally in energy
infrastructure companies. Under normal market conditions, the Fund will invest
at least 80% of its net assets (including investment borrowings) in equity
securities of companies headquartered or incorporated in the United States and
Canada.
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PERFORMANCE
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AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
6 Months 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception
Ended Ended Ended Ended (6/20/12) Ended Ended (6/20/12)
4/30/23 4/30/23 4/30/23 4/30/23 to 4/30/23 4/30/23 4/30/23 to 4/30/23
FUND PERFORMANCE
NAV 3.44% 5.36% 7.83% 5.06% 6.73% 45.78% 63.86% 102.86%
Market Price 3.25% 5.25% 7.79% 5.06% 6.72% 45.54% 63.78% 102.76%
INDEX PERFORMANCE
Blended Benchmark(1) 3.53% 8.36% 9.97% 5.97% 7.46% 60.84% 78.54% 118.55%
S&P 500(R) Index 8.63% 2.66% 11.45% 12.20% 13.07% 71.93% 216.22% 279.75%
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(See Notes to Fund Performance Overview on page 8.)
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(1) The Blended Benchmark consists of the following two indices: 50% of the
PHLX Utility Sector Index which is a market capitalization weighted index
composed of geographically diverse public U.S. utility stocks; and 50% of
the Alerian MLP Total Return Index which is a float-adjusted,
capitalization weighted composite of the 27 most prominent energy Master
Limited Partnerships (MLPs). Indices are unmanaged and an investor cannot
invest directly in an index. All index returns assume that distributions
are reinvested when they are received. The Blended Benchmark returns are
calculated by using the monthly return of the two indices during each
period shown above. At the beginning of each month the two indices are
rebalanced to a 50-50 ratio to account for divergence from that ratio that
occurred during the course of each month. The monthly returns are then
compounded for each period shown above, giving the performance for the
Blended Benchmark for each period shown above.
Page 2
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP) (CONTINUED)
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% OF TOTAL LONG-TERM
INDUSTRY CLASSIFICATION INVESTMENTS
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Electric Power & Transmission 29.8%
Natural Gas Transmission 24.4
Petroleum Product Transmission 16.4
Crude Oil Transmission 13.7
Nat. Gas Gathering & Processing 10.5
Oil & Gas Production 1.4
Marine 0.2
Propane 0.1
Other 3.5
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Total 100.0%
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% OF TOTAL LONG-TERM
TOP TEN HOLDINGS INVESTMENTS
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Enterprise Products Partners, L.P. 7.6%
Magellan Midstream Partners, L.P. 6.6
Energy Transfer, L.P. 6.3
Plains GP Holdings, L.P., Class A 5.9
Sempra Energy 5.0
Kinder Morgan, Inc. 4.2
Quanta Services, Inc. 3.9
DT Midstream, Inc. 3.8
Public Service Enterprise Group, Inc. 2.9
NextEra Energy Partners, L.P. 2.8
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Total 49.0%
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PERFORMANCE OF A $10,000 INITIAL INVESTMENT
OCTOBER 31, 2012 - APRIL 30, 2023
First Trust North American Blended S&P 500(R)
Energy Infrastructure Fund Benchmark Index
10/31/12 $10,000 $10,000 $10,000
4/30/13 11,580 11,568 11,442
10/31/13 11,354 11,400 12,718
4/30/14 12,479 12,645 13,781
10/31/14 13,900 13,592 14,914
4/30/15 14,035 13,044 15,570
10/31/15 11,966 11,378 15,690
4/30/16 12,163 11,842 15,757
10/31/16 13,404 12,368 16,397
4/30/17 13,933 13,350 18,581
10/31/17 13,813 13,134 20,272
4/30/18 13,015 12,840 21,046
10/31/18 13,256 13,365 21,762
4/30/19 14,845 14,404 23,885
10/31/19 15,143 14,447 24,879
4/30/20 12,713 11,825 24,093
10/31/20 12,616 11,806 27,293
4/30/21 15,693 15,964 35,167
10/31/21 16,649 17,190 39,006
4/30/22 18,010 19,059 35,244
10/31/22 18,345 19,947 33,308
4/30/23 18,976 20,651 36,182
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.
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST EIP CARBON IMPACT ETF (ECLN)
The First Trust EIP Carbon Impact ETF (the "Fund") seeks to achieve a
competitive risk-adjusted total return balanced between dividends and capital
appreciation. Under normal market conditions, the Fund will invest at least 80%
of its net assets (including investment borrowings) in the equity securities of
companies identified by the Fund's investment sub-advisor, Energy Income
Partners, LLC ("EIP" or the "Sub-Advisor"), as having or seeking to have a
positive carbon impact. The Sub-Advisor defines positive carbon impact companies
as companies that reduce, have a publicly available plan to reduce, or enable
the reduction of carbon and other greenhouse gas emissions from the production,
transportation, conversion, storage and use of energy.
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PERFORMANCE
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AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months Ended 1 Year Ended Inception (8/19/19) Inception (8/19/19)
4/30/23 4/30/23 to 4/30/23 to 4/30/23
FUND PERFORMANCE
NAV 2.02% 2.84% 8.56% 35.51%
Market Price 2.22% 3.20% 8.60% 35.66%
INDEX PERFORMANCE
PHLX Utility Sector Index 4.56% -0.79% 6.70% 27.10%
S&P 500(R) Index 8.63% 2.66% 11.92% 51.61%
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(See Notes to Fund Performance Overview on page 8.)
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST EIP CARBON IMPACT ETF (ECLN) (CONTINUED)
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% OF TOTAL LONG-TERM
INDUSTRY CLASSIFICATION INVESTMENTS
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Electric Power & Transmission 59.2%
Natural Gas Transmission 27.0
Nat. Gas Gathering & Processing 5.0
Petroleum Product Transmission 2.7
Gas Production 1.1
Propane 0.1
Marine 0.0*
Other 4.9
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Total 100.0%
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* Amount is less than 0.1%.
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% OF TOTAL LONG-TERM
TOP TEN HOLDINGS INVESTMENTS
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DT Midstream, Inc. 5.1%
Atmos Energy Corp. 4.3
Sempra Energy 4.2
Quanta Services, Inc. 4.1
American Electric Power Co., Inc. 3.9
Southern (The) Co. 3.6
Xcel Energy, Inc. 3.4
Clearway Energy, Inc., Class A 3.2
Cheniere Energy, Inc. 3.2
Cheniere Energy Partners, L.P. 3.2
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Total 38.2%
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PERFORMANCE OF A $10,000 INITIAL INVESTMENT
AUGUST 19, 2019 - APRIL 30, 2023
First Trust EIP PHLX Utility S&P 500(R)
Carbon Impact ETF Sector Index Index
8/19/19 $10,000 $10,000 $10,000
10/31/19 10,304 10,489 10,424
4/30/20 9,818 9,586 10,095
10/31/20 10,891 10,772 11,436
4/31/21 12,156 11,678 14,736
10/31/21 12,578 11,968 16,343
4/30/22 13,178 12,811 14,766
10/31/22 13,283 12,155 13,956
4/30/23 13,551 12,710 15,161
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 5
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FT ENERGY INCOME PARTNERS STRATEGY ETF (EIPX)
The FT Energy Income Partners Strategy ETF's (the "Fund") investment objective
is to seek risk-adjusted total return. Under normal market conditions, the Fund
will seek to achieve its investment objective by investing at least 80% of its
net assets (plus any borrowing for investment purposes) in a portfolio of equity
securities in the broader energy market ("Energy Companies"). Energy Companies
include companies in the Global Industry Classification Standard ("GICS") energy
sector, companies in the GICS utility sector (excluding water utilities), or
companies in any other GICS sectors that derive at least 50% of their revenues
or profits from exploration, development, production, gathering, transportation,
processing, storing, refining, distribution, mining or marketing, of natural
gas, natural gas liquids (including propane), crude oil, refined petroleum
products, petrochemicals, electricity, coal, uranium, hydrogen or other energy
sources, renewable energy production, renewable energy equipment, energy
storage, carbon, carbon dioxide, carbon dioxide and fugitive methane mitigation
and management, as well as electric transmission, distribution, storage and
system reliability support. Energy Companies also include companies providing
engineering, consulting and construction services that derive at least 50% of
their revenues or profits from the above, all of which are selected by Energy
Income Partners, LLC, the Fund's investment sub-advisor ("EIP" or the
"Sub-Advisor"). These companies may include publicly traded master limited
partnerships or limited liability companies taxed as partnerships ("MLPs") and
MLP affiliates.
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PERFORMANCE
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CUMULATIVE
TOTAL RETURNS
Inception (11/2/22)
to 4/30/23
FUND PERFORMANCE
NAV 4.73%
Market Price 4.83%
INDEX PERFORMANCE
S&P Global 1200 Energy Index 1.72%
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(See Notes to Fund Performance Overview on page 8.)
Page 6
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FT ENERGY INCOME PARTNERS STRATEGY ETF (EIPX) (CONTINUED)
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% OF TOTAL LONG-TERM
INDUSTRY CLASSIFICATION INVESTMENTS
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Oil & Gas Production 25.9%
Natural Gas Transmission 17.7
Petroleum Product Transmission 16.3
Electric Power & Transmission 13.9
Crude Oil Transmission 9.7
Nat. Gas Gathering & Processing 7.9
Coal 0.9
Marine 0.3
Other 7.4
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Total 100.0%
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* Amount is less than 0.1%.
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% OF TOTAL LONG-TERM
TOP TEN HOLDINGS INVESTMENTS
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Shell PLC, ADR 7.3%
Enterprise Products Partners, L.P. 7.1
BP PLC, ADR 6.2
TotalEnergies SE, ADR 6.0
Energy Transfer, L.P. 5.2
Magellan Midstream Partners, L.P. 4.1
Plains GP Holdings, L.P., Class A 3.6
MPLX, L.P. 3.5
Kinder Morgan, Inc. 3.0
Cheniere Energy Partners, L.P. 2.9
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Total 48.9%
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PERFORMANCE OF A $10,000 INITIAL INVESTMENT
NOVEMBER 2, 2022 - APRIL 30, 2023
FT Income Partners S&P Global 1200
Strategy ETF Energy Index
11/2/22 $10,000 $10,000
4/30/23 10,473 10,172
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the index does
not actually hold a portfolio of securities and therefore does not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 7
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NOTES TO FUND PERFORMANCE OVERVIEW (UNAUDITED)
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Total returns for the periods since inception are calculated from the inception
date of each Fund. "Average Annual Total Returns" represent the average annual
change in value of an investment over the periods indicated. "Cumulative Total
Returns" represent the total change in value of an investment over the periods
indicated.
Each Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint of the national best bid and offer price ("NBBO") as of
the time that the Fund's NAV is calculated. Under SEC rules, the NBBO consists
of the highest displayed buy and lowest sell prices among the various exchanges
trading the Fund at the time the Fund's NAV is calculated. Prior to January 1,
2019, the price used was the midpoint between the highest bid and the lowest
offer on the stock exchange on which shares of the Fund were listed for trading
as of the time that the Fund's NAV is calculated. Since shares of each Fund did
not trade in the secondary market until after the Fund's inception, for the
period from inception to the first day of secondary market trading in shares of
the Fund, the NAV of each Fund is used as a proxy for the secondary market
trading price to calculate market returns. NAV and market returns assume that
all distributions have been reinvested in each Fund at NAV and Market Price,
respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike each Fund, the indices do not actually hold a portfolio of
securities and therefore do not incur the expenses incurred by each Fund. These
expenses negatively impact the performance of each Fund. Also, market returns do
not include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The total returns presented reflect the reinvestment of dividends on
securities in the indices. The returns presented do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund shares. The investment return and principal value of shares of each
Fund will vary with changes in market conditions. Shares of each Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. Each Fund's past performance is no guarantee of future performance.
Page 8
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PORTFOLIO MANAGEMENT
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FIRST TRUST EXCHANGE-TRADED FUND IV
SEMI-ANNUAL REPORT
APRIL 30, 2023 (UNAUDITED)
ADVISOR
First Trust Advisors L.P. ("First Trust") is the investment advisor to the First
Trust North American Energy Infrastructure Fund ("EMLP"), the First Trust EIP
Carbon Impact ETF ("ECLN") and the FT Energy Income Partners Strategy ETF
("EIPX") (each a "Fund"). First Trust is responsible for the ongoing monitoring
of each Fund's investment portfolio, managing each Fund's business affairs and
providing certain administrative services necessary for the management of each
Fund.
