Portfolio of Investments Principal CONVERTIBLE CORPORATE BONDS - 75.8% Coupon Maturity Aerospace & Defense 1.2% $ 333,000 Aerojet Rocketdyne Holdings, Inc. (a)... 2.25% 12/15/23 $ 378,996 261,000 RTI International Metals, Inc.... 1.63% 10/15/19 290,689 669,685 Air Freight & Logistics - 0.5% 248,000 Atlas Air Worldwide Holdings, Inc.... 2.25% 06/01/22 276,675 Automobiles - 2.1% 645,000 Tesla, Inc.... 0.25% 03/01/19 702,647 370,000 Tesla, Inc.... 1.25% 03/01/21 405,612 1,108,259 Biotechnology - 3.0% 120,000 BioMarin Pharmaceutical, Inc.... 1.50% 10/15/20 142,050 233,000 Clovis Onocology, Inc.... 2.50% 09/15/21 369,014 374,000 Ionis Pharmaceuticals, Inc.... 1.00% 11/15/21 403,920 325,000 Ironwood Pharmaceuticals, Inc.... 2.25% 06/15/22 419,250 270,000 Neurocrine Biosciences, Inc. (a)... 2.25% 05/15/24 275,906 1,610,140 Chemicals - 0.7% 300,000 RPM International, Inc.... 2.25% 12/15/20 348,938 Communications Equipment - 3.4% 168,000 Ciena Corp. (a)... 3.75% 10/15/18 231,420 265,000 Finisar Corp.... 0.50% 12/15/33 302,100 299,000 Lumentum Holdings, Inc. (a)... 0.25% 03/15/24 372,442 145,000 Palo Alto Networks, Inc.... (b) 07/01/19 188,863 214,000 Viavi Solutions, Inc. (a)... 1.00% 03/01/24 230,317 427,000 Viavi Solutions, Inc.... 0.63% 08/15/33 482,510 1,807,652 Construction & Engineering - 0.6% 255,000 Dycom Industries, Inc.... 0.75% 09/15/21 299,466 Construction Materials - 1.0% 460,000 Cemex SAB de CV... 3.75% 03/15/18 560,050 Electronic Equipment, Instruments & Components - 1.0% 325,000 OSI Systems, Inc. (a)... 1.25% 09/01/22 329,266 139,000 Vishay Intertechnology, Inc.... 2.25% 11/15/40 193,731 522,997 Energy Equipment & Services - 0.8% 425,000 Weatherford International Ltd.... 5.88% 07/01/21 452,094 Equity Real Estate Investment Trusts - 3.5% 240,000 American Residential Properties OP LP (a)... 3.25% 11/15/18 319,950 385,000 Colony NorthStar, Inc.... 3.88% 01/15/21 396,309 310,000 Colony Starwood Homes... 3.00% 07/01/19 374,325
Principal CONVERTIBLE CORPORATE BONDS (Continued) Coupon Maturity Equity Real Estate Investment Trusts (Continued) $ 250,000 Empire State Realty OP LP (a)... 2.63% 08/15/19 $ 284,219 470,000 Extra Space Storage LP (a)... 3.13% 10/01/35 509,950 1,884,753 Health Care Equipment & Supplies - 5.2% 880,000 Hologic, Inc.... (b) 12/15/43 1,101,650 185,000 Insulet Corp.... 2.00% 06/15/19 222,231 255,000 Insulet Corp. (a)... 1.25% 09/15/21 278,747 171,000 NuVasive, Inc.... 2.25% 03/15/21 214,391 226,000 Quidel Corp.... 3.25% 12/15/20 276,991 610,000 Wright Medical Group, Inc.... 2.00% 02/15/20 668,332 2,762,342 Health Care Providers & Services - 2.4% 145,000 Anthem, Inc.... 2.75% 10/15/42 370,022 460,000 Molina Healthcare, Inc.... 1.63% 08/15/44 573,850 315,000 Teladoc, Inc. (a)... 