SUB-ADVISOR
ENERGY INCOME PARTNERS, LLC
Energy Income Partners, LLC ("EIP"), located in Westport, CT, was founded in
2003 to provide professional asset management services in publicly traded
energy-related infrastructure companies with above average dividend payout
ratios operating pipelines and related storage and handling facilities, electric
power transmission and distribution as well as long contracted or regulated
power generation from renewables and other sources. The corporate structure of
the portfolio companies includes C-corporations, partnerships and energy
infrastructure real estate investment trusts. EIP mainly focuses on investments
in assets that receive steady fee-based or regulated income from their corporate
and individual customers. EIP manages or supervises approximately $5.2 billion
of assets as of April 30, 2023. EIP advises two privately offered partnerships
for U.S. high net worth individuals and an open-end mutual fund. EIP also
manages separately managed accounts and provides its model portfolio to unified
managed accounts. Finally, in addition to the Funds, EIP serves as a sub-advisor
to four closed-end management investment companies and a sleeve of a series of a
variable insurance trust. EIP is a registered investment advisor with the
Securities and Exchange Commission.
PORTFOLIO MANAGEMENT TEAM
JAMES J. MURCHIE, CO-FOUNDER, CHIEF EXECUTIVE OFFICER, CO-PORTFOLIO MANAGER AND
PRINCIPAL OF ENERGY INCOME PARTNERS, LLC
EVA PAO, CO-FOUNDER, CO-PORTFOLIO MANAGER AND PRINCIPAL OF ENERGY INCOME
PARTNERS, LLC
JOHN K. TYSSELAND, CO-PORTFOLIO MANAGER AND PRINCIPAL OF ENERGY INCOME
PARTNERS, LLC
The portfolio managers are primarily and jointly responsible for the day-to-day
management of the Funds.
Page 9
FIRST TRUST EXCHANGE-TRADED FUND IV
UNDERSTANDING YOUR FUND EXPENSES
APRIL 30, 2023 (UNAUDITED)
As a shareholder of First Trust North American Energy Infrastructure Fund, First
Trust EIP Carbon Impact ETF or FT Energy Income Partners Strategy ETF (each a
"Fund" and collectively, the "Funds"), you incur two types of costs: (1)
transaction costs; and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, if any, and other Fund expenses. This
Example is intended to help you understand your ongoing costs of investing in
the Funds and to compare these costs with the ongoing costs of investing in
other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period (or since inception) and held through the six-month period (or shorter)
ended April 30, 2023.
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 Period"
to estimate the expenses you paid on your account during this six-month period
(or shorter).
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on each Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
each Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Funds and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as brokerage
commissions. Therefore, the second line in the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
------------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
NOVEMBER 1, 2022 APRIL 30, 2023 PERIOD PERIOD (a)
------------------------------------------------------------------------------------------------------------------------------
FIRST TRUST NORTH AMERICAN ENERGY
INFRASTRUCTURE FUND (EMLP)
Actual $1,000.00 $1,034.40 0.95% $4.79
Hypothetical (5% return before expenses) $1,000.00 $1,020.08 0.95% $4.76
FIRST TRUST EIP CARBON IMPACT ETF (ECLN)
Actual $1,000.00 $1,020.20 0.95% $4.76
Hypothetical (5% return before expenses) $1,000.00 $1,020.08 0.95% $4.76
------------------------------------------------------------------------------------------------------------------------------
ANNUALIZED EXPENSES PAID
EXPENSE RATIO DURING THE PERIOD
BEGINNING ENDING BASED ON THE NOVEMBER 2, 2022 (b)
ACCOUNT VALUE ACCOUNT VALUE NUMBER OF DAYS TO
NOVEMBER 2, 2022 (b) APRIL 30, 2023 IN THE PERIOD APRIL 30, 2023 (c)
------------------------------------------------------------------------------------------------------------------------------
FT ENERGY INCOME PARTNERS STRATEGY ETF (EIPX)
Actual $1,000.00 $1,047.30 0.95% $4.80
Hypothetical (5% return before expenses) $1,000.00 $1,020.08 0.95% $4.76
(a) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (November 1,
2022 through April 30, 2023), multiplied by 181/365 (to reflect the
six-month period).
(b) Inception date.
(c) Actual expenses are equal to the annualized expense ratio as indicated in
the table multiplied by the average account value over the period
(November 2, 2022 through April 30, 2023), multiplied by 180/365.
Hypothetical expenses are assumed for the most recent six-month period.
Page 10
FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2023 (UNAUDITED)
SHARES DESCRIPTION VALUE
------------------------------------------------------------
COMMON STOCKS -- 59.7%
CONSTRUCTION & ENGINEERING
-- 3.6%
532,475 Quanta Services, Inc. $ 90,329,059
--------------
ELECTRIC UTILITIES -- 15.3%
603,593 Alliant Energy Corp. 33,282,118
672,917 American Electric Power Co.,
Inc. 62,190,989
80,453 Constellation Energy Corp. 6,227,062
69,991 Duke Energy Corp. 6,920,710
40,895 Emera, Inc. (CAD) 1,740,117
4,670,248 Enel S.p.A., ADR 31,617,579
200,655 Evergy, Inc. 12,462,682
305,239 Eversource Energy 23,689,599
74,669 Exelon Corp. 3,168,952
48,822 Fortis, Inc. (CAD) 2,143,721
532,259 Iberdrola S.A., ADR 27,672,145
145,691 IDACORP, Inc. 16,189,184
328,020 NextEra Energy, Inc. 25,136,173
88,418 Orsted A/S, ADR 2,639,277
1,825,541 PPL Corp. 52,429,538
772,650 Southern (The) Co. 56,828,408
246,196 Xcel Energy, Inc. 17,211,562
--------------
381,549,816
--------------
ENERGY EQUIPMENT & SERVICES
-- 0.2%
519,025 Archrock, Inc. 5,340,767
--------------
GAS UTILITIES -- 6.0%
771,616 AltaGas Ltd. (CAD) 13,497,656
330,331 Atmos Energy Corp. 37,703,980
11,703 Chesapeake Utilities Corp. 1,445,321
1,102,335 National Fuel Gas Co. 61,620,527
123,476 New Jersey Resources Corp. 6,376,301
321,654 ONE Gas, Inc. 24,751,275
95,596 UGI Corp. 3,238,792
--------------
148,633,852
--------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS
-- 1.9%
1,561,623 AES (The) Corp. 36,948,000
228,753 Clearway Energy, Inc., Class A 6,629,262
102,188 Northland Power, Inc. (CAD) 2,508,597
--------------
46,085,859
--------------
MULTI-UTILITIES -- 11.5%
1,142,593 ATCO Ltd., Class I (CAD) 37,756,127
78,130 Canadian Utilities Ltd.,
Class A (CAD) 2,258,812
116,082 CenterPoint Energy, Inc. 3,537,019
288,715 CMS Energy Corp. 17,975,396
224,248 DTE Energy Co. 25,207,718
1,067,354 Public Service Enterprise
Group, Inc. 67,456,773
747,815 Sempra Energy 116,277,754
SHARES/
UNITS DESCRIPTION VALUE
------------------------------------------------------------
MULTI-UTILITIES (CONTINUED)
170,394 WEC Energy Group, Inc. $ 16,386,791
--------------
286,856,390
--------------
OIL, GAS & CONSUMABLE FUELS
-- 21.0%
429,863 Cheniere Energy, Inc. 65,769,039
1,805,332 DT Midstream, Inc. 88,948,708
863,581 Enbridge, Inc. 34,335,981
2,214,809 Keyera Corp. (CAD) 52,115,076
5,692,142 Kinder Morgan, Inc. 97,620,235
931,072 ONEOK, Inc. 60,901,419
691,616 Targa Resources Corp. 52,237,756
497,688 TC Energy Corp. 20,673,960
1,599,198 Williams (The) Cos., Inc. 48,391,731
--------------
520,993,905
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 0.1%
14,279 Enphase Energy, Inc. (a) 2,344,612
--------------
WATER UTILITIES -- 0.1%
15,951 American Water Works Co.,
Inc. 2,364,736
--------------
TOTAL COMMON STOCKS
-- 59.7% 1,484,498,996
(Cost $1,233,878,515) --------------
MASTER LIMITED PARTNERSHIPS
-- 33.9%
CHEMICALS -- 0.3%
379,329 Westlake Chemical Partners,
L.P. 8,512,143
--------------
ENERGY EQUIPMENT & SERVICES
-- 0.1%
149,320 USA Compression Partners,
L.P. 3,120,788
--------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS
-- 2.7%
1,146,924 NextEra Energy Partners,
L.P. (b) 65,959,599
--------------
OIL, GAS & CONSUMABLE FUELS
-- 30.8%
676,930 Cheniere Energy Partners, L.P. 30,874,777
11,463,529 Energy Transfer, L.P. 147,650,254
242,848 EnLink Midstream LLC (b) 2,382,339
6,733,649 Enterprise Products Partners,
L.P. 177,162,305
1,032,966 Hess Midstream, L.P.,
Class A (b) 30,307,223
1,670,208 Holly Energy Partners, L.P. 27,825,665
2,772,339 Magellan Midstream Partners,
L.P. 154,696,516
1,525,156 MPLX, L.P. 53,365,208
10,185,825 Plains GP Holdings, L.P.,
Class A (b) 136,490,055
See Notes to Financial Statements Page 11
FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2023 (UNAUDITED)
UNITS DESCRIPTION VALUE
------------------------------------------------------------
MASTER LIMITED PARTNERSHIPS
(CONTINUED)
OIL, GAS & CONSUMABLE FUELS
(CONTINUED)
231,768 Western Midstream Partners,
L.P. $ 6,134,899
--------------
766,889,241
--------------
TOTAL MASTER LIMITED
PARTNERSHIPS -- 33.9% 844,481,771
(Cost $618,412,003) --------------
SHARES DESCRIPTION VALUE
------------------------------------------------------------
MONEY MARKET FUNDS -- 6.0%
148,230,843 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class 4.71% (c) $ 148,230,843
(Cost $148,230,843) --------------
TOTAL INVESTMENTS -- 99.6% 2,477,211,610
(Cost $2,000,521,361)
NET OTHER ASSETS AND
LIABILITIES -- 0.4% 8,975,527
--------------
NET ASSETS -- 100.0% $2,486,187,137
==============
(a) Non-income producing security.
(b) This security is taxed as a "C" corporation for federal income tax
purposes.
(c) Rate shown reflects yield as of April 30, 2023.
ADR - American Depositary Receipt
Currency Abbreviations:
CAD - Canadian Dollar
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2023 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
4/30/2023 PRICES INPUTS INPUTS
-----------------------------------------------------------------------
Common Stocks*.................................. $ 1,484,498,996 $ 1,484,498,996 $ -- $ --
Master Limited Partnerships*.................... 844,481,771 844,481,771 -- --
Money Market Funds.............................. 148,230,843 148,230,843 -- --
-----------------------------------------------------------------------
Total Investments............................... $ 2,477,211,610 $ 2,477,211,610 $ -- $ --
=======================================================================
* See Portfolio of Investments for industry breakout.
Page 12 See Notes to Financial Statements
FIRST TRUST EIP CARBON IMPACT ETF (ECLN)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2023 (UNAUDITED)
SHARES DESCRIPTION VALUE
------------------------------------------------------------
COMMON STOCKS -- 85.6%
CONSTRUCTION & ENGINEERING
-- 3.8%
7,944 Quanta Services, Inc. $ 1,347,620
--------------
ELECTRIC UTILITIES -- 32.8%
16,934 Alliant Energy Corp. 933,741
13,899 American Electric Power Co.,
Inc. 1,284,546
2,153 Constellation Energy Corp. 166,642
2,473 Duke Energy Corp. 244,530
884 Edison International 65,062
8,175 Emera, Inc. (CAD) 347,853
141,128 Enel S.p.A., ADR 955,436
8,417 Evergy, Inc. 522,780
9,398 Eversource Energy 729,379
4,005 Fortis, Inc. (CAD) 175,855
19,479 Hydro One Ltd. (CAD) (a) (b) 570,489
17,216 Iberdrola S.A., ADR 895,060
6,967 IDACORP, Inc. 774,173
7,161 NextEra Energy, Inc. 548,747
6,327 OGE Energy Corp. 237,516
456 Orsted A/S (DKK) (a) (b) (c) 40,926
30,943 PPL Corp. 888,683
16,214 Southern (The) Co. 1,192,540
16,268 Xcel Energy, Inc. 1,137,296
--------------
11,711,254
--------------
GAS UTILITIES -- 8.5%
8,757 AltaGas Ltd. (CAD) 153,184
12,532 Atmos Energy Corp. 1,430,403
1,521 Chesapeake Utilities Corp. 187,844
12,299 National Fuel Gas Co. 687,514
1,574 New Jersey Resources Corp. 81,281
6,532 ONE Gas, Inc. 502,637
--------------
3,042,863
--------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS
-- 8.2%
22,587 AES (The) Corp. 534,408
4,503 Brookfield Renewable Corp.,
Class A (CAD) 150,460
37,090 Clearway Energy, Inc., Class A 1,074,868
32,527 EDP Renovaveis S.A.
(EUR) (c) 723,003
7,683 Encavis AG (EUR) (c) 132,857
13,185 Northland Power, Inc. (CAD) 323,677
--------------
2,939,273
--------------
MORTGAGE REAL ESTATE INVESTMENT
TRUSTS -- 2.0%
24,702 Hannon Armstrong Sustainable
Infrastructure Capital,
Inc. 701,043
--------------
MULTI-UTILITIES -- 15.0%
20,935 ATCO Ltd., Class I (CAD) 691,781
1,528 CenterPoint Energy, Inc. 46,558
11,787 CMS Energy Corp. 733,859
6,296 DTE Energy Co. 707,733
SHARES/
UNITS DESCRIPTION VALUE
------------------------------------------------------------
MULTI-UTILITIES (CONTINUED)
14,672 Public Service Enterprise
Group, Inc. $ 927,271
9,023 Sempra Energy 1,402,986
8,859 WEC Energy Group, Inc. 851,970
--------------
5,362,158
--------------
OIL, GAS & CONSUMABLE FUELS
-- 14.0%
7,025 Cheniere Energy, Inc. 1,074,825
34,325 DT Midstream, Inc. 1,691,193
10,250 ONEOK, Inc. 670,452
11,706 Targa Resources Corp. 884,154
22,984 Williams (The) Cos., Inc. 695,496
--------------
5,016,120
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 0.8%
1,668 Enphase Energy, Inc. (d) 273,886
--------------
WATER UTILITIES -- 0.5%
1,085 American Water Works Co.,
Inc. 160,851
--------------
TOTAL COMMON STOCKS
-- 85.6% 30,555,068
(Cost $29,031,621) --------------
MASTER LIMITED PARTNERSHIPS
-- 7.5%
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS
-- 4.6%
24,892 Brookfield Renewable
Partners, L.P. (CAD) 768,155
15,054 NextEra Energy Partners,
L.P. (e) 865,755
--------------
1,633,910
--------------
OIL, GAS & CONSUMABLE FUELS
-- 2.9%
23,111 Cheniere Energy Partners, L.P. 1,054,093
--------------
TOTAL MASTER LIMITED
PARTNERSHIPS -- 7.5% 2,688,003
(Cost $2,827,000) --------------
MONEY MARKET FUNDS -- 6.9%
2,462,646 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class 4.71% (f) 2,462,646
(Cost $2,462,646) --------------
TOTAL INVESTMENTS -- 100.0% 35,705,717
(Cost $34,321,267)
NET OTHER ASSETS AND
LIABILITIES -- 0.0% 14,680
--------------
NET ASSETS -- 100.0% $ 35,720,397
==============
See Notes to Financial Statements Page 13
FIRST TRUST EIP CARBON IMPACT ETF (ECLN)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2023 (UNAUDITED)
(a) This security is exempt from registration upon resale under Rule 144A of
the Securities Act of 1933, as amended (the "1933 Act") and may be resold
in transactions exempt from registration, normally to qualified
institutional buyers. This security is not restricted on the foreign
exchange where it trades freely without any additional registration. As
such, it does not require the additional disclosure required of restricted
securities.
(b) This security may be resold to qualified foreign investors and foreign
institutional buyers under Regulation S of the 1933 Act.
(c) This security is fair valued by the Advisor's Pricing Committee in
accordance with procedures approved by the Trust's Board of Trustees, and
in accordance with provisions of the Investment Company Act of 1940 and
rules thereunder, as amended. At April 30, 2023, securities noted as such
are valued at $896,786 or 2.5% of net assets. Certain of these securities
are fair valued using a factor provided by a third-party pricing service
due to the change in value between the foreign markets' close and the New
York Stock Exchange close exceeding a certain threshold. On days when this
threshold is not exceeded, these securities are typically valued at the
last sale price on the exchange on which they are principally traded.
(d) Non-income producing security.
(e) This security is taxed as a "C" corporation for federal income tax
purposes.
(f) Rate shown reflects yield as of April 30, 2023.
ADR - American Depositary Receipt
Currency Abbreviations:
CAD - Canadian Dollar
DKK - Danish Krone
EUR - Euro
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2023 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
4/30/2023 PRICES INPUTS INPUTS
-----------------------------------------------------------------------
Common Stocks:
Electric Utilities........................... $ 11,711,254 $ 11,670,328 $ 40,926 $ --
Independent Power and Renewable Electricity
Producers................................. 2,939,273 2,083,413 855,860 --
Other Industry Categories*................... 15,904,541 15,904,541 -- --
Master Limited Partnerships*.................... 2,688,003 2,688,003 -- --
Money Market Funds.............................. 2,462,646 2,462,646 -- --
-----------------------------------------------------------------------
Total Investments............................... $ 35,705,717 $ 34,808,931 $ 896,786 $ --
=======================================================================
* See Portfolio of Investments for industry breakout.
Page 14 See Notes to Financial Statements
FT ENERGY INCOME PARTNERS STRATEGY ETF (EIPX)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2023 (UNAUDITED)
SHARES DESCRIPTION VALUE
------------------------------------------------------------
COMMON STOCKS -- 67.2%
CONSTRUCTION & ENGINEERING
-- 1.9%
14,012 Quanta Services, Inc. $ 2,376,996
--------------
ELECTRIC UTILITIES -- 6.8%
5,884 Alliant Energy Corp. 324,444
9,318 American Electric Power Co.,
Inc. 861,170
3,530 Constellation Energy Corp. 273,222
268,471 Enel S.p.A., ADR 1,817,549
5,348 Entergy Corp. 575,338
9,632 Evergy, Inc. 598,243
3,968 Eversource Energy 307,956
2,980 Exelon Corp. 126,471
29,268 Iberdrola S.A., ADR 1,521,643
4,071 NextEra Energy, Inc. 311,961
22,366 PPL Corp. 642,352
12,818 Southern (The) Co. 942,764
--------------
8,303,113
--------------
ENERGY EQUIPMENT & SERVICES
-- 4.6%
156,724 Archrock, Inc. 1,612,690
11,537 Cactus, Inc., Class A 467,018
32,601 Halliburton Co. 1,067,683
3,325 Nabors Industries Ltd. (a) 331,635
26,412 NOV, Inc. 442,401
22,961 Schlumberger N.V. 1,133,125
18,677 Tenaris S.A., ADR 536,217
--------------
5,590,769
--------------
GAS UTILITIES -- 3.8%
8,955 AltaGas Ltd. (CAD) 156,647
7,587 Atmos Energy Corp. 865,980
52,848 National Fuel Gas Co. 2,954,203
7,811 ONE Gas, Inc. 601,057
--------------
4,577,887
--------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS
-- 1.1%
10,933 AES (The) Corp. 258,675
36,528 Clearway Energy, Inc., Class A 1,058,581
--------------
1,317,256
--------------
MULTI-UTILITIES -- 6.6%
76,779 ATCO Ltd., Class I (CAD) 2,537,104
5,154 CMS Energy Corp. 320,888
933 DTE Energy Co. 104,879
30,340 Public Service Enterprise
Group, Inc. 1,917,488
19,905 Sempra Energy 3,095,028
--------------
7,975,387
--------------
OIL, GAS & CONSUMABLE FUELS
-- 42.3%
179,937 BP PLC, ADR 7,247,862
14,620 Canadian Natural Resources
Ltd. (CAD) 890,894
SHARES/
UNITS DESCRIPTION VALUE
------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS
(CONTINUED)
28,656 Cenovus Energy, Inc. (CAD) $ 480,966
7,934 Cheniere Energy, Inc. 1,213,902
287 Chevron Corp. 48,382
28,911 Coterra Energy, Inc. 740,122
6,344 Diamondback Energy, Inc. 902,117
50,948 DT Midstream, Inc. 2,510,208
30,459 Enbridge, Inc. 1,211,050
6,419 EOG Resources, Inc. 766,878
10,496 Exxon Mobil Corp. 1,242,097
46,521 Imperial Oil Ltd. (CAD) 2,371,289
119,165 Keyera Corp. (CAD) 2,803,986
204,691 Kinder Morgan, Inc. 3,510,451
2,420 Marathon Petroleum Corp. 295,240
19,748 ONEOK, Inc. 1,291,717
4,039 PDC Energy, Inc. 262,737
2,975 Phillips 66 294,525
3,999 Pioneer Natural Resources Co. 869,982
31,530 Range Resources Corp. 833,968
139,442 Shell PLC, ADR 8,642,615
6,419 SM Energy Co. 180,245
131,376 Southwestern Energy Co. (a) 681,841
16,563 Targa Resources Corp. 1,251,003
27,126 TC Energy Corp. 1,126,814
110,143 TotalEnergies SE, ADR 7,041,442
19,706 Tourmaline Oil Corp. (CAD) 885,341
2,309 Valero Energy Corp. 264,773
8,918 Vital Energy, Inc. (a) 414,955
35,576 Williams (The) Cos., Inc. 1,076,530
--------------
51,353,932
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 0.1%
826 Enphase Energy, Inc. (a) 135,629
--------------
TOTAL COMMON STOCKS
-- 67.2% 81,630,969
(Cost $80,380,368) --------------
MASTER LIMITED PARTNERSHIPS
-- 29.7%
ENERGY EQUIPMENT & SERVICES
-- 0.6%
32,839 USA Compression Partners,
L.P. 686,335
--------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS
-- 0.7%
15,702 NextEra Energy Partners,
L.P. (b) 903,022
--------------
OIL, GAS & CONSUMABLE FUELS
-- 28.4%
35,814 Alliance Resource Partners,
L.P. 748,154
75,895 Cheniere Energy Partners, L.P. 3,461,571
477,592 Energy Transfer, L.P. 6,151,385
See Notes to Financial Statements Page 15
FT ENERGY INCOME PARTNERS STRATEGY ETF (EIPX)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2023 (UNAUDITED)
UNITS DESCRIPTION VALUE
------------------------------------------------------------
MASTER LIMITED PARTNERSHIPS
(CONTINUED)
OIL, GAS & CONSUMABLE FUELS
(CONTINUED)
319,394 Enterprise Products Partners,
L.P. $ 8,403,256
31,578 Hess Midstream, L.P.,
Class A (b) 926,499
38,864 Kimbell Royalty Partners,
L.P. (b) 623,379
86,592 Magellan Midstream Partners,
L.P. 4,831,834
116,352 MPLX, L.P. 4,071,157
6,895 Natural Resource Partners,
L.P. 358,954
317,156 Plains GP Holdings, L.P.,
Class A (b) 4,249,890
29,009 TXO Energy Partners, L.P. (a) 646,030
--------------
34,472,109
--------------
TOTAL MASTER LIMITED
PARTNERSHIPS -- 29.7% 36,061,466
(Cost $34,965,244) --------------
SHARES DESCRIPTION VALUE
------------------------------------------------------------
MONEY MARKET FUNDS -- 2.9%
3,475,215 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class 4.71% (c) $ 3,475,215
(Cost $3,475,215) --------------
TOTAL INVESTMENTS -- 99.8% 121,167,650
(Cost $118,820,827)
NET OTHER ASSETS AND
LIABILITIES -- 0.2% 269,247
--------------
NET ASSETS -- 100.0% $ 121,436,897
==============
(a) Non-income producing security.
(b) This security is taxed as a "C" corporation for federal income tax
purposes.
(c) Rate shown reflects yield as of April 30, 2023.
ADR - American Depositary Receipt
Currency Abbreviations:
CAD - Canadian Dollar
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2023 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
4/30/2023 PRICES INPUTS INPUTS
-----------------------------------------------------------------------
Common Stocks*.................................. $ 81,630,969 $ 81,630,969 $ -- $ --
Master Limited Partnerships*.................... 36,061,466 36,061,466 -- --
Money Market Funds.............................. 3,475,215 3,475,215 -- --
-----------------------------------------------------------------------
Total Investments............................... $ 121,167,650 $ 121,167,650 $ -- $ --
=======================================================================
* See Portfolio of Investments for industry breakout.