3.00% 12/15/22 333,900 1,277,772 Health Care Technology - 0.6% 230,000 Medidata Solutions, Inc.... 1.00% 08/01/18 317,400 Household Durables - 0.9% 426,000 KB Home... 1.38% 02/01/19 456,885 Insurance - 0.5% 194,000 Old Republic International Corp.... 3.75% 03/15/18 246,986 Internet & Direct Marketing Retail - 5.0% 340,000 Ctrip.com International Ltd.... 1.00% 07/01/20 416,712 301,000 Liberty Expedia Holdings, Inc. (a)... 1.00% 06/30/47 328,466 255,000 Priceline Group, Inc./The... 1.00% 03/15/18 546,656 555,000 Priceline Group, Inc./The... 0.35% 06/15/20 874,819 437,000 Priceline Group, Inc./The... 0.90% 09/15/21 521,396 2,688,049 Internet Software & Services - 3.8% 510,000 Altaba, Inc.... (b) 12/01/18 603,075 69,000 MercadoLibre, Inc.... 2.25% 07/01/19 159,778 343,000 VeriSign, Inc. (c)... 4.45% 08/15/37 1,018,281 215,000 Zillow Group, Inc. (a)... 2.00% 12/01/21 242,816 2,023,950 IT Services - 1.0% 269,000 Blackhawk Network Holdings, Inc.... 1.50% 01/15/22 303,129 170,000 Euronet Worldwide, Inc.... 1.50% 10/01/44 234,600 537,729 Life Sciences Tools & Services - 2.0% 500,000 Illumina, Inc.... (b) 06/15/19 510,000 285,000 Illumina, Inc.... 0.50% 06/15/21 306,553
Principal CONVERTIBLE CORPORATE BONDS (Continued) Coupon Maturity Life Sciences Tools & Services (Continued) $ 200,000 QIAGEN N.V.... 0.38% 03/19/19 $ 244,877 1,061,430 Machinery 1.3% 207,000 Greenbrier Cos., Inc./The (a)... 2.88% 02/01/24 224,724 400,000 Trinity Industries, Inc.... 3.88% 06/01/36 490,750 715,474 Media - 5.7% 3,000 CenterPoint Energy, Inc.... 3.40% 09/15/29 230,250 975,000 DISH Network Corp.... 3.38% 08/15/26 1,216,312 470,000 Liberty Interactive LLC (a)... 1.75% 09/30/46 583,388 455,000 Liberty Media Corp.... 1.38% 10/15/23 576,394 398,000 Live Nation Entertainment, Inc.... 2.50% 05/15/19 470,138 3,076,482 Mortgage Real Estate Investment Trusts - 2.4% 310,000 Blackstone Mortgage Trust, Inc.... 5.25% 12/01/18 352,237 540,000 Starwood Property Trust, Inc.... 4.55% 03/01/18 580,500 311,000 Two Harbors Investment Corp.... 6.25% 01/15/22 329,077 1,261,814 Oil, Gas & Consumable Fuels - 1.0% 320,000 Chesapeake Energy Corp. (a)... 5.50% 09/15/26 304,000 247,000 PDC Energy, Inc.... 1.13% 09/15/21 233,569 537,569 Personal Products - 1.2% 608,000 Herbalife Ltd.... 2.00% 08/15/19 616,743 Pharmaceuticals - 1.9% 335,000 Jazz Investments I Ltd.... 1.88% 08/15/21 366,825 275,000 Medicines Co./The... 2.75% 07/15/23 294,078 340,000 Pacira Pharmaceuticals, Inc. (a)... 2.38% 04/01/22 343,188 1,004,091 Semiconductors & Semiconductor Equipment - 14.0% 230,000 Advanced Micro Devices, Inc.... 2.13% 09/01/26 431,825 268,000 Cypress Semiconductor Corp.... 4.50% 01/15/22 338,183 270,000 Integrated Device Technology, Inc.... 0.88% 11/15/22 287,213 380,000 Intel Corp. (c)... 3.49% 12/15/35 514,662 450,000 Intel Corp.... 3.25% 08/01/39 776,533 235,000 Lam Research Corp.... 1.25% 05/15/18 620,400 625,000 Microchip Technology, Inc.... 1.63% 02/15/25 979,687 680,000 Microchip Technology, Inc. (a)... 1.63% 02/15/27 756,500 205,000 Microchip Technology, Inc. (a)... 2.25% 02/15/37 224,988