Page 16 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND IV
STATEMENTS OF ASSETS AND LIABILITIES
APRIL 30, 2023 (UNAUDITED)
FIRST TRUST NORTH FIRST TRUST FT ENERGY
AMERICAN ENERGY EIP CARBON INCOME PARTNERS
INFRASTRUCTURE FUND IMPACT ETF STRATEGY ETF
(EMLP) (ECLN) (EIPX)
------------------- ------------------- -------------------
ASSETS:
Investments, at value....................................... $ 2,477,211,610 $ 35,705,717 $ 121,167,650
Foreign currency, at value.................................. 215 -- --
Receivables:
Dividends................................................ 7,550,536 40,231 200,816
Investment securities sold............................... 3,299,488 -- 156,503
Reclaims................................................. 62,132 1,822 5,501
----------------- ----------------- -----------------
Total Assets.......................................... 2,488,123,981 35,747,770 121,530,470
----------------- ----------------- -----------------
LIABILITIES:
Due to custodian foreign currency........................... -- 2 --
Investment advisory fees payable............................ 1,936,844 27,371 93,573
----------------- ----------------- -----------------
Total Liabilities..................................... 1,936,844 27,373 93,573
----------------- ----------------- -----------------
NET ASSETS.................................................. $ 2,486,187,137 $ 35,720,397 $ 121,436,897
================= ================= =================
NET ASSETS CONSIST OF:
Paid-in capital............................................. $ 2,309,400,431 $ 34,234,264 $ 119,243,803
Par value................................................... 916,550 14,000 59,500
Accumulated distributable earnings (loss)................... 175,870,156 1,472,133 2,133,594
----------------- ----------------- -----------------
NET ASSETS.................................................. $ 2,486,187,137 $ 35,720,397 $ 121,436,897
================= ================= =================
NET ASSET VALUE, per share.................................. $ 27.13 $ 25.51 $ 20.41
================= ================= =================
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share)................... 91,655,000 1,400,002 5,950,002
================= ================= =================
Investments, at cost........................................ $ 2,000,521,361 $ 34,321,267 $ 118,820,827
================= ================= =================
Foreign currency, at cost (proceeds)........................ $ 211 $ (2) $ --
================= ================= =================
See Notes to Financial Statements Page 17
FIRST TRUST EXCHANGE-TRADED FUND IV
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED APRIL 30, 2023 (UNAUDITED)
FIRST TRUST NORTH FIRST TRUST FT ENERGY
AMERICAN ENERGY EIP CARBON INCOME PARTNERS
INFRASTRUCTURE FUND IMPACT ETF STRATEGY ETF
(EMLP) (ECLN) (EIPX) (a)
------------------- ------------------- -------------------
INVESTMENT INCOME:
Dividends................................................... $ 40,364,078 $ 551,895 $ 1,609,632
Foreign withholding tax..................................... (1,017,622) (18,047) (131,886)
----------------- ----------------- -----------------
Total investment income.................................. 39,346,456 533,848 1,477,746
----------------- ----------------- -----------------
EXPENSES:
Investment advisory fees.................................... 12,044,553 160,870 454,565
----------------- ----------------- -----------------
Total expenses........................................... 12,044,553 160,870 454,565
----------------- ----------------- -----------------
NET INVESTMENT INCOME (LOSS)................................ 27,301,903 372,978 1,023,181
----------------- ----------------- -----------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments.............................................. 60,025,605 (162,120) (681,899)
In-kind redemptions...................................... 53,025,020 295,700 738,842
Foreign currency transactions............................ (122,779) (15,112) 1,203
----------------- ----------------- -----------------
Net realized gain (loss).................................... 112,927,846 118,468 58,146
----------------- ----------------- -----------------
Net change in unrealized appreciation (depreciation) on:
Investments.............................................. (54,234,040) 138,075 2,346,823
Foreign currency translation............................. (214) 31 --
----------------- ----------------- -----------------
Net change in unrealized appreciation (depreciation)........ (54,234,254) 138,106 2,346,823
----------------- ----------------- -----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)..................... 58,693,592 256,574 2,404,969
----------------- ----------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS................................ $ 85,995,495 $ 629,552 $ 3,428,150
================= ================= =================
(a) Inception date is November 2, 2022, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
Page 18 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND IV
STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST FIRST TRUST
NORTH AMERICAN ENERGY EIP CARBON
INFRASTRUCTURE FUND IMPACT ETF
(EMLP) (ECLN)
-------------------------------- --------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR
4/30/2023 ENDED 4/30/2023 ENDED
(UNAUDITED) 10/31/2022 (UNAUDITED) 10/31/2022
--------------- --------------- --------------- ---------------
OPERATIONS:
Net investment income (loss)............................ $ 27,301,903 $ 25,780,173 $ 372,978 $ 273,761
Net realized gain (loss)................................ 112,927,846 110,578,584 118,468 696,748
Net change in unrealized appreciation (depreciation).... (54,234,254) 77,549,288 138,106 (283,507)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from operations...................................... 85,995,495 213,908,045 629,552 687,002
--------------- --------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations................................... (45,097,551) (33,630,677) (404,460) (331,016)
Return of capital....................................... -- (41,859,413) -- --
--------------- --------------- --------------- ---------------
Total distributions to shareholders..................... (45,097,551) (75,490,090) (404,460) (331,016)
--------------- --------------- --------------- ---------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold............................... 37,586,636 398,965,547 5,151,085 13,026,378
Cost of shares redeemed................................. (162,602,443) (96,213,496) (1,283,648) (2,436,473)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting.........
from shareholder transactions........................ (125,015,807) 302,752,051 3,867,437 10,589,905
--------------- --------------- --------------- ---------------
Total increase (decrease) in net assets................. (84,117,863) 441,170,006 4,092,529 10,945,891
NET ASSETS:
Beginning of period..................................... 2,570,305,000 2,129,134,994 31,627,868 20,681,977
--------------- --------------- --------------- ---------------
End of period........................................... $ 2,486,187,137 $ 2,570,305,000 $ 35,720,397 $ 31,627,868
=============== =============== =============== ===============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................. 96,255,000 85,105,000 1,250,002 850,002
Shares sold............................................. 1,400,000 14,900,000 200,000 500,000
Shares redeemed......................................... (6,000,000) (3,750,000) (50,000) (100,000)
--------------- --------------- --------------- ---------------
Shares outstanding, end of period....................... 91,655,000 96,255,000 1,400,002 1,250,002
=============== =============== =============== ===============
See Notes to Financial Statements Page 19
FIRST TRUST EXCHANGE-TRADED FUND IV
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FT ENERGY
INCOME PARTNERS
STRATEGY ETF
(EIPX)
---------------
PERIOD
ENDED
4/30/2023
(UNAUDITED) (a)
---------------
OPERATIONS:
Net investment income (loss)............................ $ 1,023,181
Net realized gain (loss)................................ 58,146
Net change in unrealized appreciation (depreciation).... 2,346,823
---------------
Net increase (decrease) in net assets resulting
from operations...................................... 3,428,150
---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations................................... (1,294,556)
Return of capital....................................... --
---------------
Total distributions to shareholders..................... (1,294,556)
---------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold............................... 132,384,461
Cost of shares redeemed................................. (13,081,158)
---------------
Net increase (decrease) in net assets resulting
from shareholder transactions........................ 119,303,303
---------------
Total increase (decrease) in net assets................. 121,436,897
NET ASSETS:
Beginning of period..................................... --
---------------
End of period........................................... $ 121,436,897
===============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................. --
Shares sold............................................. 6,600,002
Shares redeemed......................................... (650,000)
---------------
Shares outstanding, end of period....................... 5,950,002
===============
(a) Inception date is November 2, 2022, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
Page 20 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND IV
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
4/30/2023 --------------------------------------------------------------
(UNAUDITED) 2022 2021 2020 2019 2018
----------- ---------- ---------- ---------- ---------- ----------
Net asset value, beginning of period $ 26.70 $ 25.02 $ 19.68 $ 24.83 $ 22.64 $ 24.55
----------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.28 0.37 0.19 0.20 0.36 0.35
Net realized and unrealized gain (loss) 0.63 2.14 6.01 (4.33) 2.81 (1.33)
----------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 0.91 2.51 6.20 (4.13) 3.17 (0.98)
----------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.48) (0.37) (0.86) (0.70) (0.29) (0.45)
Return of capital -- (0.46) -- (0.32) (0.69) (0.48)
----------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.48) (0.83) (0.86) (1.02) (0.98) (0.93)
----------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 27.13 $ 26.70 $ 25.02 $ 19.68 $ 24.83 $ 22.64
=========== ========== ========== ========== ========== ==========
TOTAL RETURN (a) 3.44% 10.19% 31.97% (16.69)% 14.22% (4.03)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 2,486,187 $2,570,305 $2,129,135 $1,687,897 $2,565,360 $2,117,805
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average
net assets 0.95% (b) 0.95% 0.95% 0.95% 0.95% 0.95%
Ratio of net investment income (loss) to
average net assets 2.15% (b) 1.08% 0.71% 1.13% 1.52% 1.40%
Portfolio turnover rate (c) 18% 32% 52% 46% 33% 35%
FIRST TRUST EIP CARBON IMPACT ETF (ECLN)
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31, PERIOD
4/30/2023 ------------------------------------ ENDED
(UNAUDITED) 2022 2021 2020 10/31/2019 (d)
----------- ---------- ---------- ---------- --------------
Net asset value, beginning of period $ 25.30 $ 24.33 $ 21.40 $ 20.70 $ 20.09
----------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.27 0.31 0.31 0.30 0.05
Net realized and unrealized gain (loss) 0.24 1.05 2.98 0.85 0.56
----------- ---------- ---------- ---------- ----------
Total from investment operations 0.51 1.36 3.29 1.15 0.61
----------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.27) (0.29) (0.36) (0.33) --
Net realized gain (0.03) (0.10) -- -- --
Return of capital -- -- -- (0.12) --
----------- ---------- ---------- ---------- ----------
Total distributions (0.30) (0.39) (0.36) (0.45) --
----------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 25.51 $ 25.30 $ 24.33 $ 21.40 $ 20.70
=========== ========== ========== ========== ==========
TOTAL RETURN (a) 2.02% 5.62% 15.49% 5.69% 3.04%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 35,720 $ 31,628 $ 20,682 $ 2,140 $ 2,070
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average
net assets 0.95% (b) 0.95% 0.95% 0.95% 0.95% (b)
Ratio of net investment income (loss) to
average net assets 2.20% (b) 1.29% 1.24% 1.45% 1.18% (b)
Portfolio turnover rate (c) 30% 22% 56% 23% 3%
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year.
(b) Annualized.
(c) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
(d) Inception date is August 19, 2019, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
See Notes to Financial Statements Page 21
FIRST TRUST EXCHANGE-TRADED FUND IV
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FT ENERGY INCOME PARTNERS STRATEGY ETF (EIPX)
PERIOD
ENDED
4/30/2023 (a)
(UNAUDITED)
-----------
Net asset value, beginning of period $ 19.72
-----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.19
Net realized and unrealized gain (loss) 0.74
-----------
Total from investment operations 0.93
-----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.24)
-----------
Total distributions (0.24)
-----------
Net asset value, end of period $ 20.41
===========
TOTAL RETURN (b) 4.73%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 121,437
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average
net assets 0.95% (c)
Ratio of net investment income (loss) to
average net assets 2.14% (c)
Portfolio turnover rate (d) 11%
(a) Inception date is November 2, 2022, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The return presented does not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year.
(c) Annualized.
(d) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
Page 22 See Notes to Financial Statements
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2023 (UNAUDITED)
1. ORGANIZATION
First Trust Exchange-Traded Fund IV (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on September 15,
2010, and is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of fourteen funds that are offering shares. This
report covers the three funds (each a "Fund" and collectively, the "Funds")
listed below. The shares of each Fund are listed and traded on the NYSE Arca,
Inc. ("NYSE Arca").
First Trust North American Energy Infrastructure Fund - (ticker "EMLP")
First Trust EIP Carbon Impact ETF - (ticker "ECLN")
FT Energy Income Partners Strategy ETF - (ticker "EIPX")(1)
(1) Commenced investment operations on November 2, 2022.
Each Fund represents a separate series of shares of beneficial interest in the
Trust. Unlike conventional mutual funds, each Fund issues and redeems shares on
a continuous basis, at net asset value ("NAV"), only in large blocks of shares
known as "Creation Units."
Each Fund is an actively managed exchange-traded fund. EMLP's investment
objective is to seek total return. EMLP will invest, under normal market
conditions, at least 80% of its net assets (including investment borrowings) in
equity securities of companies deemed by Energy Income Partners, LLC ("EIP" or
the "Sub-Advisor") to be engaged in the energy infrastructure sector, which
principally include U.S. and Canadian natural gas and electric utilities,
corporations operating energy infrastructure assets such as pipelines or
renewable energy production, utilities, publicly-traded master limited
partnerships or limited liability companies taxed as partnerships ("MLPs"), MLP
affiliates, and other companies that derive the majority of their revenues from
operating or providing services in support of infrastructure assets such as
pipelines, power transmission and petroleum and natural gas storage in the
petroleum, natural gas and power generation industries (collectively, "Energy
Infrastructure Companies"). In addition, under normal market conditions, the
Fund will invest at least 80% of its net assets (including investment
borrowings) in equity securities of companies headquartered or incorporated in
the United States and Canada. ECLN's investment objective is to seek to achieve
a competitive risk-adjusted total return balanced between dividends and capital
appreciation. ECLN will invest, under normal market conditions, at least 80% of
its net assets (including investment borrowings) in the equity securities of
companies identified by EIP as having or seeking to have a positive carbon
impact. The Sub-Advisor defines positive carbon impact companies as companies
that reduce, have a publicly available plan to reduce, or enable the reduction
of carbon and other greenhouse gas emissions from the production,
transportation, conversion, storage and use of energy. ECLN's investments will
be concentrated in the industries constituting the energy infrastructure sector,
which principally include utilities, natural gas pipeline companies,
manufacturers, contracted developers and/or owners of renewable energy; and
other companies that derive the majority of their earnings from manufacturing,
operating or providing services in support of infrastructure assets and/or
infrastructure activities such as renewable energy equipment, energy storage,
carbon capture and sequestration, fugitive methane abatement and energy
transmission and distribution equipment. EIPX's investment objective is to seek
risk-adjusted total return. EIPX will invest, under normal market conditions, at
least 80% of its net assets (plus any borrowing for investment purposes) in a
portfolio of equity securities in the broader energy market ("Energy
Companies"), which principally include companies in the Global Industry
Classification Standard ("GICS") energy sector, companies in the GICS utility
sector (excluding water utilities), or companies in any other GICS sectors that
derive at least 50% of their revenues or profits from exploration, development,
production, gathering, transportation, processing, storing, refining,
distribution, mining or marketing, of natural gas, natural gas liquids
(including propane), crude oil, refined petroleum products, petrochemicals,
electricity, coal, uranium, hydrogen or other energy sources, renewable energy
production, renewable energy equipment, energy storage, carbon, carbon dioxide,
carbon dioxide and fugitive methane mitigation and management, as well as
electric transmission, distribution, storage and system reliability support.
Energy Companies also include companies providing engineering, consulting and
construction services that derive at least 50% of their revenues or profits from
the above, all of which are selected by EIP. These companies may include MLPs
and MLP affiliates.
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds are each considered an investment company and follow accounting and
reporting guidance under Financial Accounting Standards Board Accounting
Standards Codification Topic 946, "Financial Services-Investment Companies." The
following is a summary of significant accounting policies consistently followed
by the Funds in the preparation of the financial statements. The preparation of
the financial statements in accordance with accounting principles generally
accepted in the United States of America ("U.S. GAAP") requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
Page 23
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2023 (UNAUDITED)
A. PORTFOLIO VALUATION
Each Fund's NAV is determined daily as of the close of regular trading on the
New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day
the NYSE is open for trading. If the NYSE closes early on a valuation day, the
NAV is determined as of that time. Foreign securities are priced using data
reflecting the earlier closing of the principal markets for those securities.
Each Fund's NAV is calculated by dividing the value of all assets of each Fund
(including accrued interest and dividends), less all liabilities (including
accrued expenses and dividends declared but unpaid), by the total number of
shares outstanding.
Each Fund's investments are valued daily at market value or, in the absence of
the market value with respect to any portfolio securities, at fair value. Market
value prices represent readily available market quotations such as last sale or
official closing prices from a national or foreign exchange (i.e., a regulated
market) and are primarily obtained from third-party pricing services. Fair value
prices represent any prices not considered market value prices and are either
obtained from a third-party pricing service or are determined by the Pricing
Committee of the Funds' investment advisor, First Trust Advisors L.P. ("First
Trust" or the "Advisor"), in accordance with valuation procedures approved by
the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act
and rules thereunder. Investments valued by the Advisor's Pricing Committee, if
any, are footnoted as such in the footnotes to the Portfolio of Investments.
Each Fund's investments are valued as follows:
Common stocks, MLPs and other equity securities listed on any national or
foreign exchange (excluding The Nasdaq Stock Market LLC ("Nasdaq") and the
London Stock Exchange Alternative Investment Market ("AIM")) are valued at
the last sale price on the exchange on which they are principally traded
or, for Nasdaq and AIM securities, the official closing price. Securities
traded on more than one securities exchange are valued at the last sale
price or official closing price, as applicable, at the close of the
securities exchange representing the primary exchange for such securities.
Securities trading on foreign exchanges or over-the-counter markets that
close prior to the NYSE close may be valued using a systematic fair
valuation model provided by a third-party pricing service. If these
foreign securities meet certain criteria in relation to the valuation
model, their valuation is systematically adjusted to reflect the impact of
movement in the U.S. market after the close of the foreign markets.
Shares of open-end funds are valued based on NAV per share.
Securities traded in an over-the-counter market are valued at the mean of
their most recent bid and asked price, if available, and otherwise at
their last trade price.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Advisor's Pricing Committee at
fair value. These securities generally include, but are not limited to,
restricted securities (securities which may not be publicly sold without
registration under the Securities Act of 1933, as amended) for which a
third-party pricing service is unable to provide a market price; securities
whose trading has been formally suspended; a security whose market or fair value
price is not available from a pre-established pricing source; a security with
respect to which an event has occurred that is likely to materially affect the
value of the security after the market has closed but before the calculation of
a Fund's NAV or make it difficult or impossible to obtain a reliable market
quotation; and a security whose price, as provided by the third-party pricing
service, does not reflect the security's fair value. As a general principle, the
current fair value of a security would appear to be the amount which the owner
might reasonably expect to receive for the security upon its current sale. When
fair value prices are used, generally they will differ from market quotations or
official closing prices on the applicable exchanges. A variety of factors may be
considered in determining the fair value of such securities, including, but not
limited to, the following:
1) the last sale price on the exchange on which they are principally
traded or, for Nasdaq and AIM securities, the official closing
price;
2) the type of security;
3) the size of the holding;
4) the initial cost of the security;
5) transactions in comparable securities;
6) price quotes from dealers and/or third-party pricing services;
7) relationships among various securities;
8) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;
9) an analysis of the issuer's financial statements;
10) the existence of merger proposals or tender offers that might affect
the value of the security; and
11) other relevant factors.
Page 24
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2023 (UNAUDITED)
If the securities in question are foreign securities, the following additional
information may be considered:
1) the value of similar foreign securities traded on other foreign
markets;
2) ADR trading of similar securities;
3) closed-end fund or exchange-traded fund trading of similar
securities;
4) foreign currency exchange activity;
5) the trading prices of financial products that are tied to baskets of
foreign securities;
6) factors relating to the event that precipitated the pricing problem;
7) whether the event is likely to recur;
8) whether the effects of the event are isolated or whether they affect
entire markets, countries or regions; and
9) other relevant factors.
Because foreign markets may be open on different days than the days during which
investors may transact in the shares of a Fund, the value of the Fund's
securities may change on the days when investors are not able to transact in the
shares of the Fund. The value of securities denominated in foreign currencies is
converted into U.S. dollars using exchange rates determined daily as of the
close of regular trading on the NYSE.
The Funds are subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investment.
The inputs or methodologies used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value each Fund's investments as of April 30, 2023, is
included with each Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income, if any, is
recorded on the accrual basis.
Distributions received from a Fund's investments in MLPs generally are comprised
of return of capital and investment income. A Fund records estimated return of
capital and investment income based on historical information available from
each MLP. These estimates may subsequently be revised based on information
received from the MLPs after their tax reporting periods are concluded.
Distributions received from a Fund's investments in Real Estate Investment
Trusts ("REITs") may be comprised of return of capital, capital gains, and
income. The actual character of the amounts received during the year are not
known until after the REITs' fiscal year end. A Fund records the character of
distributions received from the REITs during the year based on estimates
available. The characterization of distributions received by a Fund may be
subsequently revised based on information received from the REITs after their
tax reporting periods conclude.
C. FOREIGN CURRENCY
The books and records of the Funds are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated into
U.S. dollars at the exchange rates prevailing at the end of the period.
Purchases and sales of investments and items of income and expense are
translated on the respective dates of such transactions. Unrealized gains and
Page 25
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2023 (UNAUDITED)
losses on assets and liabilities, other than investments in securities, which
result from changes in foreign currency exchange rates have been included in
"Net change in unrealized appreciation (depreciation) on foreign currency
translation" on the Statements of Operations. Unrealized gains and losses on
investments in securities which result from changes in foreign exchange rates
are included with fluctuations arising from changes in market price and are
shown in "Net change in unrealized appreciation (depreciation) on investments"
on the Statements of Operations. Net realized foreign currency gains and losses
include the effect of changes in exchange rates between trade date and
settlement date on investment security transactions, foreign currency
transactions and interest and dividends received and is included in "Net
realized gain (loss) on foreign currency transactions" on the Statements of
Operations. The portion of foreign currency gains and losses related to
fluctuations in exchange rates between the initial purchase settlement date and
subsequent sale trade date is included in "Net realized gain (loss) on
investments" on the Statements of Operations.
D. DIVIDENDS AND DISTRIBUTION TO SHAREHOLDERS
Dividends from net investment income of each Fund, if any, are declared and paid
quarterly, or as the Board of Trustees may determine from time to time.
Distributions of net realized gains earned by each Fund, if any, are distributed
at least annually. A Fund may also designate a portion of the amount paid to
redeeming shareholders as a distribution for tax purposes.
Distributions from net investment income and realized capital gains are
determined in accordance with federal income tax regulations, which may differ
from U.S. GAAP. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These permanent differences are primarily due to the varying
treatment of income and gain/loss on significantly modified portfolio securities
held by the Funds and have no impact on net assets or NAV per share. Temporary
differences, which arise from recognizing certain items of income, expense and
gain/loss in different periods for financial statement and tax purposes, will
reverse at some time in the future.
The tax character of distributions paid by each Fund during the fiscal year
ended October 31, 2022 was as follows:
Distributions Distributions Distributions
paid from paid from paid from
Ordinary Income Capital Gains Return of Capital
--------------- ------------- -----------------
First Trust North American Energy Infrastructure Fund $ 33,630,677 $ -- $ 41,548,643
First Trust EIP Carbon Impact ETF 331,016 -- --
As of October 31, 2022, the components of distributable earnings on a tax basis
for each Fund were as follows:
Accumulated
Undistributed Capital and Net Unrealized
Ordinary Other Appreciation
Income Gain (Loss) (Depreciation)
--------------- ------------- -----------------
First Trust North American Energy Infrastructure Fund $ -- $(358,055,801) $ 493,028,013
First Trust EIP Carbon Impact ETF 23,595 39,587 1,183,859
E. INCOME TAXES
Each Fund intends to qualify or continue to qualify as a regulated investment
company by complying with the requirements under Subchapter M of the Internal
Revenue Code of 1986, as amended, which includes distributing substantially all
of its net investment income and net realized gains to shareholders.
Accordingly, no provision has been made for federal and state income taxes.
However, due to the timing and amount of distributions, each Fund may be subject
to an excise tax of 4% of the amount by which approximately 98% of each Fund's
taxable income exceeds the distributions from such taxable income for the
calendar year.
Each Fund intends to utilize provisions of the federal income tax laws, which
allow it to carry a realized capital loss forward indefinitely following the
year of the loss and offset such loss against any future realized capital gains.
Each Fund is subject to certain limitations under U.S. tax rules on the use of
capital loss carryforwards and net unrealized built-in losses. These limitations
apply when there has been a 50% change in ownership. At October 31, 2022, EMLP
and ECLN had non-expiring capital loss carryforwards available for federal
income tax purposes of $358,055,801 and $0, respectively.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2023 (UNAUDITED)
The Funds are subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. For EMLP and ECLN, the taxable
years ended 2019, 2020, 2021, and 2022 remain open to federal and state audit.
As of April 30, 2023, management has evaluated the application of these
standards to the Funds and has determined that no provision for income tax is
required in the Funds' financial statements for uncertain tax positions.
During the taxable year ended October 31, 2022, EMLP and ECLN utilized
non-expiring capital loss carryforwards in the following amounts:
Capital Loss
Carryforward
Utilized
---------------
First Trust North American Energy Infrastructure Fund $ 84,449,607
First Trust EIP Carbon Impact ETF 4,660
Certain losses realized during the current fiscal year may be deferred and
treated as occurring on the first day of the following fiscal year for federal
income tax purposes. For the fiscal year ended October 31, 2022, EMLP and ECLN
had no net late year ordinary or capital losses.
As of April 30, 2023, the aggregate cost, gross unrealized appreciation, gross
unrealized depreciation, and net unrealized appreciation/(depreciation) on
investments (including short positions and derivatives, if any) for federal
income tax purposes were as follows:
Gross Gross Net Unrealized
Unrealized Unrealized Appreciation
Tax Cost Appreciation (Depreciation) (Depreciation)
--------------- --------------- --------------- ---------------
First Trust North American Energy
Infrastructure Fund $ 2,000,521,361 $ 491,309,918 $ (14,619,669) $ 476,690,249
First Trust EIP Carbon Impact ETF 34,321,267 2,446,373 (1,061,923) 1,384,450
FT Energy Income Partners Strategy ETF 118,820,827 3,757,233 (1,410,410) 2,346,823
F. EXPENSES
Expenses, other than the investment advisory fee and other excluded expenses,
are paid by the Advisor (see Note 3).
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Funds, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the ongoing monitoring of the securities in each Fund's
portfolio, managing the Funds' business affairs and providing certain
administrative services necessary for the management of the Funds.
The Trust, on behalf of the Funds, and First Trust have retained EIP, an
affiliate of First Trust, to serve as the Funds' investment sub-advisor. In this
capacity, EIP is responsible for the selection and ongoing monitoring of the
securities in each Fund's investment portfolio. Pursuant to the Investment
Management Agreement between the Trust and the Advisor, First Trust will
supervise EIP and its management of the investment of each Fund's assets and
will pay EIP for its services as the Funds' sub-advisor. First Trust will also
be responsible for each Fund's expenses, including the cost of transfer agency,
custody, fund administration, legal, audit and other services, but excluding fee
payments under the Investment Management Agreement, interest, taxes, acquired
fund fees and expenses, if any, brokerage commissions and other expenses
connected with the execution of portfolio transactions, distribution and service
fees payable pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses.
Effective November 1, 2022, for EMLP and ECLN, and for EIPX from its date of
inception, November 2, 2022, the annual unitary management fee payable by each
Fund to First Trust for these services will be reduced at certain levels of each
Fund's net assets ("breakpoints") and calculated pursuant to the schedule below:
Breakpoints
-------------------------------------------------------------------------
Fund net assets up to and including $2.5 billion 0.95000%
Fund net assets greater than $2.5 billion up to and including $5 billion 0.92625%
Fund net assets greater than $5 billion up to and including $7.5 billion 0.90250%
Fund net assets greater than $7.5 billion up to and including $10 billion 0.87875%
Fund net assets greater than $10 billion 0.85500%
Page 27
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2023 (UNAUDITED)
Prior to November 1, 2022, EMLP and ECLN each paid First Trust an annual unitary
management fee equal to 0.95% of its average daily net assets.
EIP receives a sub-advisory fee for EMLP from First Trust equal to 45% of any
remaining monthly investment management fee paid to First Trust after the Fund's
average Fund expenses accrued during the most recent twelve months are
subtracted from the investment management fee in a given month. EIP receives a
sub-advisory fee for ECLN and EIPX from First Trust equal to 50% of the monthly
investment management fee paid to First Trust less one-half of the Fund's
expenses, for which EIP is responsible. During any period in which the Advisor's
management fee is reduced in accordance with the breakpoints described above,
the investment sub-advisory fee (which is based on the Advisor's management fee)
paid to EIP will be reduced to reflect the reduction in the Advisor's management
fee.
First Trust Capital Partners, LLC ("FTCP"), an affiliate of First Trust, owns,
through a wholly-owned subsidiary, a 15% ownership interest in each of EIP and
EIP Partners, LLC, an affiliate of EIP.
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
each Fund. As custodian, BNYM is responsible for custody of each Fund's assets.
As fund accountant and administrator, BNYM is responsible for maintaining the
books and records of each Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for each Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
a target outcome fund or an index fund.
Additionally, the Lead Independent Trustee and the Chairs of the Audit
Committee, Nominating and Governance Committee and Valuation Committee are paid
annual fees to serve in such capacities, with such compensation allocated pro
rata among each fund in the First Trust Fund Complex based on net assets.
Independent Trustees are reimbursed for travel and out-of-pocket expenses in
connection with all meetings. The Lead Independent Trustee and Committee Chairs
rotate every three years. The officers and "Interested" Trustee receive no
compensation from the Trust for acting in such capacities.
4. PURCHASES AND SALES OF SECURITIES
For the period ended April 30, 2023, the cost of purchases and proceeds from
sales of investments for each Fund, excluding short-term investments and in-kind
transactions, were as follows:
Purchases Sales
--------------- ---------------
First Trust North American Energy Infrastructure Fund $ 415,960,799 $ 506,836,738
First Trust EIP Carbon Impact ETF 11,455,504 9,073,649
FT Energy Income Partners Strategy ETF 11,704,821 12,300,875
For the period ended April 30, 2023, the cost of in-kind purchases and proceeds
from in-kind sales for each Fund were as follows:
Purchases Sales
--------------- ---------------
First Trust North American Energy Infrastructure Fund $ 32,670,118 $ 142,806,136
First Trust EIP Carbon Impact ETF 4,285,024 1,255,866
FT Energy Income Partners Strategy ETF 129,556,892 12,973,480
5. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
Each Fund generally issues and redeems its shares in primary market transactions
through a creation and redemption mechanism and does not sell or redeem
individual shares. Instead, financial entities known as "Authorized
Participants" have contractual arrangements with a Fund or one of the Fund's
service providers to purchase and redeem Fund shares directly with the Fund in
large blocks of shares known as "Creation Units." Prior to the start of trading
on every business day, a Fund publishes through the National Securities Clearing
Corporation ("NSCC") the "basket" of securities, cash or other assets that it
Page 28
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2023 (UNAUDITED)
will accept in exchange for a Creation Unit of the Fund's shares. An Authorized
Participant that wishes to effectuate a creation of a Fund's shares deposits
with the Fund the "basket" of securities, cash or other assets identified by the
Fund that day, and then receives the Creation Unit of the Fund's shares in
return for those assets. After purchasing a Creation Unit, the Authorized
Participant may continue to hold a Fund's shares or sell them in the secondary
market. The redemption process is the reverse of the purchase process: the
Authorized Participant redeems a Creation Unit of a Fund's shares for a basket
of securities, cash or other assets. The combination of the creation and
redemption process with secondary market trading in a Fund's shares and
underlying securities provides arbitrage opportunities that are designed to help
keep the market price of a Fund's shares at or close to the NAV per share of the
Fund.
Each Fund imposes fees in connection with the purchase of Creation Units. These
fees may vary based upon various fact-based circumstances, including, but not
limited to, the composition of the securities included in the Creation Unit or
the countries in which the transactions are settled. The price for each Creation
Unit will equal the daily NAV per share of a Fund times the number of shares in
a Creation Unit, plus the fees described above and, if applicable, any
operational processing and brokerage costs, transfer fees, stamp taxes and part
or all of the spread between the expected bid and offer side of the market
related to the securities comprising the creation basket.
Each Fund also imposes fees in connection with the redemption of Creation Units.
These fees may vary based upon various fact-based circumstances, including, but
not limited to, the composition of the securities included in the Creation Unit
or the countries in which the transactions are settled. The price received for
each Creation Unit will equal the daily NAV per share of a Fund times the number
of shares in a Creation Unit, minus the fees described above and, if applicable,
any operational processing and brokerage costs, transfer fees, stamp taxes and
part or all of the spread between the expected bid and offer side of the market
related to the securities comprising the redemption basket. Investors who use
the services of a broker or other such intermediary in addition to an Authorized
Participant to effect a redemption of a Creation Unit may also be assessed an
amount to cover the cost of such services. The redemption fee charged by a Fund
will comply with Rule 22c-2 of the 1940 Act which limits redemption fees to no
more than 2% of the value of the shares redeemed.
6. DISTRIBUTION PLAN
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Funds are
authorized to pay an amount up to 0.25% of their average daily net assets each
year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the
Funds, for amounts expended to finance activities primarily intended to result
in the sale of Creation Units or the provision of investor services. FTP may
also use this amount to compensate securities dealers or other persons that are
Authorized Participants for providing distribution assistance, including
broker-dealer and shareholder support and educational and promotional services.
No 12b-1 fees are currently paid by the Funds, and pursuant to a contractual
arrangement, no 12b-1 fees will be paid any time before March 31, 2024 for EMLP
and ECLN and October 28, 2024 for EIPX.
7. INDEMNIFICATION
The Trust, on behalf of the Funds, has a variety of indemnification obligations
under contracts with its service providers. The Trust's maximum exposure under
these arrangements is unknown. However, the Trust has not had prior claims or
losses pursuant to these contracts and expects the risk of loss to be remote.
8. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Funds
through the date the financial statements were issued and has determined that
there was the following subsequent event:
On May 23, 2023, the Advisor's Pricing Committee approved changes to the
Advisor's Valuation Procedures for the First Trust Funds, including
clarifications to certain pricing methodologies. These changes will be reflected
in future reports' Notes to Financial Statements.
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ADDITIONAL INFORMATION
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FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2023 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine
how to vote proxies and information on how each Fund voted proxies relating to
its portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
each Fund's website at www.ftportfolios.com; and (3) on the Securities and
Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
Each Fund files portfolio holdings information for each month in a fiscal
quarter within 60 days after the end of the relevant fiscal quarter on Form
N-PORT. Portfolio holdings information for the third month of each fiscal
quarter will be publicly available on the SEC's website at www.sec.gov. Each
Fund's complete schedule of portfolio holdings for the second and fourth
quarters of each fiscal year is included in the semi-annual and annual reports
to shareholders, respectively, and is filed with the SEC on Form N-CSR. The
semi-annual and annual report for each Fund is available to investors within 60
days after the period to which it relates. Each Fund's Forms N-PORT and Forms
N-CSR are available on the SEC's website listed above.
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE
APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS
RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW
APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT
IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY
FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE,
RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT
WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO
REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
CONCENTRATION RISK. To the extent that a fund is able to invest a significant
percentage of its assets in a single asset class or the securities of issuers
within the same country, state, region, industry or sector, an adverse economic,
business or political development may affect the value of the fund's investments
more than if the fund were more broadly diversified. A fund that tracks an index
will be concentrated to the extent the fund's corresponding index is
concentrated. A concentration makes a fund more susceptible to any single
occurrence and may subject the fund to greater market risk than a fund that is
more broadly diversified.
CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable
or unwilling to make dividend, interest and/or principal payments when due and
the related risk that the value of a security may decline because of concerns
about the issuer's ability to make such payments.
CYBER SECURITY RISK. The funds are susceptible to potential operational risks
through breaches in cyber security. A breach in cyber security refers to both
intentional and unintentional events that may cause a fund to lose proprietary
information, suffer data corruption or lose operational capacity. Such events
could cause a fund to incur regulatory penalties, reputational damage,
additional compliance costs associated with corrective measures and/or financial
loss. In addition, cyber security breaches of a fund's third-party service
providers, such as its administrator, transfer agent, custodian, or sub-advisor,
as applicable, or issuers in which the fund invests, can also subject a fund to
many of the same risks associated with direct cyber security breaches.
DEFINED OUTCOME FUNDS RISK. To the extent a fund's investment strategy is
designed to deliver returns tied to the price performance of an underlying ETF,
an investor may not realize the returns the fund seeks to achieve if that
investor does not hold shares for the entire target outcome period. In the event
an investor purchases shares after the first day of the target outcome period or
sells shares prior to the end of the target outcome period, the buffer that the
fund seeks to provide against a decline in the value of the underlying ETF may
not be available, the enhanced returns that the fund seeks to provide (if any)
may not be available and the investor may not participate in a gain in the value
of the underlying ETF up to the cap for the investor's investment period.
Additionally, the fund will not participate in gains of the underlying ETF above
the cap and a shareholder may lose their entire investment. If the fund seeks
enhanced returns, there are certain time periods when the value of the fund may
fall faster than the value of the underlying ETF, and it is very unlikely that,
on any given day during which the underlying ETF share price increases in value,
the fund's share price will increase at the same rate as the enhanced returns
sought by the fund, which is designed for an entire target outcome period.
Trading flexible exchange options involves risks different from, or possibly
greater than, the risks associated with investing directly in securities, such
as less liquidity and correlation and valuation risks. A fund may experience
substantial downside from specific flexible exchange option positions and
certain positions may expire worthless.
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2023 (UNAUDITED)
DERIVATIVES RISK. To the extent a fund uses derivative instruments such as
futures contracts, options contracts and swaps, the fund may experience losses
because of adverse movements in the price or value of the underlying asset,
index or rate, which may be magnified by certain features of the derivative.
These risks are heightened when a fund's portfolio managers use derivatives to
enhance the fund's return or as a substitute for a position or security, rather
than solely to hedge (or offset) the risk of a position or security held by the
fund.
EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the
value of the fund's shares will fluctuate with changes in the value of the
equity securities. Equity securities prices fluctuate for several reasons,
including changes in investors' perceptions of the financial condition of an
issuer or the general condition of the relevant stock market, such as market
volatility, or when political or economic events affecting the issuers occur. In
addition, common stock prices may be particularly sensitive to rising interest
rates, as the cost of capital rises and borrowing costs increase. Equity
securities may decline significantly in price over short or extended periods of
time, and such declines may occur in the equity market as a whole, or they may
occur in only a particular country, company, industry or sector of the market.
ETF RISK. The shares of an ETF trade like common stock and represent an interest
in a portfolio of securities. The risks of owning an ETF generally reflect the
risks of owning the underlying securities, although lack of liquidity in an ETF
could result in it being more volatile and ETFs have management fees that
increase their costs. Shares of an ETF trade on an exchange at market prices
rather than net asset value, which may cause the shares to trade at a price
greater than net asset value (premium) or less than net asset value (discount).
In times of market stress, decisions by market makers to reduce or step away
from their role of providing a market for an ETF's shares, or decisions by an
ETF's authorized participants that they are unable or unwilling to proceed with
creation and/or redemption orders of an ETF's shares, could result in shares of
the ETF trading at a discount to net asset value and in greater than normal
intraday bid-ask spreads.
FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income
securities, the fund will be subject to credit risk, income risk, interest rate
risk, liquidity risk and prepayment risk. Income risk is the risk that income
from a fund's fixed income investments could decline during periods of falling
interest rates. Interest rate risk is the risk that the value of a fund's fixed
income securities will decline because of rising interest rates. Liquidity risk
is the risk that a security cannot be purchased or sold at the time desired, or
cannot be purchased or sold without adversely affecting the price. Prepayment
risk is the risk that the securities will be redeemed or prepaid by the issuer,
resulting in lower interest payments received by the fund. In addition to these
risks, high yield securities, or "junk" bonds, are subject to greater market
fluctuations and risk of loss than securities with higher ratings, and the
market for high yield securities is generally smaller and less liquid than that
for investment grade securities.
INDEX OR MODEL CONSTITUENT RISK. Certain funds may be a constituent of one or
more indices or ETF models. As a result, such a fund may be included in one or
more index-tracking exchange-traded funds or mutual funds. Being a component
security of such a vehicle could greatly affect the trading activity involving a
fund, the size of the fund and the market volatility of the fund. Inclusion in
an index could increase demand for the fund and removal from an index could
result in outsized selling activity in a relatively short period of time. As a
result, a fund's net asset value could be negatively impacted and the fund's
market price may be significantly below its net asset value during certain
periods. In addition, index rebalances may potentially result in increased
trading activity in a fund's shares.
INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject
to Index Provider Risk. There is no assurance that the Index Provider will
compile the Index accurately, or that the Index will be determined, maintained,
constructed, reconstituted, rebalanced, composed, calculated or disseminated
accurately. To correct any such error, the Index Provider may carry out an
unscheduled rebalance or other modification of the Index constituents or
weightings, which may increase the fund's costs. The Index Provider does not
provide any representation or warranty in relation to the quality, accuracy or
completeness of data in the Index, and it does not guarantee that the Index will
be calculated in accordance with its stated methodology. Losses or costs
associated with any Index Provider errors generally will be borne by the fund
and its shareholders.
INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of
other investment vehicles, the fund will incur additional fees and expenses that
would not be present in a direct investment in those investment vehicles.
Furthermore, the fund's investment performance and risks are directly related to
the investment performance and risks of the investment vehicles in which the
fund invests.
LIBOR RISK. To the extent a fund invests in floating or variable rate
obligations that use the London Interbank Offered Rate ("LIBOR") as a reference
interest rate, it is subject to LIBOR Risk. The United Kingdom's Financial
Conduct Authority, which regulates LIBOR has ceased making LIBOR available as a
reference rate over a phase-out period that began December 31, 2021.
Page 31
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2023 (UNAUDITED)
There is no assurance that any alternative reference rate, including the Secured
Overnight Financing Rate ("SOFR") will be similar to or produce the same value
or economic equivalence as LIBOR or that instruments using an alternative rate
will have the same volume or liquidity. The unavailability or replacement of
LIBOR may affect the value, liquidity or return on certain fund investments and
may result in costs incurred in connection with closing out positions and
entering into new trades. Any potential effects of the transition away from
LIBOR on the fund or on certain instruments in which the fund invests can be
difficult to ascertain, and they may vary depending on a variety of factors, and
they could result in losses to the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. Market risk is the risk that a particular security, or shares of a
fund in general, may fall in value. Securities held by a fund, as well as shares
of a fund itself, are subject to market fluctuations caused by factors such as
general economic conditions, political events, regulatory or market
developments, changes in interest rates and perceived trends in securities
prices. Shares of a fund could decline in value or underperform other
investments as a result of the risk of loss associated with these market
fluctuations. In addition, local, regional or global events such as war, acts of
terrorism, spread of infectious diseases or other public health issues,
recessions, or other events could have a significant negative impact on a fund
and its investments. Such events may affect certain geographic regions,
countries, sectors and industries more significantly than others. In February
2022, Russia invaded Ukraine which has caused and could continue to cause
significant market disruptions and volatility within the markets in Russia,
Europe, and the United States. The hostilities and sanctions resulting from
those hostilities could have a significant impact on certain fund investments as
well as fund performance. The COVID-19 global pandemic and the ensuing policies
enacted by governments and central banks have caused and may continue to cause
significant volatility and uncertainty in global financial markets. While the
U.S. has resumed "reasonably" normal business activity, many countries continue
to impose lockdown measures. Additionally, there is no guarantee that vaccines
will be effective against emerging variants of the disease. These events also
adversely affect the prices and liquidity of a fund's portfolio securities or
other instruments and could result in disruptions in the trading markets. Any of
such circumstances could have a materially negative impact on the value of a
fund's shares and result in increased market volatility. During any such events,
a fund's shares may trade at increased premiums or discounts to their net asset
value and the bid/ask spread on a fund's shares may widen.
NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities,
it is subject to additional risks not associated with securities of domestic
issuers. Non-U.S. securities are subject to higher volatility than securities of
domestic issuers due to: possible adverse political, social or economic
developments; restrictions on foreign investment or exchange of securities;
capital controls; lack of liquidity; currency exchange rates; excessive
taxation; government seizure of assets; the imposition of sanctions by foreign
governments; different legal or accounting standards; and less government
supervision and regulation of exchanges in foreign countries. Investments in
non-U.S. securities may involve higher costs than investments in U.S.
securities, including higher transaction and custody costs, as well as
additional taxes imposed by non-U.S. governments. These risks may be heightened
for securities of companies located, or with significant operations, in emerging
market countries.
OPERATIONAL RISK. Each fund is subject to risks arising from various operational
factors, including, but not limited to, human error, processing and
communication errors, errors of a fund's service providers, counterparties or
other third-parties, failed or inadequate processes and technology or systems
failures. Each fund relies on third-parties for a range of services, including
custody. Any delay or failure relating to engaging or maintaining such service
providers may affect a fund's ability to meet its investment objective. Although
the funds and the funds' investment advisor seek to reduce these operational
risks through controls and procedures, there is no way to completely protect
against such risks.
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
PREFERRED SECURITIES RISK. Preferred securities combine some of the
characteristics of both common stocks and bonds. Preferred securities are
typically subordinated to bonds and other debt securities in a company's capital
structure in terms of priority to corporate income, subjecting them to greater
credit risk than those debt securities. Generally, holders of preferred
securities have no voting rights with respect to the issuing company unless
preferred dividends have been in arrears for a specified number of periods, at
which time the preferred security holders may obtain limited rights. In certain
circumstances, an issuer of preferred securities may defer payment on the
securities and, in some cases, redeem the securities prior to a specified date.
Preferred securities may also be substantially less liquid than other
securities, including common stock.
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APRIL 30, 2023 (UNAUDITED)
VALUATION RISK. The valuation of certain securities may carry more risk than
that of common stock. Uncertainties in the conditions of the financial markets,
unreliable reference data, lack of transparency and inconsistency of valuation
models and processes may lead to inaccurate asset pricing. A fund may hold
investments in sizes smaller than institutionally sized round lot positions
(sometimes referred to as odd lots). However, third-party pricing services
generally provide evaluations on the basis of institutionally-sized round lots.
If a fund sells certain of its investments in an odd lot transaction, the sale
price may be less than the value at which such securities have been held by the
fund. Odd lots often trade at lower prices than institutional round lots. There
is no assurance that the fund will be able to sell a portfolio security at the
price established by the pricing service, which could result in a loss to the
fund.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
LIQUIDITY RISK MANAGEMENT PROGRAM
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as
amended (the "1940 Act"), the Funds and each other fund in the First Trust Fund
Complex, other than the closed-end funds, have adopted and implemented a
liquidity risk management program (the "Program") reasonably designed to assess
and manage the funds' liquidity risk, i.e., the risk that a fund could not meet
requests to redeem shares issued by the fund without significant dilution of
remaining investors' interests in the fund. The Board of Trustees of the First
Trust Funds has appointed First Trust Advisors L.P. (the "Advisor") as the
person designated to administer the Program, and in this capacity the Advisor
performs its duties primarily through the activities and efforts of the First
Trust Liquidity Committee (the "Liquidity Committee").
Pursuant to the Program, the Liquidity Committee classifies the liquidity of
each fund's portfolio investments into one of the four liquidity categories
specified by Rule 22e-4: highly liquid investments, moderately liquid
investments, less liquid investments and illiquid investments. The Liquidity
Committee determines certain of the inputs for this classification process,
including reasonably anticipated trade sizes and significant investor dilution
thresholds. The Liquidity Committee also determines and periodically reviews a
highly liquid investment minimum for certain funds, monitors the funds' holdings
of assets classified as illiquid investments to seek to ensure they do not
exceed 15% of a fund's net assets and establishes policies and procedures
regarding redemptions in kind.
At the April 17, 2023 meeting of the Board of Trustees, as required by Rule
22e-4 and the Program, the Advisor provided the Board with a written report
prepared by the Advisor that addressed the operation of the Program during the
period from March 17, 2022 through the Liquidity Committee's annual meeting held
on March 23, 2023 and assessed the Program's adequacy and effectiveness of
implementation during this period, including the operation of the highly liquid
investment minimum for each fund that is required under the Program to have one,
and any material changes to the Program. Note that because the Funds primarily
hold assets that are highly liquid investments, the Funds have not adopted any
highly liquid investment minimums.
As stated in the written report, during the review period, two funds breached
the 15% limitation on illiquid investments for one day each, as a result of an
unscheduled week-long closure of the stock exchange in Istanbul following
devastating earthquakes in February, causing all Turkish equities to be
re-classified as "illiquid" for one day. Each fund filed a Form N-RN on the day
after the breach occurred, and one day later after the breach was cured. No fund
with a highly liquid investment minimum breached that minimum during the
reporting period. The Advisor concluded that each fund's investment strategy is
appropriate for an open-end fund; that the Program operated effectively in all
material respects during the review period; and that the Program is reasonably
designed to assess and manage the liquidity risk of each fund and to maintain
compliance with Rule 22e-4.
ADVISORY AND SUB-ADVISORY AGREEMENTS
BOARD CONSIDERATIONS REGARDING APPROVAL OF INVESTMENT MANAGEMENT AND
SUB-ADVISORY AGREEMENTS
The Board of Trustees of First Trust Exchange-Traded Fund IV (the "Trust"),
including the Independent Trustees, approved the Investment Management Agreement
(the "Advisory Agreement") with First Trust Advisors L.P. (the "Advisor"), on
behalf of FT Energy Income Partners Strategy ETF (the "Fund"), and the
Investment Sub-Advisory Agreement (the "Sub-Advisory Agreement" and together
with the Advisory Agreement, the "Agreements") among the Trust, on behalf of the
Fund, the Advisor and Energy Income Partners, LLC (the "Sub-Advisor"), for an
initial two-year term at a meeting held on September 19, 2022. The Board
determined that the Agreements are in the best interests of the Fund in light of
the nature, extent and quality of the services expected to be provided and such
other matters as the Board considered to be relevant in the exercise of its
business judgment.
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FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2023 (UNAUDITED)
To reach this determination, the Board considered its duties under the
Investment Company Act of 1940, as amended (the "1940 Act"), as well as under
the general principles of state law, in reviewing and approving advisory
contracts; the requirements of the 1940 Act in such matters; the fiduciary duty
of investment advisors with respect to advisory agreements and compensation; the
standards used by courts in determining whether investment company boards have
fulfilled their duties; and the factors to be considered by the Board in voting
on such agreements. To assist the Board in its evaluation of the Agreements for
the Fund, the Independent Trustees received a separate report from each of the
Advisor and the Sub-Advisor in advance of the Board meeting responding to
requests for information from counsel to the Independent Trustees, submitted on
behalf of the Independent Trustees, that, among other things, outlined: the
services to be provided by the Advisor and the Sub-Advisor to the Fund
(including the relevant personnel responsible for these services and their
experience); the proposed unitary fee rate payable by the Fund as compared to
fees charged to a peer group of funds (the "Expense Group") and a broad peer
universe of funds (the "Expense Universe"), each assembled by Broadridge
Financial Solutions, Inc. ("Broadridge"), an independent source, and as compared
to fees charged to other exchange-traded funds ("ETFs") managed by the Advisor;
the proposed sub-advisory fee rate as compared to fees charged to other clients
of the Sub-Advisor; the estimated expense ratio of the Fund as compared to
expense ratios of the funds in the Fund's Expense Group and Expense Universe;
the nature of expenses to be incurred in providing services to the Fund and the
potential for the Advisor and the Sub-Advisor to realize economies of scale, if
any; profitability and other financial data for the Advisor; financial data for
the Sub-Advisor; any indirect benefits to the Advisor and its affiliates, First
Trust Portfolios L.P. ("FTP") and First Trust Capital Partners, LLC ("FTCP"),
and the Sub-Advisor; and information on the Advisor's and the Sub-Advisor's
compliance programs. The Independent Trustees and their counsel also met
separately to discuss the information provided by the Advisor and the
Sub-Advisor. The Board applied its business judgment to determine whether the
arrangements between the Trust and the Advisor and among the Trust, the Advisor
and the Sub-Advisor are reasonable business arrangements from the Fund's
perspective.
In evaluating whether to approve the Agreements for the Fund, the Board
considered the nature, extent and quality of the services to be provided by the
Advisor and the Sub-Advisor under the Agreements. With respect to the Advisory
Agreement, the Board considered that the Advisor will be responsible for the
overall management and administration of the Fund and reviewed all of the
services to be provided by the Advisor to the Fund, including the oversight of
the Sub-Advisor, as well as the background and experience of the persons who
will be responsible for such services. The Board considered that the Fund will
be an actively-managed ETF and will employ an advisor/sub-advisor management
structure and considered that the Advisor manages other ETFs with a similar
structure in the First Trust Fund Complex. The Board noted that the Advisor will
oversee the Sub-Advisor's day-to-day management of the Fund's investments,
including portfolio risk monitoring and performance review. In reviewing the
services to be provided, the Board noted the compliance program that had been
developed by the Advisor and considered that it includes a robust program for
monitoring the Advisor's, the Sub-Advisor's and the Fund's compliance with the
1940 Act, as well as the Fund's compliance with its investment objective,
policies and restrictions. The Board noted that employees of the Advisor provide
management services to other ETFs and to other funds in the First Trust Fund
Complex with diligence and care. With respect to the Sub-Advisory Agreement, in
addition to the written materials provided by the Sub-Advisor, at the September
19, 2022 meeting, the Board also received a presentation from representatives of
the Sub-Advisor, who discussed the services that the Sub-Advisor will provide to
the Fund, and the Trustees were able to ask questions about the proposed
investment strategy for the Fund. The Board noted the background and experience
of the Sub-Advisor's portfolio management team and the Sub-Advisor's investment
style. Because the Fund had yet to commence investment operations, the Board
could not consider the historical investment performance of the Fund. In light
of the information presented and the considerations made, the Board concluded
that the nature, extent and quality of the services to be provided to the Fund
by the Advisor and the Sub-Advisor under the Agreements are expected to be
satisfactory.
The Board considered the proposed unitary fee rate payable by the Fund under the
Advisory Agreement for the services to be provided. The Board noted that, under
the unitary fee arrangement, the Fund would pay the Advisor a unitary fee equal
to an annual rate of 0.95% of its average daily net assets. The Board considered
that, from the unitary fee for the Fund, the Advisor would pay the Sub-Advisor a
sub-advisory fee equal to an annual rate of 0.475% of the Fund's average daily
net assets less one-half of the Fund's expenses. The Board noted that the
Advisor and the Sub-Advisor would be responsible for the Fund's expenses,
including the cost of sub-advisory, transfer agency, custody, fund
administration, legal, audit and other services and license fees, if any, but
excluding the fee payment under the Advisory Agreement and interest, taxes,
acquired fund fees and expenses, if any, brokerage commissions and other
expenses connected with the execution of portfolio transactions, distribution
and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary
expenses, if any. The Board received and reviewed information showing the fee
rates and expense ratios of the peer funds in the Expense Group, as well as
advisory and unitary fee rates charged by the Advisor and Sub-Advisor to other
fund (including ETF) and non-fund clients, as applicable. Because the Fund will
pay a unitary fee, the Board determined that expense ratios were the most
relevant comparative data point. Based on the information provided, the Board
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FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2023 (UNAUDITED)
noted that the unitary fee rate for the Fund was above the median total (net)
expense ratio of the peer funds in the Expense Group. With respect to the
Expense Group, the Board discussed with representatives of the Advisor how the
Expense Group was assembled and how the Fund compared and differed from the peer
funds. The Board took this information into account in considering the peer
data. With respect to fees charged to other clients, the Board considered the
Advisor's statement that the Fund will be most comparable to another
actively-managed ETF in the First Trust Fund Complex that is sub-advised by the
Sub-Advisor, which pays a unitary fee equal to an annual rate of 0.95% of its
average daily net assets. In light of the information considered and the nature,
extent and quality of the services expected to be provided to the Fund under the
Agreements, the Board determined that the proposed unitary fee, including the
sub-advisory fee to be paid by the Advisor to the Sub-Advisor from the unitary
fee, was fair and reasonable.
The Board noted that the proposed unitary fee for the Fund was not structured to
pass on to shareholders the benefits of any economies of scale as the Fund's
assets grow. The Board noted that any reduction in fixed costs associated with
the management of the Fund would benefit the Advisor and the Sub-Advisor, but
that the unitary fee structure provides a level of certainty in expenses for the
Fund. The Board noted that the Advisor has continued to build infrastructure and
add new staff to improve the services to the funds in the First Trust Fund
Complex. The Board took into consideration the types of costs to be borne by the
Advisor in connection with its services to be performed for the Fund under the
Advisory Agreement. The Board considered the Advisor's estimate of the asset
level for the Fund at which the Advisor expects the Advisory Agreement to be
profitable to the Advisor and the Advisor's estimate of the profitability of the
Advisory Agreement if the Fund's assets reach $100 million. The Board noted the
inherent limitations in the profitability analysis and concluded that, based on
the information provided, the Advisor's estimated profitability level for the
Fund was not unreasonable. The Board reviewed financial information provided by
the Sub-Advisor, but did not review any potential profitability of the
Sub-Advisory Agreement to the Sub-Advisor. The Board considered that the
Sub-Advisor would be paid by the Advisor from the Fund's unitary fee and its
understanding that the sub-advisory fee rate was the product of an arm's length
negotiation. In addition, the Board considered indirect benefits described by
the Advisor that may be realized from its relationship with the Fund. The Board
noted that FTCP has an ownership interest in the Sub-Advisor and considered
potential indirect benefits to the Advisor from such ownership interest. The
Board also considered that the Advisor had identified as an indirect benefit to
the Advisor and FTP their exposure to investors and brokers who, absent their
exposure to the Fund, may have had no dealings with the Advisor or FTP. The
Board considered indirect benefits described by the Sub-Advisor that may be
realized from its relationship with the Fund, including soft-dollar
arrangements, and considered a summary of such arrangements. The Board also
considered the potential indirect benefits to the Sub-Advisor from the ownership
interest of FTCP in the Sub-Advisor. The Board concluded that the character and
amount of potential indirect benefits to the Advisor and the Sub-Advisor were
not unreasonable.
Based on all of the information considered and the conclusions reached, the
Board, including the Independent Trustees, determined that the terms of the
Agreements are fair and reasonable and that the approval of the Agreements is in
the best interests of the Fund. No single factor was determinative in the
Board's analysis.
BOARD CONSIDERATIONS REGARDING APPROVAL OF AMENDMENTS TO THE INVESTMENT
MANAGEMENT AND SUB-ADVISORY AGREEMENTS
The Board of Trustees of First Trust Exchange-Traded Fund IV (the "Trust"),
including the Independent Trustees, unanimously approved the amendment (the
"Advisory Agreement Amendment") of the Investment Management Agreement (the
"Advisory Agreement") with First Trust Advisors L.P. (the "Advisor") and the
amendment (the "Sub-Advisory Agreement Amendment" and together with the Advisory
Agreement Amendment, the "Amendments") of the Investment Sub-Advisory Agreement
(the "Sub-Advisory Agreement" and together with the Advisory Agreement, the
"Agreements") among the Trust, the Advisor and Energy Income Partners, LLC (the
"Sub-Advisor") on behalf of the FT Energy Income Partners Strategy ETF (the
"Fund").
The Board approved the Amendments at a meeting held on October 24, 2022. As part
of the review process, the Board reviewed information and had preliminary
discussions with the Advisor regarding the proposed Amendments at a meeting held
on September 18-19, 2022. Following those preliminary discussions, the Board
requested and received information from the Advisor regarding the proposed
Amendments, and that information was considered at an executive session of the
Independent Trustees and their counsel held prior to the October 24, 2022
meeting, as well as at the October meeting.
In reviewing the Advisory Agreement Amendment, the Board considered that the
purpose of the Advisory Agreement Amendment is to modify the unitary fee rate
for the Fund under the Advisory Agreement by introducing a breakpoint schedule
pursuant to which the unitary fee rate paid by the Fund to the Advisor will be
reduced as assets of the Fund meet certain thresholds. In reviewing the
Sub-Advisory Agreement Amendment, the Board considered that the purpose of the
Sub-Advisory Agreement Amendment is to modify the sub-advisory fee rate for the
Fund under the Sub-Advisory Agreement to reflect the modification of the unitary
fee rate schedule under the Advisory Agreement Amendment. The Board noted the
Advisor's representations that the quality and quantity of the services
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FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2023 (UNAUDITED)
provided to the Fund by the Advisor under the Advisory Agreement and by the
Sub-Advisor under the Sub-Advisory Agreement will not be reduced or modified as
a result of the Advisory Agreement Amendment and the Sub-Advisory Agreement
Amendment, and that the obligations of the Advisor under the Advisory Agreement
and the obligations of the Sub-Advisor under the Sub-Advisory Agreement will
remain the same in all respects.
The Board noted that it, including the Independent Trustees, approved the
Agreements for an initial two-year period ending October 28, 2024 at a meeting
held on September 19, 2022. The Board noted that in connection with such
approval it had determined, based upon the information provided, that the terms
of the Agreements were fair and reasonable and that the approval of the
Agreements was in the best interests of the Fund in light of the nature, extent
and quality of the services expected to be provided and such other matters as
the Board considered to be relevant in the exercise of its business judgment.
Based on all of the information considered, the Board, including the Independent
Trustees, unanimously determined that the terms of the Amendments are fair and
reasonable and that the Amendments are in the best interests of the Fund.
Page 36
FIRST TRUST
First Trust Exchange-Traded Fund IV
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
INVESTMENT SUB-ADVISOR
Energy Income Partners, LLC
10 Wright Street
Westport, CT 06880
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 South Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
320 South Canal Street
Chicago, IL 60606
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