Principal CONVERTIBLE CORPORATE BONDS (Continued) Coupon Maturity Semiconductors & Semiconductor Equipment (Continued) $ 285,000 Micron Technology, Inc., Series E... 1.63% 02/15/33 $ 733,341 100,000 Novellus Systems, Inc.... 2.63% 05/15/41 473,000 17,000 NVIDIA Corp.... 1.00% 12/01/18 137,328 465,000 ON Semiconductor Corp.... 1.00% 12/01/20 502,200 330,000 Silicon Laboratories, Inc. (a)... 1.38% 03/01/22 357,225 275,000 Teradyne, Inc. (a)... 1.25% 12/15/23 349,078 7,482,163 Software - 6.6% 675,000 Citrix Systems, Inc.... 0.50% 04/15/19 804,516 340,000 HubSpot, Inc. (a)... 0.25% 06/01/22 349,350 325,000 Nuance Communications, Inc.... 1.00% 12/15/35 315,047 177,000 Proofpoint, Inc.... 0.75% 06/15/20 221,692 298,000 RealPage, Inc. (a)... 1.50% 11/15/22 340,279 188,000 Red Hat, Inc.... 0.25% 10/01/19 267,195 330,000 salesforce.com, Inc.... 0.25% 04/01/18 456,844 140,000 ServiceNow, Inc.... (b) 11/01/18 213,325 315,000 ServiceNow, Inc. (a)... (b) 06/01/22 329,962 60,000 Take-Two Interactive Software, Inc.... 1.00% 07/01/18 221,325 3,519,535 Technology Hardware, Storage & Peripherals - 0.7% 340,000 Electronics For Imaging, Inc.... 0.75% 09/01/19 367,625 Thrifts & Mortgage Finance - 0.8% 360,000 LendingTree, Inc. (a)... 0.63% 06/01/22 454,275 Trading Companies & Distributors - 0.4% 218,000 Kaman Corp. (a)... 3.25% 05/01/24 227,810 Transportation Infrastructure - 0.6% 300,000 Macquarie Infrastructure Corp.... 2.88% 07/15/19 329,250 Total Convertible Corporate Bonds... 40,506,083 (Cost $37,553,547) Shares Rate Maturity (d) CONVERTIBLE PREFERRED SECURITIES -22.5% Aerospace & Defense - 0.3% 4,305 Arconic Inc.... 5.38% 10/01/17 169,230 Banks - 5.4% 941 Bank of America Corp., Series L... 7.25% (e) 1,221,418 126 Huntington Bancshares, Inc./OH, Series A 8.50% (e) 182,070 1,137 Wells Fargo & Co., Series L... 7.50% (e) 1,509,367 2,912,855 Capital Markets - 0.2% 2,040 AMG Capital Trust II... 5.15% 10/15/37 124,695
Shares CONVERTIBLE PREFERRED SECURITIES (Continued) Rate Maturity (d) Electric Utilities - 1.1% 8,950 NextEra Energy, Inc.... 6.37% 09/01/18 $ 592,758 Electronic Equipment, Instruments & Components - 0.5% 2,625 Belden, Inc.... 6.75% 07/15/19 262,448 Equity Real Estate Investment Trusts - 2.1% 4,590 American Tower Corp.... 5.50% 02/15/18 549,423 341 Crown Castle International Corp., Series A... 6.88% 08/01/20 362,619 3,300 Welltower, Inc., Series I... 6.50% (e) 215,820 1,127,862 Food Products - 0.7% 3,250 Bunge Ltd.... 4.88% (e) 356,558 Health Care Equipment & Supplies - 1.6% 15,700 Becton Dickinson and Co., Series A... 6.13% 05/01/20 877,473 Health Care Providers & Services - 1.0% 9,950 Anthem, Inc.... 5.25% 05/01/18 512,226 Internet Software & Services - 2.2% 6,575 Mandatory Exchangeable Trust (a)... 5.75% 06/03/19 1,175,511 Machinery - 0.9% 4,935 Rexnord Corp., Series A... 5.75% 11/15/19 264,639 1,905 Stanley Black & Decker, Inc.... 5.38% 05/15/20 204,464 469,103 Multi-Utilities - 1.2% 3,625 Black Hills Corp.... 7.75% 11/01/18 273,252 7,150 Dominion Energy, Inc., Series A... 6.75% 08/15/19 364,507 637,759 Oil, Gas & Consumable Fuels - 1.6% 4,825 Anadarko Petroleum Corp.... 7.50% 06/07/18 192,421 5,220 Hess Corp.... 8.00% 02/01/19 293,625 7,800 Kinder Morgan, Inc./DE, Series A... 9.75% 10/26/18 345,306 831,352 Pharmaceuticals - 2.7% 1,605 Allergan PLC, Series A... 5.50% 03/01/18 1,434,886 Wireless Telecommunication Services - 1.0% 5,550 T-Mobile US, Inc.... 5.50% 12/15/17 556,388 Total Convertible Preferred Securities... 12,041,104 (Cost $11,276,553)
Total Investments 98.3%... $ 52,547,187 (Cost $48,830,100) (f) Net Other Assets and Liabilities 1.7%... 915,852 Net Assets 100.0%... $ 53,463,039 (a) (b) (c) (d) (e) (f) This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A under the Securities Act of 1933, as amended (the 1933 Act ), and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Pursuant to procedures adopted by the Trust s Board of Trustees, this security has been determined to be liquid by SSI Investment Management Inc., the sub-advisor. Although market instability can result in periods of increased overall market illiquidity, liquidity for each security is determined based on security-specific factors and assumptions, which require subjective judgment. At July 31, 2017, securities noted as such amounted to $10,136,673 or 19.0% of net assets. Zero coupon security. Multi-Step Coupon Bond - Coupon steps up or down at predetmined dates. The interest rate shown reflects the rate in effect at July 31, 2017. maturity represents the mandatory conversion date. Perpetual maturity. Aggregate cost for financial reporting purposes, which approximates the aggregate cost for federal income tax purposes. As of July 31, 2017, the aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost was $3,883,448 and the aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value was $166,361. Valuation Inputs A summary of the inputs used to value the Fund s investments as of July 31, 2017 is as follows (see Note 2A - Portfolio Valuation in the Notes to Portfolio of Investments): Total at 7/31/2017 Level 1 Quoted Prices Level 2 Significant Observable Inputs Level 3 Significant Unobservable Inputs Convertible Corporate Bonds*... $ 40,506,083 $ $ 40,506,083 $ Convertible Preferred Securities: Capital Markets. 124,695 124,695 Food Products 356,558 356,558 Internet Software & Services 1,175,511 1,175,511 Other Industry categories*. 10,384,340 10,384,340 Total Convertible Preferred Securities... 12,041,104 10,384,340 1,656,764 Total Investments... $ 52,547,187 $ 10,384,340 $ 42,162,847 $ * See Portfolio of Investments for industry breakout. All transfers in and out of the Levels during the period are assumed to occur on the last day of the period at their current value. There were no transfers between Levels at July 31, 2017.
Notes to Portfolio of Investments 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 eight funds that are offering shares. This report covers the First Trust SSI Strategic Convertible Securities ETF (the Fund ), which trades under the ticker FCVT on The Nasdaq Stock Market LLC ( Nasdaq ). The Fund is considered an investment company and follows accounting and reporting guidance under Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services-Investment Companies. A. Portfolio Valuation 2. Valuation and Investment Practices The Fund s net asset value ( NAV ) is determined daily as of the close of regular trading on the New York Stock Exchange ( NYSE ), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV is determined as of that time. Domestic debt securities are priced using data reflecting the earlier closing of the principal markets for those securities. The Fund s NAV is calculated by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding. The Fund s investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Pricing Committee of the Fund s investment advisor, First Trust Advisors L.P. ( First Trust or the Advisor ), in accordance with valuation procedures adopted by the Trust s Board of Trustees, and in accordance with provisions of the 1940 Act. Investments valued by the Advisor s Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. The Fund s investments are valued as follows: Convertible preferred stocks and other equity securities listed on any national or foreign exchange (excluding Nasdaq and the London Stock Exchange Alternative Investment Market ( AIM )) are valued at the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price. Securities traded on more than one securities exchange are valued at the last sale price or official closing price, as applicable, at the close of the securities exchange representing the principal market for such securities. Convertible corporate bonds, notes and other debt securities are valued on the basis of valuations provided by dealers who make markets in such securities or by a third-party service approved by the Trust s Board of Trustees, which may use the following valuation inputs when available: 1) benchmark yields; 2) reported trades; 3) broker/dealer quotes; 4) issuer spreads; 5) benchmark securities; 6) bids and offers; and 7) reference data including market research publications. Securities traded in an over-the-counter market are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price. Fixed income and other debt securities having a remaining maturity of 60 days or less when purchased are fair valued at cost adjusted for amortization of premiums and accretion of discounts (amortized cost), provided the Advisor s Pricing Committee has determined that the use of amortized cost is an appropriate reflection of fair value given market and issuer-specific conditions existing at the time of the determination. Factors that may be considered in determining the appropriateness of the use of amortized cost include, but are not limited to, the following: 1) the credit conditions in the relevant market and changes thereto; 2) the liquidity conditions in the relevant market and changes thereto; 3) the interest rate conditions in the relevant market and changes thereto (such as significant changes in interest rates); 4) issuer-specific conditions (such as significant credit deterioration); and 5) any other market-based data the Advisor s Pricing Committee considers relevant. In this regard, the Advisor s Pricing Committee may use last-obtained market-based data to assist it when valuing portfolio securities using amortized cost.
Notes to Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Trust s Board of Trustees or its delegate, the Advisor s Pricing Committee, at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a thirdparty pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of the Fund s NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security s fair value. As a general principle, the current fair value of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities. Fair valuation of a debt security will be based on the consideration of all available information, including, but not limited to, the following: 1) the fundamental business data relating to the issuer; 2) an evaluation of the forces which influence the market in which these securities are purchased and sold; 3) the type, size and cost of security; 4) the financial statements of the issuer; 5) the credit quality and cash flow of the issuer, based on the sub-advisor s or external analysis; 6) the information as to any transactions in or offers for the security; 7) the price and extent of public trading in similar securities (or equity securities) of the issuer/borrower, or comparable companies; 8) the coupon payments; 9) the quality, value and salability of collateral, if any, securing the security; 10) the business prospects of the issuer, including any ability to obtain money or resources from a parent or affiliate and an assessment of the issuer s management (for corporate debt only); 11) the prospects for the issuer s industry, and multiples (of earnings and/or cash flows) being paid for similar businesses in that industry (for corporate debt only); and 12) other relevant factors. Fair valuation of an equity security will be based on the consideration of all available information, including, but not limited to, the following: 1) the type of security; 2) the size of the holding; 3) the initial cost of the security; 4) transactions in comparable securities; 5) price quotes from dealers and/or third-party pricing services; 6) relationships among various securities; 7) information obtained by contacting the issuer, analysts, or the appropriate stock exchange; 8) an analysis of the issuer s financial statements; and 9) the existence of merger proposals or tender offers that might affect the value of the security. The Fund is subject to fair value accounting standards that define fair value, establish the framework for measuring fair value and provide a three-level hierarchy for fair valuation based upon the inputs to the valuation as of the measurement date. The three levels of the fair value hierarchy are as follows: Level 1 Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 Level 2 inputs are observable inputs, either directly or indirectly, and include the following: o Quoted prices for similar investments in active markets. o Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly. o Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). o Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Notes to Level 3 Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity s own assumptions about the assumptions that market participants would use in pricing the investment. The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A summary of the inputs used to value the Fund s investments as of July 31, 2017, is included with the Fund s Portfolio of Investments. B. Securities Transactions Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis.