Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORT TO STOCKHOLDERS.
The registrant's semi-annual report transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940 is as follows:
FIRST TRUST
First Trust Exchange-Traded Fund VIII
First Trust CEF Income Opportunity ETF (FCEF)
First Trust Municipal CEF Income Opportunity ETF (MCEF)
Semi-Annual Report
For the Six Months Ended
February 29, 2020
TABLE OF CONTENTS
FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL REPORT
FEBRUARY 29, 2020
Shareholder Letter........................................................... 1
Fund Performance Overview
First Trust CEF Income Opportunity ETF (FCEF)............................. 2
First Trust Municipal CEF Income Opportunity ETF (MCEF)................... 5
Notes to Fund Performance Overview........................................... 8
Portfolio Management......................................................... 9
Understanding Your Fund Expenses............................................. 10
Portfolio of Investments
First Trust CEF Income Opportunity ETF (FCEF)............................. 11
First Trust Municipal CEF Income Opportunity ETF (MCEF)................... 13
Statements of Assets and Liabilities......................................... 15
Statements of Operations..................................................... 16
Statements of Changes in Net Assets.......................................... 17
Financial Highlights......................................................... 18
Notes to Financial Statements................................................ 19
Additional Information....................................................... 24
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
|
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and its representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
any series of First Trust Exchange-Traded Fund VIII (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 its representatives only as of the date hereof. We
undertake no obligation to publicly revise or update these forward-looking
statements to reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that any Fund described in this report will achieve its
investment objectives. 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 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 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 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 its prospectus, statement of additional information, and
other Fund regulatory filings.
SHAREHOLDER LETTER
FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
FEBRUARY 29, 2020
Dear Shareholders:
First Trust is pleased to provide you with the semi-annual report for the First
Trust CEF Income Opportunity ETF ("FCEF") and the First Trust Municipal CEF
Income Opportunity ETF ("MCEF" and together with FCEF, the "Funds"), each a
series of the First Trust Exchange-Traded Fund VIII, which contains detailed
information about the Funds for the six months ended February 29, 2020.
To say that much has transpired over the past six months would be an
understatement. Prior to the onset of the coronavirus (COVID-19) in Wuhan, China
this past December, my message to investors would have sounded quite bullish,
focusing on such accomplishments as the progress in the trade negotiations
between the U.S. and China, where a "Phase One" deal was signed into law on
January 15, 2020. The main takeaway from the deal is that China agreed to
purchase an additional $200 billion of goods and services from the U.S. over the
next several years in exchange for the U.S. cutting some of its tariffs on
Chinese goods. The deal marked the first breakthrough since the Trump
Administration launched its new tariff initiative in March 2018. On top of that
news, the S&P 500(R) Index was setting new all-time highs all the way up through
the close of trading on February 19, 2020, the day it peaked.
Unfortunately, the good news has been overshadowed by the escalation and spread
of the COVID-19 pandemic. As of April 16, 2020, this disease had spread to 213
countries, areas or territories, had infected 1,991,562 people (confirmed cases)
and was responsible for 130,885 confirmed deaths, according to the World Health
Organization. These numbers are expected to trend higher in the days and weeks
ahead. A growing number of U.S. state governors and foreign leaders have issued
shelter in place orders to their citizens to help slow the spread of this new
virus. The primary objective in doing so is to slow down the number of cases so
that hospitals and health care workers are not overwhelmed by too many patients.
The cost is high because it requires shutting down large chunks of the economy,
which in turn negatively impacts the financial well-being of workers and
companies. In the U.S., Congress passed a financial stimulus package valued at
$2.0 trillion to help backstop workers and companies in the near-term. The
faster we can end the shutdown, consistent with general health and welfare, the
better, according to Brian Wesbury, Chief Economist at First Trust Advisors L.P.
Here is what we think we know. Brian Wesbury believes the U.S. could experience
a modest decline in real gross domestic product of 1.5% (annualized) in the
first quarter of 2020, followed by a massive decline of 20% (annualized) in the
second quarter. The good news is that he sees the economy growing at a 3.0% and
3.5% annual pace in the third and fourth quarters of 2020, respectively. In
other words, we are expecting a healthy rebound in the second half of this year.
As I noted earlier, the stock market was still at a record high in the third
week of February. From February 19 through March 23, however, the S&P 500(R)
Index posted a total return of -33.79%, putting it in bear market territory
(price decline of 20% or more from the most recent peak). Sorry to say it, but
the nearly 11-year bull market is no more. While we do not have a projection for
where stocks will be at year-end, we do know this: excluding the current bear
market, the S&P 500(R) Index has never failed to recoup all the losses sustained
in any sell-off, pullback, correction or bear market. So, while I am
understandably not bullish on the first half of 2020, I will be a bull once
again after we put the worst of COVID-19 behind us. I continue to urge investors
to stay the course. This too shall pass.
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
FUND PERFORMANCE OVERVIEW (UNAUDITED)
FIRST TRUST CEF INCOME OPPORTUNITY ETF (FCEF)
The First Trust CEF Income Opportunity ETF (the "Fund") seeks to provide current
income with a secondary emphasis on total return. Under normal market
conditions, the Fund seeks to achieve its investment objectives by investing at
least 80% of its net assets (including investment borrowings) in a portfolio of
closed-end investment companies that are listed and traded in the United States
on registered exchanges. The Fund is classified as "non-diversified" under the
Investment Company Act of 1940, as amended. The shares of the Fund are listed
and traded on The Nasdaq Stock Market LLC under the ticker symbol "FCEF."
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months Ended 1 Year Ended Inception (9/27/16) Inception (9/27/16)
2/29/20 2/29/20 to 2/29/20 to 2/29/20
FUND PERFORMANCE
NAV -1.64% 3.37% 6.62% 24.50%
Market Price -1.69% 3.61% 6.62% 24.50%
INDEX PERFORMANCE
Prior Blended Benchmark (1) (2) N/A N/A N/A N/A
Russell 3000(R) Index 1.81% 6.90% 11.31% 44.33%
Blended Benchmark (3) -2.69% 2.40% 5.77% 21.18%
------------------------------------------------------------------------------------------------------------------------------------
|
(See Notes to Fund Performance Overview on page 8.)
(1) Prior to August 1, 2019, the Fund's primary benchmark was a blended index
(the "Prior Blended Benchmark") composed 60% of the Morningstar US All
Equity CEF Index and 40% of the Morningstar US All Taxable Fixed Income
CEF Index (the "Morningstar Closed-End Fund Indices"). Effective August 1,
2019, Morningstar, Inc., the index provider of the Morningstar Closed-End
Fund Indices, ceased calculating the Morningstar Closed-End Fund Indices.
Accordingly, the Russell 3000(R) Index, a broad-based index composed of
the equity securities of the 3,000 largest publicly-traded U.S. companies,
was selected to replace the Prior Blended Benchmark as the Fund's primary
benchmark.
(2) Performance data is not available for all the periods shown in the table
for the index because performance data does not exist for some of the
entire periods.
(3) A blended benchmark (the "Blended Benchmark") comprised 60% of the First
Trust Equity Closed-End Fund Total Return Index, a cap-weighted index
(based on NAV) designed to provide a broad representation of the equity
based closed-end fund universe, and 40% of the First Trust Taxable Fixed
Income Closed-End Fund Total Return Index, a cap-weighted index (based on
NAV) designed to provide a broad representation of the taxable fixed
income closed-end fund universe, has been selected as a secondary
benchmark to provide a more direct correlation to the Fund's underlying
portfolio.
Page 2
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
FIRST TRUST CEF INCOME OPPORTUNITY ETF (FCEF) (CONTINUED)
----------------------------------------------------------
% OF TOTAL
LONG-TERM
TOP TEN HOLDINGS INVESTMENTS
----------------------------------------------------------
PIMCO Dynamic Credit and Mortgage
Income Fund 4.58%
BlackRock Science & Technology Trust 4.36
Cohen & Steers REIT and Preferred and
Income Fund, Inc. 4.33
Eaton Vance Tax-Advantaged Global
Dividend Income Fund 4.20
Ares Dynamic Credit Allocation Fund, Inc. 3.93
Eaton Vance Tax-Advantaged Dividend
Income Fund 3.77
Nuveen Credit Strategies Income Fund 3.71
Cohen & Steers Infrastructure Fund, Inc. 3.70
John Hancock Tax-Advantaged Dividend
Income Fund 3.36
PGIM Global High Yield Fund, Inc. 3.26
--------
Total 39.20%
========
----------------------------------------------------------
% OF TOTAL
LONG-TERM
WORLD REGIONS INVESTMENTS
----------------------------------------------------------
North America 77.46%
Europe 11.84
Asia 10.70
--------
Total 100.00%
========
----------------------------------------------------------
% OF TOTAL
LONG-TERM
MARKET CAPITALIZATION INVESTMENTS
----------------------------------------------------------
Mega 29.09%
Large 37.10
Mid 24.09
Small 7.78
Micro 1.94
--------
Total 100.00%
========
----------------------------------------------------------
% OF TOTAL
LONG-TERM
CREDIT QUALITY (4) INVESTMENTS
----------------------------------------------------------
AAA 7.49%
AA 0.39
A 1.75
BBB 14.68
BB 27.11
B 33.02
CCC-D 8.60
NR 6.96
--------
Total 100.00%
========
-----------------------------
|
(4) The ratings are by Standard & Poor's except where otherwise indicated. A
credit rating is an assessment provided by a nationally recognized
statistical rating organization (NRSRO) of the creditworthiness of an
issuer with respect to debt obligations except for those debt obligations
that are only privately rated. Ratings are measured on a scale that
generally ranges from AAA (highest) to D (lowest). Investment grade is
defined as those issuers that have a long-term credit rating of BBB- or
higher. "NR" indicates no rating. The credit ratings shown relate to the
creditworthiness of the issuers of the underlying securities in the Fund,
and not to the Fund or its shares. Credit ratings are subject to change.
Page 3
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
FIRST TRUST CEF INCOME OPPORTUNITY ETF (FCEF) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 27, 2016 - FEBRUARY 29, 2020
First Trust CEF Income Russell 3000(R) Blended
Opportunity ETF Index Benchmark
9/28/16 $10,000 $10,000 $10,000
2/28/17 10,698 11,058 10,693
8/31/17 11,348 11,637 11,267
2/28/18 11,572 12,853 11,410
8/31/18 12,267 13,993 12,041
2/28/19 12,044 13,502 11,833
8/31/19 12,657 14,176 12,452
2/29/20 12,450 14,433 12,117
|
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
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period September 28, 2016
(commencement of trading) through February 29, 2020. Shareholders may pay more
than NAV when they buy Fund shares and receive less than NAV when they sell
those shares because shares are bought and sold at current market price. Data
presented represents past performance and cannot be used to predict future
results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
9/28/16 - 8/31/17 178 13 0 1
9/1/17 - 8/31/18 137 0 0 0
9/1/18 - 8/31/19 143 1 0 0
9/1/19 - 2/29/20 93 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
9/28/16 - 8/31/17 42 0 0 0
9/1/17 - 8/31/18 115 0 0 0
9/1/18 - 8/31/19 105 1 0 0
9/1/19 - 2/29/20 31 0 0 0
|
Page 4
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
FIRST TRUST MUNICIPAL CEF INCOME OPPORTUNITY ETF (MCEF)
The First Trust Municipal CEF Income Opportunity ETF (the "Fund") seeks to
provide current income. Under normal market conditions, the Fund seeks to
achieve its investment objective by investing at least 80% of its net assets
(including investment borrowings) in a portfolio of closed-end investment
companies that are listed and traded in the United States on registered
exchanges which invest primarily in municipal debt securities, some or all of
which pay interest that is exempt from regular federal income taxes. The Fund
may also invest in exchange-traded funds. The Fund is classified as
"non-diversified" under the Investment Company Act of 1940, as amended. The
shares of the Fund are listed and traded on The Nasdaq Stock Market LLC under
the ticker symbol "MCEF."
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months Ended 1 Year Ended Inception (9/27/16) Inception (9/27/16)
2/29/20 2/29/20 to 2/29/20 to 2/29/20
FUND PERFORMANCE
NAV 2.10% 12.11% 3.06% 10.86%
Market Price 2.20% 12.29% 3.06% 10.85%
INDEX PERFORMANCE
Morningstar US National & High Yield
Municipal CEF Index (1) (2) N/A N/A N/A N/A
Bloomberg Barclays Municipal Bond Index 3.04% 9.46% 3.90% 14.01%
First Trust Municipal Closed-End Fund Total
Return Index (3) 2.08% 13.95% 3.94% 14.15%
------------------------------------------------------------------------------------------------------------------------------------
|
(See Notes to Fund Performance Overview on page 8.)
(1) Prior to August 1, 2019, the Morningstar US National & High Yield
Municipal CEF Index served as the Fund's primary benchmark. Effective
August 1, 2019, Morningstar, Inc., the index provider of the Morningstar
US National & High Yield Municipal CEF Index, ceased calculating the
Morningstar US National & High Yield Municipal CEF Index. Accordingly, the
Bloomberg Barclays Municipal Bond Index, a broad-based index composed of
tax-exempt bonds, was selected to replace the Morningstar US National &
High Yield Municipal CEF Index as the Fund's primary benchmark.
(2) Performance data is not available for all the periods shown in the table
for the index because performance data does not exist for some of the
entire periods.
(3) The First Trust Municipal Closed-End Fund Total Return Index, a
cap-weighted index (based on NAV) designed to provide a broad
representation of the taxable fixed income closed-end fund universe, has
been selected as a secondary benchmark to provide a more direct
correlation to the Fund's underlying portfolio.
Page 5
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
FIRST TRUST MUNICIPAL CEF INCOME OPPORTUNITY ETF (MCEF) (CONTINUED)
----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS INVESTMENTS
----------------------------------------------------------
Nuveen AMT-Free Municipal Credit Income
Fund 5.15%
Nuveen AMT-Free Quality Municipal Income
Fund 5.13
Nuveen Quality Municipal Income Fund 4.61
BlackRock Municipal 2030 Target Term Trust 4.59
Nuveen Municipal Value Fund, Inc 4.11
BlackRock Muni Intermediate Duration
Fund, Inc. 3.97
BlackRock MuniYield Quality Fund III, Inc. 3.80
Invesco Quality Municipal Income Trust 3.80
Nuveen Enhanced Municipal Value Fund 3.61
Nuveen Municipal Credit Income Fund 3.54
--------
Total 42.31%
========
----------------------------------------------------------
% OF TOTAL
TOP STATE EXPOSURE INVESTMENTS
----------------------------------------------------------
Illinois 11.74%
California 9.80
Texas 8.42
Florida 8.13
New Jersey 7.04
--------
Total 45.13%
========
----------------------------------------------------------
% OF TOTAL
CREDIT QUALITY (4) INVESTMENTS
----------------------------------------------------------
AAA 8.71%
AA 28.52
A 26.72
BBB 18.50
BB 5.31
B 2.62
CCC-D 1.66
NR 7.96
--------
Total 100.00%
========
-----------------------------
|
(4) The ratings are by Standard & Poor's except where otherwise indicated. A
credit rating is an assessment provided by a nationally recognized
statistical rating organization (NRSRO) of the creditworthiness of an
issuer with respect to debt obligations except for those debt obligations
that are only privately rated. Ratings are measured on a scale that
generally ranges from AAA (highest) to D (lowest). Investment grade is
defined as those issuers that have a long-term credit rating of BBB- or
higher. "NR" indicates no rating. The credit ratings shown relate to the
creditworthiness of the issuers of the underlying securities in the Fund,
and not to the Fund or its shares. Credit ratings are subject to change.
Page 6
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
FIRST TRUST MUNICIPAL CEF INCOME OPPORTUNITY ETF (MCEF) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 27, 2016 - FEBRUARY 29, 2020
First Trust Municipal CEF Bloomberg Barclays First Trust Municipal
Income Opportunity ETF Municipal Bond Index Closed-End Fund Index
9/28/16 $10,000 $10,000 $10,000
2/28/17 9,433 9,758 9,359
8/31/17 9,919 10,128 9,978
2/28/18 9,415 10,003 9,399
8/31/18 9,613 10,178 9,693
2/28/19 9,889 10,416 10,017
8/31/19 10,859 11,066 11,182
2/29/20 11,087 11,402 11,415
|
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
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period September 28, 2016
(commencement of trading) through February 29, 2020. Shareholders may pay more
than NAV when they buy Fund shares and receive less than NAV when they sell
those shares because shares are bought and sold at current market price. Data
presented represents past performance and cannot be used to predict future
results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
9/28/16 - 8/31/17 207 17 0 0
9/1/17 - 8/31/18 188 0 0 1
9/1/18 - 8/31/19 169 0 0 0
9/1/19 - 2/29/20 95 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
9/28/16 - 8/31/17 10 0 0 0
9/1/17 - 8/31/18 63 0 0 0
9/1/18 - 8/31/19 81 0 0 0
9/1/19 - 2/29/20 29 0 0 0
|
Page 7
NOTES TO FUND PERFORMANCE OVERVIEW (UNAUDITED)
Total returns for the period 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 between the highest bid and the lowest offer on the stock
exchange on which shares of the Fund are 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 its 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
PORTFOLIO MANAGEMENT
FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL REPORT
FEBRUARY 29, 2020 (UNAUDITED)
INVESTMENT ADVISOR
First Trust Advisors L.P. ("First Trust" or the "Advisor") is the investment
advisor to the First Trust CEF Income Opportunity ETF ("FCEF") and the First
Trust Municipal CEF Income Opportunity ETF ("MCEF" and together with FCEF, the
"Funds"), each a series of the First Trust Exchange-Traded Fund VIII, and is
responsible for the selection and ongoing monitoring of the securities in the
Funds' portfolios and certain other services necessary for the management of the
portfolios.
PORTFOLIO MANAGEMENT
Ken Fincher, Senior Vice President of First Trust, and Jordan Ramsland, Vice
President of First Trust are the Funds' portfolio managers and have
responsibility for the day-to-day management of each Fund's investment
portfolio. Mr. Fincher has nearly 30 years of experience in financial markets.
His current responsibilities include management of two First Trust
exchange-traded funds and separately managed accounts that invest primarily in
closed-end funds. He has also helped develop new product structures in the
closed-end fund space. Mr. Fincher has been named Outstanding Individual
Contributor to the Closed-End Fund Sector in 2007, 2006, 2005 and 2004 by
financial analysts and his peers in the closed-end fund community and served on
the Closed-End Fund committee of the Investment Company Institute. Mr. Fincher
received a B.A. in financial administration from Michigan State University and
an M.B.A. from Loyola University Graduate School of Business. Mr. Ramsland
joined First Trust in 2013, and his current responsibilities include research
and management of strategies that invest primarily in closed-end funds. He is
responsible for updating and maintaining First Trust's proprietary closed-end
fund models as part of the investment process for the First Trust closed-end
funds, exchange-traded funds and separately managed accounts. Mr. Ramsland
graduated from Palm Beach Atlantic University in 2011 with a B.S. in finance.
Page 9
FIRST TRUST EXCHANGE-TRADED FUND VIII
UNDERSTANDING YOUR FUND EXPENSES
FEBRUARY 29, 2020 (UNAUDITED)
As a shareholder of First Trust CEF Income Opportunity ETF or First Trust
Municipal CEF Income Opportunity 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 fees, if any, and
other Fund expenses. This Example is intended to help you understand your
ongoing costs of investing in the Funds and to compare these costs with the
ongoing costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended February 29, 2020.
ACTUAL EXPENSES
The first line in the following table provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During the Six-Month
Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on each Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
each Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as brokerage
commissions. Therefore, the second line in the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX MONTH SIX MONTH
SEPTEMBER 1, 2019 FEBRUARY 29, 2020 PERIOD (a) PERIOD (a) (b)
------------------------------------------------------------------------------------------------------------------------
FIRST TRUST CEF INCOME OPPORTUNITY ETF (FCEF)
Actual $1,000.00 $ 983.60 0.85% $4.19
Hypothetical (5% return before expenses) $1,000.00 $1,020.64 0.85% $4.27
FIRST TRUST MUNICIPAL CEF INCOME OPPORTUNITY ETF (MCEF)
Actual $1,000.00 $1,021.00 0.75% $3.77
Hypothetical (5% return before expenses) $1,000.00 $1,021.13 0.75% $3.77
|
(a) Annualized expense ratio and expenses paid during the six-month period do
not include fees and expenses of the underlying funds in which each Fund
invests.
(b) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (September
1, 2019 through February 29, 2020), multiplied by 182/366 (to reflect the
six-month period).
Page 10
FIRST TRUST CEF INCOME OPPORTUNITY ETF (FCEF)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
CLOSED-END FUNDS -- 97.5%
CAPITAL MARKETS -- 97.5%
43,911 Advent Convertible and Income
Fund $ 635,392
5,661 AllianzGI Artificial Intelligence &
Technology Opportunities Fund 100,313
27,901 AllianzGI Convertible & Income
2024 Target 255,015
22,770 Apollo Tactical Income Fund, Inc. 331,303
88,086 Ares Dynamic Credit Allocation
Fund, Inc. 1,281,651
36,703 Barings Global Short Duration
High Yield Fund 596,424
25,101 BlackRock Corporate High Yield
Fund, Inc. 261,301
9,250 BlackRock Health Sciences
Trust II 185,000
42,419 BlackRock Income Trust, Inc. 254,938
28,313 BlackRock Multi-Sector Income
Trust 439,984
45,712 BlackRock Science & Technology
Trust 1,421,643
30,330 BlackRock Science & Technology
Trust II 584,762
53,049 Blackstone / GSO Strategic
Credit Fund 718,814
11,316 Central Securities Corp. 337,217
52,840 Cohen & Steers Infrastructure
Fund, Inc. 1,206,337
65,804 Cohen & Steers REIT and
Preferred and Income Fund, Inc. 1,413,470
54,605 DoubleLine Income Solutions
Fund 1,018,383
11,973 Eaton Vance Enhanced Equity
Income Fund 163,791
47,059 Eaton Vance Short Duration
Diversified Income Fund 601,414
55,950 Eaton Vance Tax-Advantaged
Dividend Income Fund 1,231,459
87,280 Eaton Vance Tax-Advantaged
Global Dividend Income Fund 1,370,296
32,007 Eaton Vance Tax-Advantaged
Global Dividend Opportunities
Fund 727,199
50,141 Gabelli Dividend & Income
Trust (The) 932,121
19,645 General American Investors
Co., Inc. 659,483
10,940 John Hancock Financial
Opportunities Fund 322,621
47,932 John Hancock Tax-Advantaged
Dividend Income Fund 1,094,767
11,316 KKR Income Opportunities Fund 162,724
14,229 Lazard Global Total Return and
Income Fund, Inc. 207,032
37,801 Macquarie Global Infrastructure
Total Return Fund, Inc. 820,660
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
CAPITAL MARKETS (CONTINUED)
16,672 Morgan Stanley China A Share
Fund, Inc. $ 308,432
174,790 Nuveen Credit Strategies Income
Fund 1,211,295
64,361 Nuveen Preferred & Income
Opportunities Fund 601,132
31,303 Nuveen Real Asset Income and
Growth Fund 508,361
21,193 Nuveen Short Duration Credit
Opportunities Fund 300,305
43,785 Nuveen Tax-Advantaged
Dividend Growth Fund 668,159
74,795 PGIM Global High Yield Fund,
Inc. 1,065,081
63,526 PIMCO Dynamic Credit and
Mortgage Income Fund 1,492,861
36,787 Principal Real Estate Income
Fund 712,196
18,295 Royce Micro-Cap Trust, Inc. 142,884
43,987 Royce Value Trust, Inc. 570,951
16,392 Source Capital, Inc. 591,751
35,964 Tekla Healthcare Investors 682,237
58,417 Tekla Healthcare Opportunities
Fund 972,059
21,659 Tekla Life Sciences Investors 343,945
24,607 Templeton Emerging Markets
Fund 338,838
33,710 Tortoise Pipeline & Energy
Fund, Inc. 332,381
33,515 Tortoise Power and Energy
Infrastructure Fund, Inc. 493,006
31,369 Tri-Continental Corp. 794,577
52,660 Western Asset Emerging Markets
Debt Fund, Inc. 724,602
52,811 Western Asset High Income
Opportunity Fund, Inc. 254,021
15,284 Western Asset Inflation-Linked
Opportunities & Income Fund 177,447
-------------
TOTAL CLOSED-END FUNDS
-- 97.5% 32,622,035
(Cost $35,421,325) -------------
MONEY MARKET FUNDS -- 2.5%
838,880 Morgan Stanley Institutional Liquidity
Funds - Treasury Portfolio -
Institutional Class - 1.44% (a) 838,880
(Cost $838,880) -------------
TOTAL INVESTMENTS -- 100.0% 33,460,915
(Cost $36,260,205) (b)
NET OTHER ASSETS AND
LIABILITIES -- (0.0)% (13,723)
-------------
NET ASSETS -- 100.0% $ 33,447,192
=============
|
See Notes to Financial Statements Page 11
FIRST TRUST CEF INCOME OPPORTUNITY ETF (FCEF)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
|
(a) Rate shown reflects yield as of February 29, 2020.
(b) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of February 29, 2020, the
aggregate gross unrealized appreciation for all investments in which there
was an excess of value over tax cost was $321,998 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $3,121,288. The net unrealized depreciation was
$2,799,290.
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of February 29,
2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
------------------------------------------
Closed-End Funds* $32,622,035 $ -- $ --
Money Market
Funds 838,880 -- --
------------------------------------------
Total Investments $33,460,915 $ -- $ --
==========================================
|
* See Portfolio of Investments for industry breakout.
Page 12 See Notes to Financial Statements
FIRST TRUST MUNICIPAL CEF INCOME OPPORTUNITY ETF (MCEF)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
CLOSED-END FUNDS -- 95.9%
CAPITAL MARKETS -- 95.9%
12,887 BlackRock Florida Municipal
2020 Term Trust $ 186,862
18,750 BlackRock Investment Quality
Municipal Trust, Inc. 292,313
18,636 BlackRock Long-Term Municipal
Advantage Trust 240,591
26,806 BlackRock Muni Intermediate
Duration Fund, Inc. 387,883
18,396 BlackRock Municipal 2030
Target Term Trust 448,127
12,893 BlackRock Municipal Income
Investment Quality Trust 185,144
17,412 BlackRock Municipal Income
Trust 243,768
12,701 BlackRock Municipal Income
Trust II 187,721
15,816 BlackRock MuniHoldings
Investment Quality Fund 217,470
15,233 BlackRock MuniHoldings
Quality Fund, Inc. 195,135
13,007 BlackRock MuniYield Quality
Fund, Inc. 200,828
21,021 BlackRock MuniYield Quality
Fund II, Inc. 281,091
26,330 BlackRock MuniYield Quality
Fund III, Inc. 371,253
11,416 DTF Tax-Free Income, Inc. 173,523
10,971 Eaton Vance Municipal Bond
Fund 144,159
14,170 Eaton Vance Municipal Income
2028 Term Trust 296,436
17,163 Eaton Vance Municipal Income
Trust 223,119
13,157 Invesco Municipal Trust 165,910
7,386 Invesco Pennsylvania Value
Municipal Income Trust 95,870
29,108 Invesco Quality Municipal
Income Trust 370,545
14,111 Invesco Trust for Investment
Grade Municipals 182,737
6,682 MainStay MacKay DefinedTerm
Municipal Opportunities Fund 140,322
7,922 Neuberger Berman Municipal
Fund, Inc. 124,296
30,184 Nuveen AMT-Free Municipal
Credit Income Fund 502,865
34,132 Nuveen AMT-Free Quality
Municipal Income Fund 500,716
22,923 Nuveen Enhanced Municipal
Value Fund 352,556
7,049 Nuveen Intermediate Duration
Municipal Term Fund 98,757
7,341 Nuveen Intermediate Duration
Quality Municipal Term Fund 103,802
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
CAPITAL MARKETS (CONTINUED)
21,239 Nuveen Municipal Credit Income
Fund $ 345,983
16,110 Nuveen Municipal Credit
Opportunities Fund 246,483
22,123 Nuveen Municipal High Income
Opportunity Fund 315,695
37,790 Nuveen Municipal Value Fund,
Inc. 400,952
30,276 Nuveen Quality Municipal
Income Fund 449,901
4,764 Nuveen Select Tax-Free Income
Portfolio 74,604
23,669 Western Asset Intermediate Muni
Fund, Inc. 220,344
4,442 Western Asset Municipal Defined
Opportunity Trust, Inc. 94,126
9,342 Western Asset Municipal High
Income Fund, Inc. 73,113
21,581 Western Asset Municipal Partners
Fund, Inc. 328,894
-------------
TOTAL CLOSED-END FUNDS -- 95.9% 9,463,894
(Cost $9,371,541) -------------
EXCHANGE-TRADED FUNDS -- 3.0%
CAPITAL MARKETS -- 3.0%
4,547 VanEck Vectors High-Yield
Municipal Index ETF 298,374
(Cost $292,163) -------------
TOTAL INVESTMENTS -- 98.9% 9,762,268
(Cost $9,663,704) (a)
NET OTHER ASSETS AND
LIABILITIES -- 1.1% 104,464
-------------
NET ASSETS -- 100.0% $ 9,866,732
=============
|
(a) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of February 29, 2020, the
aggregate gross unrealized appreciation for all investments in which there
was an excess of value over tax cost was $166,489 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $67,925. The net unrealized appreciation was
$98,564.
See Notes to Financial Statements Page 13
FIRST TRUST MUNICIPAL CEF INCOME OPPORTUNITY ETF (MCEF)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of February 29,
2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
------------------------------------------
Closed-End Funds* $ 9,463,894 $ -- $ --
Exchange-Traded
Funds* 298,374 -- --
------------------------------------------
Total Investments $ 9,762,268 $ -- $ --
==========================================
|
* See Portfolio of Investments for industry breakout.
Page 14 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF ASSETS AND LIABILITIES
FEBRUARY 29, 2020 (UNAUDITED)
FIRST TRUST
FIRST TRUST MUNICIPAL CEF
CEF INCOME INCOME
OPPORTUNITY ETF OPPORTUNITY ETF
(FCEF) (MCEF)
--------------- ---------------
ASSETS:
Investments, at value.................................................. $ 33,460,915 $ 9,762,268
Cash................................................................... -- 56,465
Receivables:...........................................................
Dividends........................................................... 80,909 23,228
Investment securities sold.......................................... 4,715 30,509
--------------- ---------------
Total Assets........................................................ 33,546,539 9,872,470
--------------- ---------------
LIABILITIES:
Payables:
Investment securities purchased..................................... 72,750 --
Investment advisory fees............................................ 26,597 5,738
--------------- ---------------
Total Liabilities................................................... 99,347 5,738
--------------- ---------------
NET ASSETS............................................................. $ 33,447,192 $ 9,866,732
=============== ===============
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $ 34,520,705 $ 9,600,002
Par value.............................................................. 16,050 5,000
Accumulated distributable earnings (loss).............................. (1,089,563) 261,730
--------------- ---------------
NET ASSETS............................................................. $ 33,447,192 $ 9,866,732
=============== ===============
NET ASSET VALUE, per share............................................. $ 20.84 $ 19.73
=============== ===============
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share).............................. 1,605,000 500,002
=============== ===============
Investments, at cost................................................... $ 36,260,205 $ 9,663,704
=============== ===============
|
See Notes to Financial Statements Page 15
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 29, 2020 (UNAUDITED)
FIRST TRUST
FIRST TRUST MUNICIPAL CEF
CEF INCOME INCOME
OPPORTUNITY ETF OPPORTUNITY ETF
(FCEF) (MCEF)
--------------- ---------------
INVESTMENT INCOME:
Dividends.............................................................. $ 1,501,683 $ 199,492
--------------- ---------------
Total investment income............................................. 1,501,683 199,492
--------------- ---------------
EXPENSES:
Investment advisory fees............................................... 172,522 36,749
--------------- ---------------
Total expenses...................................................... 172,522 36,749
--------------- ---------------
NET INVESTMENT INCOME (LOSS)........................................... 1,329,161 162,743
--------------- ---------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments......................................................... (31,419) 6,635
In-kind redemptions................................................. 1,242,383 213,867
Distribution of capital gains from investment companies............. 211,253 913
--------------- ---------------
Net realized gain (loss)............................................... 1,422,217 221,415
Net change in unrealized appreciation (depreciation) on investments.... (2,730,161) (215,734)
--------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ (1,307,944) 5,681
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ 21,217 $ 168,424
=============== ===============
|
Page 16 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST FIRST TRUST
CEF INCOME MUNICIPAL CEF INCOME
OPPORTUNITY ETF OPPORTUNITY ETF
(FCEF) (MCEF)
-------------------------------- --------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR
2/29/2020 ENDED 2/29/2020 ENDED
(UNAUDITED) 8/31/2019 (UNAUDITED) 8/31/2019
--------------- --------------- --------------- ---------------
OPERATIONS:
Net investment income (loss).............................. $ 1,329,161 $ 1,498,152 $ 162,743 $ 350,546
Net realized gain (loss).................................. 1,422,217 1,123,865 221,415 (229,273)
Net change in unrealized appreciation (depreciation)...... (2,730,161) (1,972,125) (215,734) 883,685
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from operations........................................ 21,217 649,892 168,424 1,004,958
--------------- --------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations..................................... (1,041,300) (2,101,900) (141,250) (340,376)
--------------- --------------- --------------- ---------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................. 7,977,511 7,834,038 2,985,800 1,919,382
Cost of shares redeemed................................... (10,594,835) (15,050,996) (3,931,633) (5,252,800)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from shareholder transactions.......................... (2,617,324) (7,216,958) (945,833) (3,333,418)
--------------- --------------- --------------- ---------------
Total increase (decrease) in net assets................... (3,637,407) (8,668,966) (918,659) (2,668,836)
NET ASSETS:
Beginning of period....................................... 37,084,599 45,753,565 10,785,391 13,454,227
--------------- --------------- --------------- ---------------
End of period............................................. $ 33,447,192 $ 37,084,599 $ 9,866,732 $ 10,785,391
=============== =============== =============== ===============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................... 1,705,000 2,055,000 550,002 750,002
Shares sold............................................... 350,000 400,000 150,000 100,000
Shares redeemed........................................... (450,000) (750,000) (200,000) (300,000)
--------------- --------------- --------------- ---------------
Shares outstanding, end of period......................... 1,605,000 1,705,000 500,002 550,002
=============== =============== =============== ===============
|
See Notes to Financial Statements Page 17
FIRST TRUST EXCHANGE-TRADED FUND VIII
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST CEF INCOME OPPORTUNITY ETF (FCEF)
SIX MONTHS
ENDED YEAR ENDED AUGUST 31 PERIOD
2/29/2020 ---------------------------- ENDED
(UNAUDITED) 2019 2018 8/31/2017 (a)
------------- ------------- ------------- -------------
Net asset value, beginning of period............................ $ 21.75 $ 22.26 $ 21.66 $ 20.05
--------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).................................... 0.77 0.82 0.78 1.02
Net realized and unrealized gain (loss)......................... (1.09) (0.18) 0.93 1.61
--------- --------- --------- ---------
Total from investment operations................................ (0.32) 0.64 1.71 2.63
--------- --------- --------- ---------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income........................................... (0.59) (0.96) (1.01) (0.79)
Net realized gain............................................... -- (0.19) (0.10) (0.12)
Return of capital............................................... -- -- -- (0.11)
--------- --------- --------- ---------
Total distributions............................................. (0.59) (1.15) (1.11) (1.02)
--------- --------- --------- ---------
Net asset value, end of period.................................. $ 20.84 $ 21.75 $ 22.26 $ 21.66
========= ========= ========= =========
TOTAL RETURN (b)................................................ (1.64)% 3.18% 8.09% 13.49%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)............................ $ 33,447 $ 37,085 $ 45,754 $ 31,517
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets (c)............... 0.85% (d) 0.85% 0.85% 0.85% (d)
Ratio of net investment income (loss) to average net assets..... 6.55% (d) 3.92% 3.14% 5.99% (d)
Portfolio turnover rate (e)..................................... 1% 13% 15% 23%
|
FIRST TRUST MUNICIPAL CEF INCOME OPPORTUNITY ETF (MCEF)
SIX MONTHS
ENDED YEAR ENDED AUGUST 31 PERIOD
2/29/2020 ---------------------------- ENDED
(UNAUDITED) 2019 2018 8/31/2017 (a)
------------- ------------- ------------- -------------
Net asset value, beginning of period............................ $ 19.61 $ 17.94 $ 19.20 $ 20.05
--------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).................................... 0.33 0.62 0.64 0.61
Net realized and unrealized gain (loss)......................... 0.08 1.65 (1.24) (0.80)
--------- --------- --------- ---------
Total from investment operations................................ 0.41 2.27 (0.60) (0.19)
--------- --------- --------- ---------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income........................................... (0.29) (0.60) (0.64) (0.61)
Return of capital............................................... -- -- (0.02) (0.05)
--------- --------- --------- ---------
Total distributions............................................. (0.29) (0.60) (0.66) (0.66)
--------- --------- --------- ---------
Net asset value, end of period.................................. $ 19.73 $ 19.61 $ 17.94 $ 19.20
========= ========= ========= =========
TOTAL RETURN (b)................................................ 2.10% 12.96% (3.09)% (0.81)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)............................ $ 9,867 $ 10,785 $ 13,454 $ 13,441
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets (c)............... 0.75% (d) 0.75% 0.75% 0.75% (d)
Ratio of net investment income (loss) to average net assets..... 3.32% (d) 3.49% 3.54% 3.59% (d)
Portfolio turnover rate (e)..................................... 5% 20% 11% 18%
|
(a) Inception date is September 27, 2016, 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 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.
(c) The Fund indirectly bears its proportionate share of fees and expenses
incurred by the underlying funds in which the Fund invests. This ratio
does not include these indirect fees and expenses.
(d) Annualized.
(e) 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 18 See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
1. ORGANIZATION
First Trust Exchange-Traded Fund VIII (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on February 22,
2016, 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 sixteen funds that are offering shares. This
report covers the two funds listed below. The shares of each fund are listed and
traded on The Nasdaq Stock Market LLC ("Nasdaq").
First Trust CEF Income Opportunity ETF - (Nasdaq ticker "FCEF")
First Trust Municipal CEF Income Opportunity ETF - (Nasdaq ticker "MCEF")
Each fund represents a separate series of shares of beneficial interest in the
Trust (each a "Fund" and collectively, the "Funds"). Unlike conventional mutual
funds, each Fund issues and redeems shares on a continuous basis, at net asset
value ("NAV"), only in large specified blocks consisting of 50,000 shares called
a "Creation Unit." Each Fund's Creation Units are generally issued and redeemed
in-kind for securities in which the Fund invests, and in certain circumstances,
for cash, and only to and from broker-dealers and large institutional investors
that have entered into participation agreements. Except when aggregated in
Creation Units, each Fund's shares are not redeemable securities.
Each Fund is an actively managed exchange-traded fund and principally invests in
a portfolio of closed-end investment companies that are listed and traded in the
United States on registered exchanges ("Closed-End Funds"). FCEF's primary
investment objective is to provide current income with a secondary emphasis on
total return. MCEF's investment objective is to provide current income. Each
Fund seeks to achieve its investment objective(s) by investing, under normal
market conditions, at least 80% of its net assets (including investment
borrowings) in Closed-End Funds. MCEF invests in Closed-End Funds ("Municipal
Closed-End Funds") which invest primarily in municipal debt securities, some or
all of which pay interest that is exempt from regular federal income taxes
("Municipal Securities"). MCEF may also invest in exchange-traded funds.
Closed-End Funds issue shares of common stock that are traded on a securities
exchange. Because the shares of Closed-End Funds cannot be redeemed upon demand
to the issuer like the shares of an open-end investment company, investors seek
to buy and sell shares of Closed-End Funds in the secondary market.
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds are each considered an investment company and follow accounting and
reporting guidance under Financial Accounting Standards Board ("FASB")
Accounting Standards Codification ("ASC") Topic 946, "Financial
Services-Investment Companies." The following is a summary of significant
accounting policies consistently followed by the Funds in the preparation of the
financial statements. The preparation of the financial statements in accordance
with accounting principles generally accepted in the United States of America
("U.S. GAAP") requires management to make estimates and assumptions that affect
the reported amounts and disclosures in the financial statements. Actual results
could differ from those estimates.
A. PORTFOLIO VALUATION
Each Fund's NAV is determined daily as of the close of regular trading on the
New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day
the NYSE is open for trading. If the NYSE closes early on a valuation day, the
NAV is determined as of that time. 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
market value with respect to any portfolio securities, at fair value. Market
value prices represent last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are primarily obtained from
third-party pricing services. Fair value prices represent any prices not
considered market value prices and are either obtained from a third-party
pricing service or are determined by the Pricing Committee of the Funds'
investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"),
in accordance with valuation procedures adopted by the Trust's Board of
Trustees, and in accordance with provisions of the 1940 Act. Investments valued
by the Advisor's Pricing Committee, if any, are footnoted as such in the
footnotes to the Portfolio of Investments. Each Fund's investments are valued as
follows:
Common stocks 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.
Shares of open-end funds are valued at fair value which is based on NAV
per share.
Page 19
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Trust's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities
which may not be publicly sold without registration under the Securities Act of
1933, as amended) for which a third-party pricing service is unable to provide a
market price; securities whose trading has been formally suspended; a security
whose market or fair value price is not available from a pre-established pricing
source; a security with respect to which an event has occurred that is likely to
materially affect the value of the security after the market has closed but
before the calculation of a Fund's NAV or make it difficult or impossible to
obtain a reliable market quotation; and a security whose price, as provided by
the third-party pricing service, does not reflect the security's fair value. As
a general principle, the current fair value of a security would appear to be the
amount which the owner might reasonably expect to receive for the security upon
its current sale. When fair value prices are used, generally they will differ
from market quotations or official closing prices on the applicable exchanges. A
variety of factors may be considered in determining the fair value of such
securities, including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or third-party pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect
the value of the security.
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
investments.
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 February 29, 2020, 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.
C. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income of each Fund, if any, are declared and paid
monthly, or as the Board of Trustees may determine from time to time.
Distributions of net realized gains earned by each Fund, if any, are distributed
at least annually.
Distributions from net investment income and realized capital gains are
determined in accordance with federal income tax regulations, which may differ
from U.S. GAAP. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These permanent differences are primarily due to the varying
treatment of income and gain/loss on 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.
Page 20
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
The tax character of distributions paid by each Fund during the fiscal year
ended August 31, 2019 was as follows:
Distributions Distributions Distributions Distributions
paid from paid from paid from paid from
Ordinary Capital Tax-Exempt Return of
Income Gains Income Capital
------------- ------------- ------------- -------------
First Trust CEF Income Opportunity ETF $ 1,678,056 $ 423,844 $ -- $ --
First Trust Municipal CEF Income Opportunity ETF 3,749 -- 336,627 --
|
As of August 31, 2019, the components of distributable earnings on a tax basis
for each Fund were as follows:
Accumulated Net
Undistributed Capital and Unrealized
Ordinary Other Appreciation
Income Gain (Loss) (Depreciation)
------------- ------------- -------------
First Trust CEF Income Opportunity ETF $ -- $ 6,642 $ (76,122)
First Trust Municipal CEF Income Opportunity ETF 10,170 (86,293) 310,679
|
D. INCOME TAXES
Each Fund intends to continue to qualify as a regulated investment company by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no
provision has been made for federal and state income taxes. However, due to the
timing and amount of distributions, each Fund may be subject to an excise tax of
4% of the amount by which approximately 98% of each Fund's taxable income
exceeds the distributions from such taxable income for the calendar year.
In addition, the First Trust Municipal CEF Income Opportunity ETF intends to
invest in such Municipal Closed-End Funds to allow it to qualify to pass through
"exempt dividends" as defined in the Internal Revenue Code.
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. Taxable years ending 2017, 2018
and 2019 remain open to federal and state audit. As of February 29, 2020,
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.
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 August 31, 2019, for
federal income tax purposes, each applicable Fund had a capital loss
carryforward available that is shown in the table below, to the extent provided
by regulations, to offset future capital gains. To the extent that these loss
carryforwards are used to offset future capital gains, it is probable that the
capital gains so offset will not be distributed to each applicable Fund's
shareholders.
Non-Expiring
Capital Loss
Carryforwards
-------------
First Trust CEF Income Opportunity ETF $ --
First Trust Municipal CEF Income Opportunity ETF 86,293
|
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 August 31, 2019, the Funds had no
net late year ordinary or capital losses.
E. EXPENSES
Expenses, other than the investment advisory fee and other excluded expenses,
are paid by the Advisor (see Note 3).
Page 21
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
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 selection and 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.
Pursuant to the Investment Management Agreement between the Trust and the
Advisor, First Trust manages the investment of the Funds' assets and is
responsible for the expenses of each Fund including the cost of transfer agency,
custody, fund administration, legal, audit and other services and license fees
(if any), but excluding fee payments under the Investment Management Agreement,
interest, taxes, pro rata share of fees and expenses attributable to investments
in other investment companies ("acquired fund fees and expenses"), brokerage
commissions and other expenses connected with the execution of portfolio
transactions, distribution and service fees payable pursuant to a Rule 12b-1
plan, if any, and extraordinary expenses, which are paid by each respective
Fund. FCEF and MCEF have each agreed to pay First Trust an annual unitary
management fee equal to 0.85% and 0.75% of its average daily net assets,
respectively. In addition, each Fund incurs acquired fund fees and expenses. The
total of the unitary management fee and acquired fund fees and expenses
represents each Fund's total annual operating expenses.
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
each Fund. As custodian, BNYM is responsible for custody of each Fund's assets.
As fund accountant and administrator, BNYM is responsible for maintaining the
books and records of each Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for each Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
a defined-outcome fund or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen 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
Chairmen 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 six months ended February 29, 2020, 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 CEF Income Opportunity ETF $ 1,303,109 $ 531,286
First Trust Municipal CEF Income Opportunity ETF 696,912 468,888
|
For the six months ended February 29, 2020, the cost of in-kind purchases and
proceeds from in-kind sales for each Fund were as follows:
Purchases Sales
------------ ------------
First Trust CEF Income Opportunity ETF $ 7,668,322 $ 10,243,402
First Trust Municipal CEF Income Opportunity ETF 2,935,164 3,869,782
|
5. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
Shares are created and redeemed by each Fund only in Creation Unit size
aggregations of 50,000 shares in transactions with broker-dealers or large
institutional investors that have entered into a participation agreement (an
"Authorized Participant"). In order to purchase Creation Units of each Fund, an
Authorized Participant must deposit (i) a designated portfolio of securities
determined by First Trust (the "Deposit Securities") and generally make or
receive a cash payment referred to as the "Cash Component," which is
Page 22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
an amount equal to the difference between the NAV of the Fund Shares (per
Creation Unit Aggregation) and the market value of the Deposit Securities,
and/or (ii) cash in lieu of all or a portion of the Deposit Securities. If the
Cash Component is a positive number (i.e., the NAV per Creation Unit Aggregation
exceeds the Deposit Amount), the Authorized Participant will deliver the Cash
Component. If the Cash Component is a negative number (i.e., the NAV per
Creation Unit Aggregation is less than the Deposit Amount), the Authorized
Participant will receive the Cash Component. Authorized Participants purchasing
Creation Units must pay to BNYM, as transfer agent, a creation transaction fee
(the "Creation Transaction Fee") regardless of the number of Creation Units
purchased in the transaction. The Creation Transaction Fee may vary and is based
on the composition of the securities included in each Fund's portfolio and the
countries in which the transactions are settled. The Creation Transaction Fee
may increase or decrease with changes in each Fund's portfolio. The price for
each Creation Unit will equal the daily NAV per share 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 or stamp taxes. When a
Fund permits an Authorized Participant to substitute cash or a different
security in lieu of depositing one or more of the requisite Deposit Securities,
the Authorized Participant may also be assessed an amount to cover the cost of
purchasing the Deposit Securities and/or disposing of the substituted
securities, including 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 such Deposit Securities and/or substitute
securities.
Authorized Participants redeeming Creation Units must pay to BNYM, as transfer
agent, a standard redemption transaction fee (the "Redemption Transaction Fee"),
regardless of the number of Creation Units redeemed in the transaction. The
Redemption Transaction Fee may vary and is based on the composition of the
securities included in each Fund's portfolio and the countries in which the
transactions are settled. The Redemption Transaction Fee may increase or
decrease with changes in each Fund's portfolio. Each Fund reserves the right to
effect redemptions in cash. An Authorized Participant may request cash
redemption in lieu of securities; however, a Fund may, in its discretion, reject
any such request.
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 December 31, 2020.
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:
Beginning in December 2019, the outbreak of the respiratory disease designated
as COVID-19 has caused significant volatility and declines in global financial
markets, which have caused losses for investors. The impact of this COVID-19
pandemic may be short-term or may last for an extended period of time and, in
either case, could result in a substantial economic downturn or recession.
Management is continuing to monitor this event.
Page 23
ADDITIONAL INFORMATION
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (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 large
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
not concentrated.
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.
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.
Page 24
ADDITIONAL INFORMATION (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
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 CONSTITUENT RISK. Certain funds may be a constituent of one or more
indices. 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
significantly 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.
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. In 2017, the United Kingdom's
Financial Conduct Authority announced that LIBOR will cease to be available for
use after 2021. The unavailability or replacement of LIBOR may affect the value,
liquidity or return on certain fund investments and may result in costs incurred
in connection with closing out positions and entering into new trades. Any
potential effects of the transition away from LIBOR on the fund or on certain
instruments in which the fund invests can be difficult to ascertain, and they
may vary depending on a variety of factors. Any such effects of the transition
away from LIBOR, as well as other unforeseen effects, could result in losses to
the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are
subject to market fluctuations caused by factors such as general economic
conditions, political events, regulatory or market developments, changes in
interest rates and perceived trends in securities prices. Shares of a fund could
decline in value or underperform other investments as a result of the risk of
loss associated with these market fluctuations. In addition, local, regional or
global events such as war, acts of terrorism, spread of infectious diseases or
other public health issues, recessions, or other events could have a significant
negative impact on a fund and its investments. Such events may affect certain
geographic regions, countries, sectors and industries more significantly than
others. The outbreak of the respiratory disease designated as COVID-19 in
December 2019 has caused significant volatility and declines in global financial
markets, which have caused losses for investors. The impact of this COVID-19
pandemic may be short term or may last for an extended period of time, and in
either case could result in a substantial economic downturn or recession.
Page 25
ADDITIONAL INFORMATION (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
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; lack
of liquidity; currency exchange rates; excessive taxation; government seizure of
assets; 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.
Passive Investment Risk. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
Page 26
This page intentionally left blank.
This page intentionally left blank.
FIRST TRUST
First Trust Exchange-Traded Fund VIII
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
[BLANK BACK COVER]
FIRST TRUST
First Trust Exchange-Traded Fund VIII
First Trust TCW Opportunistic Fixed Income ETF (FIXD)
First Trust TCW Unconstrained Plus Bond ETF (UCON)
Semi-Annual Report
For the Six Months Ended
February 29, 2020
TABLE OF CONTENTS
FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL REPORT
FEBRUARY 29, 2020
Shareholder Letter........................................................... 1
Fund Performance Overview
First Trust TCW Opportunistic Fixed Income ETF (FIXD)..................... 2
First Trust TCW Unconstrained Plus Bond ETF (UCON)........................ 5
Notes to Fund Performance Overview........................................... 8
Portfolio Management......................................................... 9
Understanding Your Fund Expenses............................................. 10
Portfolio of Investments
First Trust TCW Opportunistic Fixed Income ETF (FIXD)..................... 11
First Trust TCW Unconstrained Plus Bond ETF (UCON)........................ 34
Statements of Assets and Liabilities......................................... 53
Statements of Operations..................................................... 54
Statements of Changes in Net Assets.......................................... 55
Financial Highlights......................................................... 56
Notes to Financial Statements................................................ 57
Additional Information....................................................... 67
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 TCW Investment Management Company LLC ("TCW" 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 VIII (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 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 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 a relevant market benchmark.
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.
SHAREHOLDER LETTER
FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
FEBRUARY 29, 2020
Dear Shareholders:
First Trust is pleased to provide you with the semi-annual report for the
Taxable Fixed Income Funds of First Trust Exchange-Traded Fund VIII (the
"Funds"), which contains detailed information about the Funds for the six months
ended February 29, 2020.
To say that much has transpired over the past six months would be an
understatement. Prior to the onset of the coronavirus (COVID-19) in Wuhan, China
this past December, my message to investors would have sounded quite bullish,
focusing on such accomplishments as the progress in the trade negotiations
between the U.S. and China, where a "Phase One" deal was signed into law on
January 15, 2020. The main takeaway from the deal is that China agreed to
purchase an additional $200 billion of goods and services from the U.S. over the
next several years in exchange for the U.S. cutting some of its tariffs on
Chinese goods. The deal marked the first breakthrough since the Trump
Administration launched its new tariff initiative in March 2018. On top of that
news, the S&P 500(R) Index was setting new all-time highs all the way up through
the close of trading on February 19, 2020, the day it peaked.
Unfortunately, the good news has been overshadowed by the escalation and spread
of the COVID-19 pandemic. As of April 16, 2020, this disease had spread to 213
countries, areas or territories, had infected 1,991,562 people (confirmed cases)
and was responsible for 130,885 deaths, according to the World Health
Organization. These numbers are expected to trend higher in the days and weeks
ahead. A growing number of U.S. state governors and foreign leaders have issued
shelter in place orders to their citizens to help slow the spread of this new
virus. The primary objective in doing so is to slow down the number of cases so
that hospitals and health care workers are not overwhelmed by too many patients.
The cost is high because it requires shutting down large chunks of the economy,
which in turn negatively impacts the financial well-being of workers and
companies. In the U.S., Congress passed a financial stimulus package valued at
$2.0 trillion to help backstop workers and companies in the near-term. The
faster we can end the shutdown, consistent with general health and welfare, the
better, according to Brian Wesbury, Chief Economist at First Trust Advisors L.P.
Here is what we think we know. Brian Wesbury believes the U.S. could experience
a modest decline in real gross domestic product of 1.5% (annualized) in the
first quarter of 2020, followed by a massive decline of 20% (annualized) in the
second quarter. The good news is that he sees the economy growing at a 3.0% and
3.5% annual pace in the third and fourth quarters of 2020, respectively. In
other words, we are expecting a healthy rebound in the second half of this year.
As I noted earlier, the stock market was still at a record high in the third
week of February. From February 19 through March 23, however, the S&P 500(R)
Index posted a total return of -33.79%, putting it in bear market territory
(price decline of 20% or more from the most recent peak). Sorry to say it, but
the nearly 11-year bull market is no more. While we do not have a projection for
where stocks will be at year-end, we do know this: excluding the current bear
market, the S&P 500(R) Index has never failed to recoup all the losses sustained
in any sell-off, pullback, correction or bear market. So, while I am
understandably not bullish on the first half of 2020, I will be a bull once
again after we put the worst of COVID-19 behind us. I continue to urge investors
to stay the course. This too shall pass.
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
FUND PERFORMANCE OVERVIEW (UNAUDITED)
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
The investment objective of the First Trust TCW Opportunistic Fixed Income ETF
(the "Fund") is to seek to maximize long-term total return. Under normal market
conditions, the Fund pursues its objective by investing at least 80% of its net
assets (including investment borrowings) in fixed income securities. The Fund's
investments principally include securities issued or guaranteed by the U.S.
government or its agencies, instrumentalities or U.S. government-sponsored
entities; Treasury Inflation Protected Securities (TIPS); residential and
commercial mortgage-backed securities; asset-backed securities; U.S. corporate
bonds; fixed income securities issued by non-U.S. corporations and governments,
including issuers with significant ties to emerging market countries; bank
loans, including first lien senior secured floating rate bank loans; municipal
bonds; collateralized loan obligations (CLOs); Rule 144A securities, and other
debt securities bearing fixed, floating or variable interest rates of any
maturity. Shares of the Fund are listed on The Nasdaq Stock Market LLC under the
ticker symbol "FIXD."
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
Inception Inception
6 Months Ended 1 Year Ended (2/14/17) (2/14/17)
2/29/20 2/29/20 to 2/29/20 to 2/29/20
FUND PERFORMANCE
NAV 3.30% 11.74% 5.30% 16.98%
Market Price 3.16% 11.62% 5.31% 17.02%
INDEX PERFORMANCE
Bloomberg Barclays U.S. Aggregate Bond Index 3.39% 11.68% 5.17% 16.57%
------------------------------------------------------------------------------------------------------------------------------------
|
(See Notes to Fund Performance Overview on page 8.)
Page 2
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD) (CONTINUED)
----------------------------------------------------------
% OF TOTAL
ASSET CLASSIFICATION INVESTMENTS
----------------------------------------------------------
U.S. Government Agency Mortgage-
Backed Securities 35.12%
U.S. Government Bonds and Notes 23.75
Corporate Bonds and Notes 14.53
Money Market Funds 6.88
Mortgage-Backed Securities 6.64
Asset-Backed Securities 5.74
Foreign Corporate Bonds and Notes 3.77
U.S. Treasury Bills 2.40
Foreign Sovereign Bonds and Notes 0.67
Municipal Bonds 0.48
Capital Preferred Securities 0.02
--------
Total 100.00%
========
----------------------------------------------------------
% OF TOTAL
CREDIT QUALITY(1) INVESTMENTS
----------------------------------------------------------
Government/Agency 61.27%
AAA 8.55
AA+ 0.70
AA 0.27
AA- 0.39
A+ 0.58
A 0.49
A- 2.49
BBB+ 3.26
BBB 5.11
BBB- 4.62
BB+ 0.86
BB 0.63
BB- 0.19
B+ 0.51
B 1.13
B- 0.22
CCC+ 0.11
CCC 1.77
CCC- 0.02
CC 0.61
D 0.28
NR 5.94
--------
Total 100.00%
========
----------------------------------------------------------
% OF FIXED-
INCOME
TOP TEN HOLDINGS INVESTMENTS
----------------------------------------------------------
U.S. Treasury Note 1.63%, 12/31/21 4.38%
Federal National Mortgage Association,
Pool TBA, 2.50%, 03/15/35 4.01
U.S. Treasury Note 1.38%, 01/31/25 3.02
U.S. Treasury Note 1.13%, 02/28/25 2.87
U.S. Treasury Note 1.13%, 02/28/22 2.72
U.S. Treasury Bill 0.00%, 04/21/20 2.51
Federal National Mortgage Association,
Pool TBA, 3.00%, 04/15/50 2.49
U.S. Treasury Bond 2.38%, 11/15/49 2.46
U.S. Treasury Bond 2.00%, 02/15/50 2.01
Federal Home Loan Mortgage Corporation,
Pool SD8044, 3.00%, 02/01/50 1.85
--------
Total 28.32%
========
-----------------------------
|
(1) The ratings are by Standard & Poor's. A credit rating is an assessment
provided by a nationally recognized statistical rating organization
(NRSRO), of the creditworthiness of an issuer with respect to debt
obligations. Ratings are measured on a scale that generally ranges from
AAA (highest) to D (lowest). Investment grade is defined as those issuers
that have a long-term credit rating of BBB- or higher. "NR" indicates no
rating. The credit ratings shown relate to the creditworthiness of the
issuers of the underlying securities in the fund, and not to the fund or
its shares. U.S. Treasury, U.S. Agency and U.S. Agency mortgage-backed
securities appear under "Government/Agency." Credit ratings are subject to
change.
Page 3
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
FEBRUARY 14, 2017 - FEBRUARY 29, 2020
First Trust TCW Bloomberg Barclays
Opportunistic Fixed U.S. Aggregate
Income ETF Bond Index
2/14/17 $10,000 $10,000
2/28/17 10,068 10,066
8/31/17 10,323 10,342
2/28/18 10,130 10,117
8/31/18 10,265 10,233
2/28/19 10,470 10,437
8/31/19 11,325 11,274
2/29/20 11,698 11,657
|
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
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period February 15, 2017
(commencement of trading) through February 29, 2020. Shareholders may pay more
than NAV when they buy Fund shares and receive less than NAV when they sell
those shares because shares are bought and sold at current market price. Data
presented represents past performance and cannot be used to predict future
results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
2/15/17 - 8/31/17 117 0 0 0
9/1/17 - 8/31/18 180 1 0 0
9/1/18 - 8/31/19 224 0 0 0
9/1/19 - 2/29/20 119 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
2/15/17 - 8/31/17 21 0 0 0
9/1/17 - 8/31/18 71 0 0 0
9/1/18 - 8/31/19 26 0 0 0
9/1/19 - 2/29/20 5 0 0 0
|
Page 4
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
The investment objective of the First Trust TCW Unconstrained Plus Bond ETF (the
"Fund") is to seek to maximize long-term total return. Under normal market
conditions, the Fund pursues its objective by investing at least 80% of its net
assets (including investment borrowings) in a portfolio of fixed income
securities. The Fund's investment sub-advisor, TCW Investment Management Company
LLC, manages the Fund's portfolio in an "unconstrained" manner, meaning that its
investment universe is not limited to the securities of any particular index and
it has discretion to invest in fixed income securities of any type or credit
quality, including up to 70% of its net assets in high yield (or "junk")
securities, up to 60% of its net assets in securities issued by issuers with
significant ties to emerging market countries and up to 50% of its net assets in
securities denominated in non-U.S. currencies. Pursuant to the investment
strategy, the Fund may invest principally in the following types of fixed income
securities: securities issued or guaranteed by the U.S. government or its
agencies, instrumentalities or U.S. government-sponsored entities; Treasury
Inflation Protected Securities (TIPS); residential and commercial
mortgage-backed securities; asset-backed securities; U.S. corporate bonds; fixed
income securities issued by non-U.S. corporations and governments, including
issuers with significant ties to emerging market countries; bank loans,
including first lien senior secured floating rate bank loans; municipal bonds;
collateralized loan obligations (CLOs); Rule 144A securities, and other debt
securities bearing fixed, floating or variable interest rates of any maturity.
The Fund may also invest in preferred stock and common stock. Under normal
market conditions, the Fund's average portfolio duration will vary from between
0 to 10 years. Shares of the Fund are listed on The NYSE Arca, Inc. under the
ticker symbol "UCON."
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
Inception Inception
6 Months Ended 1 Year Ended (6/4/18) (6/4/18)
2/29/20 2/29/20 to 2/29/20 to 2/29/20
FUND PERFORMANCE
NAV 2.16% 6.16% 5.42% 9.60%
Market Price 2.35% 6.70% 5.62% 9.97%
INDEX PERFORMANCE
ICE BofA US Dollar 3-Month Deposit Offered Rate
Average Index 1.03% 2.35% 2.42% 4.24%
------------------------------------------------------------------------------------------------------------------------------------
|
(See Notes to Fund Performance Overview on page 8.)
Page 5
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON) (CONTINUED)
----------------------------------------------------------
% OF TOTAL
ASSET CLASSIFICATION INVESTMENTS
----------------------------------------------------------
Corporate Bonds and Notes 33.72%
U.S. Government Agency Mortgage-Backed
Securities 23.38
Mortgage-Backed Securities 10.71
U.S. Treasury Bills 10.63
Asset-Backed Securities 8.81
Foreign Corporate Bonds and Notes 6.99
Money Market Funds 3.05
Foreign Sovereign Bonds and Notes 1.51
Municipal Bonds 0.83
Commercial Paper 0.25
U.S. Government Bonds and Notes 0.12
--------
Total 100.00%
========
----------------------------------------------------------
% OF TOTAL
CREDIT QUALITY(1) INVESTMENTS
----------------------------------------------------------
Government/Agency 34.13%
AAA 3.14
AA+ 2.01
AA 0.35
AA- 0.88
A+ 2.68
A 1.63
A- 5.79
BBB+ 7.93
BBB 10.18
BBB- 8.74
BB+ 1.78
BB 1.38
BB- 0.69
B+ 0.78
B 1.79
B- 0.88
CCC+ 0.23
CCC 7.24
CCC- 0.75
CC 1.73
D 0.56
NA 4.73
--------
Total 100.00%
========
----------------------------------------------------------
% OF
FIXED-INCOME
TOP TEN HOLDINGS INVESTMENTS
----------------------------------------------------------
U.S. Treasury Bill 0.00%, 04/14/20 2.72%
U.S. Treasury Bill 0.00%, 04/21/20 2.36
U.S. Treasury Bill 0.00%, 07/16/20 2.06
U.S. Treasury Bill 0.00%, 05/14/20 1.91
U.S. Treasury Bill 0.00%, 04/09/20 0.83
Morgan Stanley, Global Medium-Term
Note 3.70%, 10/23/24 0.80
U.S. Treasury Bill 0.00%, 03/17/20 0.75
JPMorgan Chase & Co., 4.20%, 07/23/29 0.73
Conseco Finance Corp., Series 1999-3,
Class A8, 7.06%, 02/01/31 0.70
Federal National Mortgage Association,
Pool BL1857, 3.53%, 04/01/29 0.66
--------
Total 13.52%
========
-----------------------------
|
(1) The ratings are by Standard & Poor's. A credit rating is an assessment
provided by a nationally recognized statistical rating organization
(NRSRO), of the creditworthiness of an issuer with respect to debt
obligations. Ratings are measured on a scale that generally ranges from
AAA (highest) to D (lowest). Investment grade is defined as those issuers
that have a long-term credit rating of BBB- or higher. "NR" indicates no
rating. The credit ratings shown relate to the creditworthiness of the
issuers of the underlying securities in the fund, and not to the fund or
its shares. U.S. Treasury, U.S. Agency and U.S. Agency mortgage-backed
securities appear under "Government/Agency." Credit ratings are subject to
change.
Page 6
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JUNE 4, 2018 - FEBRUARY 29, 2020
First Trust TCW ICE BofA US Dollar
Opportunistic Fixed 3-Month Deposit Offered
Income ETF Rate Average Index
6/4/18 $10,000 $10,000
8/31/18 10,106 10,057
2/28/19 10,323 10,185
8/31/19 10,728 10,318
2/29/20 10,960 10,424
|
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
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period June 5, 2018 (commencement of
trading) through February 29, 2020. Shareholders may pay more than NAV when they
buy Fund shares and receive less than NAV when they sell those shares because
shares are bought and sold at current market price. Data presented represents
past performance and cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
6/5/18 - 8/31/18 50 0 0 0
9/1/18 - 8/31/19 203 0 0 0
9/1/19 - 2/29/20 110 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
6/5/18 - 8/31/18 13 0 0 0
9/1/18 - 8/31/19 46 0 0 1
9/1/19 - 2/29/20 14 0 0 0
|
Page 7
NOTES TO FUND PERFORMANCE OVERVIEW (UNAUDITED)
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. The total returns would have been lower if certain fees had not been
waived by the Advisor.
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 between the highest bid and the lowest offer on the stock
exchange on which shares of the Fund are 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
PORTFOLIO MANAGEMENT
FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL REPORT
FEBRUARY 29, 2020 (UNAUDITED)
ADVISOR
First Trust Advisors L.P. ("First Trust") is the investment advisor to First
Trust TCW Opportunistic Fixed Income ETF ("FIXD") and First Trust TCW
Unconstrained Plus Bond ETF ("UCON") (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
TCW Investment Management Company LLC ("TCW" or the "Sub-Advisor"), serves as
investment sub-advisor. In this capacity, TCW is responsible for the selection
and ongoing monitoring of the securities in each Fund's investment portfolio.
TCW, with principal offices at 865 South Figueroa Street, Los Angeles,
California 90017, was founded in 1996, and is a wholly-owned subsidiary of The
TCW Group, Inc. ("TCW Group"). TCW, together with TCW Group and its other
subsidiaries, which provide investment management and investment advisory
services, had approximately $225.5 billion under management or committed to
management, including $191 billion of U.S. fixed income investments, as of
February 29, 2020.
PORTFOLIO MANAGEMENT TEAM
TAD RIVELLE, CHIEF INVESTMENT OFFICER OF THE FIXED INCOME GROUP OF TCW
STEPHEN M. KANE, CFA, GENERALIST PORTFOLIO MANAGER IN THE FIXED INCOME GROUP OF
TCW
LAIRD LANDMANN, CO-DIRECTOR AND GENERALIST PORTFOLIO MANAGER IN THE FIXED INCOME
GROUP OF TCW
BRIAN T. WHALEN, CFA, GENERALIST PORTFOLIO MANAGER IN THE FIXED INCOME GROUP OF
TCW
Page 9
FIRST TRUST EXCHANGE-TRADED FUND VIII
UNDERSTANDING YOUR FUND EXPENSES
FEBRUARY 29, 2020 (UNAUDITED)
As a shareholder of First Trust TCW Opportunistic Fixed Income ETF or First
Trust TCW Unconstrained Plus Bond 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 fees, if any, and
other Fund expenses. This Example is intended to help you understand your
ongoing costs of investing in the Funds and to compare these costs with the
ongoing costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended February 29, 2020.
ACTUAL EXPENSES
The first line in the following table provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During the Six-Month
Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on each Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
each Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Funds and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as brokerage
commissions. Therefore, the second line in the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
----------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX MONTH SIX MONTH
SEPTEMBER 1, 2019 FEBRUARY 29, 2020 PERIOD (a) PERIOD (b)
----------------------------------------------------------------------------------------------------------------------
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
Actual $1,000.00 $1,033.00 0.55% $2.78
Hypothetical (5% return before expenses) $1,000.00 $1,022.13 0.55% $2.77
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
Actual $1,000.00 $1,021.60 0.75% $3.77
Hypothetical (5% return before expenses) $1,000.00 $1,021.13 0.75% $3.77
|
(a) These expense ratios reflect an expense waiver. See Note 3 in the Notes to
Financial Statements.
(b) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (September
1, 2019 through February 29, 2020), multiplied by 182/366 (to reflect the
six-month period).
Page 10
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 40.8%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.9%
Federal Home Loan Mortgage Corporation
$ 248,000 Series 2017-4656, Class EZ....................................... 4.00% 02/15/47 $ 295,603
Federal National Mortgage Association
3,306,477 Series 2012-20, Class ZT......................................... 3.50% 03/25/42 3,624,290
2,932,809 Series 2012-84, Class VZ......................................... 3.50% 08/25/42 3,259,046
1,230,686 Series 2018-38, Class PA......................................... 3.50% 06/25/47 1,303,637
3,328,026 Series 2018-43, Class CT......................................... 3.00% 06/25/48 3,429,437
1,394,780 Series 2018-86, Class JA......................................... 4.00% 05/25/47 1,468,557
543,706 Series 2018-94, Class KD......................................... 3.50% 12/25/48 567,435
607,651 Series 2019-1, Class KP.......................................... 3.25% 02/25/49 640,927
940,607 Series 2019-20, Class BA......................................... 3.50% 02/25/48 987,321
336,456 Series 2019-52, Class PA......................................... 3.00% 09/25/49 348,532
5,424,178 Series 2019-67, Class FE, 1 Mo. LIBOR + 0.45% (a)................ 2.08% 11/25/49 5,410,046
Government National Mortgage Association
584,181 Series 2018-115, Class DE........................................ 3.50% 08/20/48 612,413
548,395 Series 2018-124, Class NW........................................ 3.50% 09/20/48 578,302
2,852,152 Series 2019-12, Class QA......................................... 3.50% 09/20/48 2,949,529
820,595 Series 2019-71, Class PT......................................... 3.00% 06/20/49 852,210
4,360,024 Series 2019-119, Class JE........................................ 3.00% 09/20/49 4,491,491
--------------
30,818,776
--------------
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 1.7%
Federal National Mortgage Association
1,245,000 Series 2018-M1, Class A2 (b)..................................... 2.98% 12/25/27 1,360,303
3,750,000 Series 2018-M14, Class A2 (b).................................... 3.58% 08/25/28 4,310,344
Freddie Mac Multifamily Structured Pass-Through Certificates
5,150,000 Series 2014-K038, Class A2....................................... 3.39% 03/25/24 5,548,280
83,546 Series 2016-KF16, Class A, 1 Mo. LIBOR + 0.63% (a)............... 2.29% 03/25/26 83,451
6,963,000 Series 2017-K068, Class A2....................................... 3.24% 08/25/27 7,735,389
66,374 Series 2017-KJ18, Class A1....................................... 2.46% 03/25/22 66,797
965,784 Series 2017-Q006, Class APT2 (a)................................. 2.51% 09/25/26 1,021,433
1,250,000 Series 2018-K155, Class A2....................................... 3.75% 11/25/32 1,463,927
1,520,000 Series 2018-K157, Class A2 (a)................................... 3.99% 05/25/33 1,823,018
1,000,000 Series 2018-K158, Class A2 (a)................................... 3.90% 12/25/30 1,188,300
JP Morgan Structure Products
2,120,000 Series JPM-2598 (c).............................................. 2.46% 04/25/40 2,114,700
--------------
26,715,942
--------------
PASS-THROUGH SECURITIES -- 37.2%
Federal Home Loan Mortgage Corporation
228,689 Pool C91981...................................................... 3.00% 02/01/38 237,440
143,734 Pool G07961...................................................... 3.50% 03/01/45 153,575
157,751 Pool G08692...................................................... 3.00% 02/01/46 165,165
4,657,479 Pool G08715...................................................... 3.00% 08/01/46 4,869,198
91,949 Pool G08721...................................................... 3.00% 09/01/46 96,292
1,062,346 Pool G08726...................................................... 3.00% 10/01/46 1,110,612
2,483,972 Pool G08732...................................................... 3.00% 11/01/46 2,596,318
1,147,673 Pool G08737...................................................... 3.00% 12/01/46 1,197,807
344,663 Pool G08738...................................................... 3.50% 12/01/46 363,699
597,638 Pool G08741...................................................... 3.00% 01/01/47 624,864
386,154 Pool G08747...................................................... 3.00% 02/01/47 403,500
361,310 Pool G08748...................................................... 3.50% 02/01/47 381,751
1,265,961 Pool G08750...................................................... 3.00% 03/01/47 1,321,078
|
See Notes to Financial Statements Page 11
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Federal Home Loan Mortgage Corporation (Continued)
$ 533,690 Pool G08766...................................................... 3.50% 06/01/47 $ 562,633
1,339,608 Pool G08788...................................................... 3.50% 11/01/47 1,412,321
3,595,701 Pool G08791...................................................... 3.00% 12/01/47 3,726,548
1,229,125 Pool G08795...................................................... 3.00% 01/01/48 1,276,014
611,402 Pool G08800...................................................... 3.50% 02/01/48 643,866
1,228,405 Pool G08816...................................................... 3.50% 06/01/48 1,287,281
242,388 Pool G08833...................................................... 5.00% 07/01/48 263,025
43,033 Pool G08838...................................................... 5.00% 09/01/48 46,661
931,088 Pool G08843...................................................... 4.50% 10/01/48 996,658
200,848 Pool G08844...................................................... 5.00% 10/01/48 217,862
580,089 Pool G08849...................................................... 5.00% 11/01/48 628,977
816,974 Pool G16085...................................................... 2.50% 02/01/32 846,522
584,113 Pool G16350...................................................... 2.50% 10/01/32 605,011
869,852 Pool G16396...................................................... 3.50% 02/01/33 914,568
2,342,867 Pool G16524...................................................... 3.50% 05/01/33 2,479,327
946,145 Pool G16598...................................................... 2.50% 12/01/31 979,107
2,612,418 Pool G18622...................................................... 2.50% 12/01/31 2,696,345
297,770 Pool G18670...................................................... 3.00% 12/01/32 309,635
104,902 Pool G18691...................................................... 3.00% 06/01/33 109,067
356,799 Pool G18713...................................................... 3.50% 11/01/33 374,788
764,023 Pool G60080...................................................... 3.50% 06/01/45 824,455
499,241 Pool G60440...................................................... 3.50% 03/01/46 538,744
1,705,566 Pool G60582...................................................... 3.50% 05/01/46 1,819,828
1,300,877 Pool G60658...................................................... 3.50% 07/01/46 1,413,548
824,993 Pool G61556...................................................... 3.50% 08/01/48 881,120
1,458,199 Pool G67700...................................................... 3.50% 08/01/46 1,570,680
3,278,232 Pool G67703...................................................... 3.50% 04/01/47 3,537,025
8,774,137 Pool G67706...................................................... 3.50% 12/01/47 9,419,671
2,673,399 Pool G67707...................................................... 3.50% 01/01/48 2,908,286
2,625,572 Pool G67708...................................................... 3.50% 03/01/48 2,798,783
3,127,941 Pool G67709...................................................... 3.50% 03/01/48 3,373,476
3,037,885 Pool G67710...................................................... 3.50% 03/01/48 3,238,218
4,428,518 Pool G67714...................................................... 4.00% 07/01/48 4,827,495
6,187,208 Pool G67717...................................................... 4.00% 11/01/48 6,736,881
6,180,318 Pool G67718...................................................... 4.00% 01/01/49 6,681,749
332,102 Pool Q44452...................................................... 3.00% 11/01/46 347,122
886,226 Pool Q50135...................................................... 3.50% 08/01/47 934,259
6,365,169 Pool RE6029...................................................... 3.00% 02/01/50 6,516,391
8,923,613 Pool SD7511...................................................... 3.50% 01/01/50 9,510,234
16,442,127 Pool SD8016...................................................... 3.00% 10/01/49 16,952,018
30,926,309 Pool SD8044...................................................... 3.00% 02/01/50 31,909,419
514,824 Pool U90772...................................................... 3.50% 01/01/43 548,632
706,601 Pool U99114...................................................... 3.50% 02/01/44 752,885
1,672,799 Pool WA3208...................................................... 3.98% 04/01/34 1,970,458
1,748,102 Pool ZA4692...................................................... 3.50% 06/01/46 1,863,370
816,171 Pool ZM0063...................................................... 4.00% 08/01/45 883,761
805,412 Pool ZS8602...................................................... 3.00% 03/01/31 837,082
1,418,425 Pool ZS9844...................................................... 3.50% 07/01/46 1,511,957
4,287,766 Pool ZT0277...................................................... 3.50% 10/01/46 4,569,019
|
Page 12 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Federal Home Loan Mortgage Corporation (Continued)
$ 1,607,495 Pool ZT0531...................................................... 3.50% 04/01/47 $ 1,733,585
1,815,816 Pool ZT0536...................................................... 3.50% 03/01/48 1,934,691
1,096,744 Pool ZT0542...................................................... 4.00% 07/01/48 1,194,993
367,323 Pool ZT1403...................................................... 3.50% 11/01/33 385,565
3,790,912 Pool ZT1703...................................................... 4.00% 01/01/49 4,096,549
Federal National Mortgage Association
6,464,453 Pool AL8825...................................................... 3.50% 06/01/46 6,904,913
872,912 Pool AM1619...................................................... 2.34% 12/01/22 897,653
113,700 Pool AM5673...................................................... 3.65% 04/01/23 121,027
1,600,000 Pool AM6501...................................................... 3.32% 08/01/26 1,767,048
116,091 Pool AM7122...................................................... 3.61% 11/01/34 134,213
91,576 Pool AM7817...................................................... 3.31% 01/01/27 100,861
42,019 Pool AN0550...................................................... 3.63% 02/01/31 48,832
119,216 Pool AN2786...................................................... 2.76% 09/01/36 130,453
200,191 Pool AN4665...................................................... 3.49% 02/01/32 232,117
4,500,000 Pool AN5942...................................................... 3.10% 07/01/32 5,108,109
700,000 Pool AN7274...................................................... 3.10% 11/01/29 780,854
1,665,000 Pool AN9186...................................................... 3.47% 04/01/27 1,840,295
1,960,002 Pool AN9454...................................................... 3.60% 04/01/27 2,183,098
3,524,000 Pool AN9924...................................................... 3.65% 07/01/30 4,097,177
3,831,509 Pool AS3134...................................................... 3.50% 08/01/44 4,088,100
938,789 Pool AS6620...................................................... 3.50% 02/01/46 1,000,688
301,876 Pool AS9334...................................................... 3.00% 03/01/32 313,934
382,956 Pool AS9749...................................................... 4.00% 06/01/47 407,786
320,544 Pool BD7081...................................................... 4.00% 03/01/47 342,438
3,347,665 Pool BJ2692...................................................... 3.50% 04/01/48 3,523,889
3,225,000 Pool BL0828...................................................... 4.02% 12/01/30 3,835,099
1,182,452 Pool BL3555...................................................... 2.99% 01/01/27 1,274,657
2,097,857 Pool BM1903...................................................... 3.50% 08/01/47 2,250,029
931,217 Pool BM2000...................................................... 3.50% 05/01/47 981,489
2,267,915 Pool BM3260...................................................... 3.50% 01/01/48 2,416,418
1,096,876 Pool BM4299...................................................... 3.00% 03/01/30 1,136,699
1,081,079 Pool BM4304...................................................... 3.00% 02/01/30 1,119,931
1,735,946 Pool BM4472...................................................... 3.50% 07/01/48 1,871,133
2,362,397 Pool CA0854...................................................... 3.50% 12/01/47 2,522,370
1,071,619 Pool CA0907...................................................... 3.50% 12/01/47 1,142,374
961,470 Pool CA0996...................................................... 3.50% 01/01/48 1,027,521
7,211,770 Pool CA1182...................................................... 3.50% 02/01/48 7,697,516
2,233,208 Pool CA1187...................................................... 3.50% 02/01/48 2,356,063
1,361,819 Pool CA1710...................................................... 4.50% 05/01/48 1,462,424
894,817 Pool CA1711...................................................... 4.50% 05/01/48 961,281
587,920 Pool CA2208...................................................... 4.50% 08/01/48 629,555
1,155,778 Pool CA2327...................................................... 4.00% 09/01/48 1,268,108
7,309,554 Pool CA3633...................................................... 3.50% 06/01/49 7,831,389
1,710,450 Pool FM1134...................................................... 3.00% 04/01/48 1,786,592
643,987 Pool MA1146...................................................... 4.00% 08/01/42 694,427
910,745 Pool MA1373...................................................... 3.50% 03/01/43 969,951
1,066,872 Pool MA2077...................................................... 3.50% 11/01/34 1,127,983
281,960 Pool MA2145...................................................... 4.00% 01/01/45 305,480
|
See Notes to Financial Statements Page 13
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Federal National Mortgage Association (Continued)
$ 1,512,456 Pool MA2670...................................................... 3.00% 07/01/46 $ 1,584,052
1,336,721 Pool MA2806...................................................... 3.00% 11/01/46 1,398,862
43,751 Pool MA2896...................................................... 3.50% 02/01/47 46,118
1,973,500 Pool MA3057...................................................... 3.50% 07/01/47 2,077,643
831,462 Pool MA3088...................................................... 4.00% 08/01/47 886,274
625,071 Pool MA3147...................................................... 3.00% 10/01/47 648,865
1,822,723 Pool MA3210...................................................... 3.50% 12/01/47 1,920,356
230,031 Pool MA3238...................................................... 3.50% 01/01/48 242,731
1,646,228 Pool MA3239...................................................... 4.00% 01/01/48 1,754,187
893,321 Pool MA3276...................................................... 3.50% 02/01/48 940,854
614,454 Pool MA3336...................................................... 3.50% 04/01/38 646,478
466,549 Pool MA3410...................................................... 3.50% 07/01/33 489,600
847,998 Pool MA3537...................................................... 4.50% 12/01/48 905,322
10,243,038 Pool MA3834...................................................... 3.00% 11/01/49 10,560,687
4,896,487 Pool MA3846...................................................... 3.00% 11/01/49 5,010,818
11,310,634 Pool MA3864...................................................... 2.50% 12/01/34 11,622,405
19,353,288 Pool MA3896...................................................... 2.50% 01/01/35 19,886,765
25,728,111 Pool MA3905...................................................... 3.00% 01/01/50 26,541,368
17,707,887 Pool MA3930...................................................... 2.50% 02/01/35 18,196,014
9,571,426 Pool MA3937...................................................... 3.00% 02/01/50 9,875,690
7,930,000 Pool MA3960...................................................... 3.00% 03/01/50 8,184,626
67,175,000 Pool TBA (d)..................................................... 2.50% 03/15/35 68,996,073
4,275,000 Pool TBA (d)..................................................... 2.50% 03/15/50 4,362,256
25,950,000 Pool TBA (d)..................................................... 3.00% 03/15/50 26,732,555
41,700,000 Pool TBA (d)..................................................... 3.00% 04/15/50 42,903,558
1,075,000 Pool TBA (d)..................................................... 5.00% 04/15/50 1,163,111
Government National Mortgage Association
416,240 Pool MA1157...................................................... 3.50% 07/20/43 442,582
586,709 Pool MA3521...................................................... 3.50% 03/20/46 617,919
429,435 Pool MA4069...................................................... 3.50% 11/20/46 449,928
251,222 Pool MA4195...................................................... 3.00% 01/20/47 261,957
305,578 Pool MA4196...................................................... 3.50% 01/20/47 318,577
1,399,996 Pool MA4261...................................................... 3.00% 02/20/47 1,458,035
413,516 Pool MA4262...................................................... 3.50% 02/20/47 432,385
11,846,788 Pool MA4382...................................................... 3.50% 04/20/47 12,410,251
138,413 Pool MA4453...................................................... 4.50% 05/20/47 148,585
154,602 Pool MA4586...................................................... 3.50% 07/20/47 162,151
983,251 Pool MA4588...................................................... 4.50% 07/20/47 1,054,652
2,570,723 Pool MA4651...................................................... 3.00% 08/20/47 2,680,226
1,414,056 Pool MA4652...................................................... 3.50% 08/20/47 1,483,515
1,419,157 Pool MA4719...................................................... 3.50% 09/20/47 1,494,395
148,977 Pool MA4722...................................................... 5.00% 09/20/47 160,736
132,009 Pool MA4777...................................................... 3.00% 10/20/47 137,366
3,512,097 Pool MA4778...................................................... 3.50% 10/20/47 3,678,488
3,211,480 Pool MA4836...................................................... 3.00% 11/20/47 3,341,060
3,399,424 Pool MA4837...................................................... 3.50% 11/20/47 3,560,766
1,144,839 Pool MA4838...................................................... 4.00% 11/20/47 1,208,281
193,231 Pool MA4901...................................................... 4.00% 12/20/47 204,647
839,117 Pool MA4961...................................................... 3.00% 01/20/48 872,594
1,257,785 Pool MA4962...................................................... 3.50% 01/20/48 1,312,732
|
Page 14 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Government National Mortgage Association (Continued)
$ 1,847,774 Pool MA4963...................................................... 4.00% 01/20/48 $ 1,956,299
1,046,880 Pool MA5078...................................................... 4.00% 03/20/48 1,106,112
2,449,174 Pool MA5136...................................................... 3.50% 04/20/48 2,574,146
2,280,585 Pool MA5399...................................................... 4.50% 08/20/48 2,419,685
858,106 Pool MA5466...................................................... 4.00% 09/20/48 905,006
248,643 Pool MA5467...................................................... 4.50% 09/20/48 263,411
746,670 Pool MA5597...................................................... 5.00% 11/20/48 802,617
4,211,518 Pool MA5976...................................................... 3.50% 06/20/49 4,310,575
770,797 Pool MA6030...................................................... 3.50% 07/20/49 788,502
2,911,347 Pool MA6080...................................................... 3.00% 08/20/49 2,986,545
13,850,000 Pool TBA (d)..................................................... 3.00% 04/15/50 14,298,942
--------------
591,492,374
--------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES........................................ 649,027,092
(Cost $634,601,974) --------------
U.S. GOVERNMENT BONDS AND NOTES -- 27.6%
36,242,000 U.S. Treasury Bond.................................................. 2.38% 11/15/49 42,273,603
32,085,000 U.S. Treasury Bond.................................................. 2.00% 02/15/50 34,614,200
20,502,975 U.S. Treasury Inflation Indexed Bond (e)............................ 0.25% 02/15/50 21,522,008
1,515,192 U.S. Treasury Inflation Indexed Note (e)............................ 0.13% 07/15/24 1,555,022
13,702,298 U.S. Treasury Inflation Indexed Note (e)............................ 0.13% 10/15/24 14,080,818
17,878,751 U.S. Treasury Inflation Indexed Note (e)............................ 0.25% 07/15/29 18,881,756
74,345,000 U.S. Treasury Note.................................................. 1.63% 12/31/21 75,306,258
26,420,000 U.S. Treasury Note.................................................. 1.38% 01/31/22 26,662,528
46,630,000 U.S. Treasury Note.................................................. 1.13% 02/28/22 46,859,507
25,340,000 U.S. Treasury Note.................................................. 1.75% 12/31/24 26,335,288
50,800,000 U.S. Treasury Note.................................................. 1.38% 01/31/25 51,922,164
48,890,000 U.S. Treasury Note.................................................. 1.13% 02/28/25 49,399,908
28,023,000 U.S. Treasury Note.................................................. 1.75% 11/15/29 29,614,619
--------------
TOTAL U.S. GOVERNMENT BONDS AND NOTES.......................................................... 439,027,679
(Cost $422,951,917) --------------
CORPORATE BONDS AND NOTES -- 16.9%
AEROSPACE/DEFENSE -- 0.0%
100,000 Northrop Grumman Corp............................................... 2.93% 01/15/25 106,050
--------------
AGRICULTURE -- 0.4%
280,000 BAT Capital Corp.................................................... 4.39% 08/15/37 297,012
545,000 BAT Capital Corp.................................................... 4.54% 08/15/47 568,276
1,010,000 Reynolds American, Inc.............................................. 5.70% 08/15/35 1,204,982
3,445,000 Reynolds American, Inc.............................................. 5.85% 08/15/45 4,124,269
--------------
6,194,539
--------------
AIRLINES -- 0.2%
1,089,794 American Airlines Pass-Through Trust, Series 2014-1, Class A........ 3.70% 10/01/26 1,185,811
125,135 American Airlines Pass-Through Trust, Series 2015-2, Class AA....... 3.60% 09/22/27 136,666
970,814 Continental Airlines Pass-Through Trust, Series 2007-1, Class A..... 5.98% 04/19/22 1,026,060
123,284 Delta Air Lines Pass-Through Trust, Series 2002-1, Class G1......... 6.72% 01/02/23 131,806
514,819 US Airways Pass-Through Trust, Series 2012-1, Class A............... 5.90% 10/01/24 583,391
--------------
3,063,734
--------------
|
See Notes to Financial Statements Page 15
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
AUTO MANUFACTURERS -- 2.1%
$ 1,965,000 Daimler Finance North America LLC, 3 Mo. LIBOR +
0.90% (a) (f).................................................... 2.59% 02/15/22 $ 1,983,594
1,000,000 Ford Motor Credit Co. LLC........................................... 3.16% 08/04/20 1,003,772
885,000 Ford Motor Credit Co. LLC........................................... 2.34% 11/02/20 887,346
2,000,000 Ford Motor Credit Co. LLC........................................... 5.09% 01/07/21 2,052,176
4,190,000 Ford Motor Credit Co. LLC........................................... 3.20% 01/15/21 4,218,181
1,020,000 Ford Motor Credit Co. LLC........................................... 5.75% 02/01/21 1,049,671
3,135,000 Ford Motor Credit Co. LLC, 3 Mo. LIBOR + 0.81% (a).................. 2.71% 04/05/21 3,117,201
1,000,000 Ford Motor Credit Co. LLC........................................... 5.88% 08/02/21 1,044,903
285,000 Ford Motor Credit Co. LLC, 3 Mo. LIBOR + 0.88% (a).................. 2.73% 10/12/21 281,922
2,235,000 Ford Motor Credit Co. LLC........................................... 3.81% 10/12/21 2,281,178
2,916,000 Ford Motor Credit Co. LLC........................................... 5.60% 01/07/22 3,078,129
2,285,000 Ford Motor Credit Co. LLC........................................... 3.22% 01/09/22 2,295,068
390,000 Ford Motor Credit Co. LLC, 3 Mo. LIBOR + 1.27% (a).................. 3.23% 03/28/22 383,470
230,000 Ford Motor Credit Co. LLC........................................... 3.34% 03/28/22 232,423
150,000 Ford Motor Credit Co. LLC, 3 Mo. LIBOR + 1.08% (a).................. 2.84% 08/03/22 146,120
655,000 Ford Motor Credit Co. LLC........................................... 4.25% 09/20/22 674,571
1,822,000 General Motors Financial Co., Inc................................... 3.20% 07/06/21 1,843,985
1,465,000 General Motors Financial Co., Inc................................... 4.38% 09/25/21 1,514,921
2,140,000 General Motors Financial Co., Inc................................... 4.20% 11/06/21 2,213,821
760,000 General Motors Financial Co., Inc................................... 3.45% 04/10/22 779,551
2,095,000 General Motors Financial Co., Inc................................... 3.15% 06/30/22 2,144,683
--------------
33,226,686
--------------
BANKS -- 1.9%
180,000 Bank of America Corp. (g)........................................... 3.00% 12/20/23 186,605
75,000 Bank of America Corp., Medium-Term Note (g)......................... 3.09% 10/01/25 78,840
6,910,000 Bank of America Corp., Medium-Term Note (g)......................... 2.02% 02/13/26 6,962,325
210,000 Bank of America Corp., Medium-Term Note (g)......................... 4.27% 07/23/29 241,766
300,000 Bank of New York Mellon (The) Corp., Medium-Term Note (g)........... 2.66% 05/16/23 307,252
1,000,000 Citigroup, Inc. (g)................................................. 3.14% 01/24/23 1,026,681
1,000,000 Goldman Sachs Group, (The), Inc. (g)................................ 2.88% 10/31/22 1,020,178
750,000 Goldman Sachs Group, (The), Inc. (g)................................ 2.91% 07/24/23 770,920
1,950,000 Goldman Sachs Group, (The), Inc. (g)................................ 3.27% 09/29/25 2,059,319
1,890,000 JPMorgan Chase & Co. (g)............................................ 4.02% 12/05/24 2,050,092
500,000 JPMorgan Chase & Co................................................. 3.90% 07/15/25 551,970
1,455,000 JPMorgan Chase & Co................................................. 3.20% 06/15/26 1,564,784
2,145,000 Morgan Stanley, Global Medium-Term Note, SOFR + 0.70% (a)........... 2.28% 01/20/23 2,153,419
425,000 Morgan Stanley, Global Medium-Term Note (g)......................... 4.43% 01/23/30 494,671
400,000 PNC Bank N.A........................................................ 3.80% 07/25/23 429,628
690,000 PNC Bank N.A., Bank Note............................................ 2.50% 01/22/21 695,384
1,480,000 Wells Fargo & Co.................................................... 3.07% 01/24/23 1,518,630
1,000,000 Wells Fargo & Co.................................................... 3.00% 04/22/26 1,060,527
250,000 Wells Fargo & Co.................................................... 3.00% 10/23/26 265,034
6,060,000 Wells Fargo & Co., Medium-Term Note (g)............................. 2.16% 02/11/26 6,142,313
350,000 Wells Fargo & Co., Medium-Term Note (g)............................. 3.58% 05/22/28 380,782
--------------
29,961,120
--------------
BEVERAGES -- 0.1%
635,000 Anheuser-Busch InBev Worldwide, Inc................................. 4.75% 01/23/29 753,118
200,000 Anheuser-Busch InBev Worldwide, Inc................................. 4.44% 10/06/48 234,019
--------------
987,137
--------------
|
Page 16 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
BIOTECHNOLOGY -- 0.1%
$ 727,000 Amgen, Inc.......................................................... 4.40% 05/01/45 $ 843,396
175,000 Gilead Sciences, Inc................................................ 3.65% 03/01/26 192,597
--------------
1,035,993
--------------
CHEMICALS -- 0.1%
1,744,000 International Flavors & Fragrances, Inc............................. 5.00% 09/26/48 2,055,389
--------------
COMPUTERS -- 0.1%
1,020,000 Dell International LLC / EMC Corp. (f).............................. 4.42% 06/15/21 1,051,118
--------------
DIVERSIFIED FINANCIAL SERVICES -- 0.3%
1,485,000 Air Lease Corp...................................................... 3.50% 01/15/22 1,527,370
1,890,000 Air Lease Corp...................................................... 3.25% 03/01/25 1,961,131
360,000 Air Lease Corp., Medium-Term Note................................... 2.30% 02/01/25 360,343
450,000 Raymond James Financial, Inc........................................ 4.95% 07/15/46 576,798
--------------
4,425,642
--------------
ELECTRIC -- 0.8%
200,000 Ameren Illinois Co.................................................. 3.70% 12/01/47 237,223
750,000 Cleco Power LLC..................................................... 6.00% 12/01/40 1,003,135
500,000 Consolidated Edison Co. of New York, Inc............................ 4.50% 05/15/58 635,627
155,000 Duke Energy Carolinas LLC........................................... 3.70% 12/01/47 177,709
700,000 Duke Energy Progress LLC............................................ 3.25% 08/15/25 758,407
750,000 Duquesne Light Holdings, Inc. (f)................................... 6.40% 09/15/20 767,554
750,000 Entergy Texas, Inc.................................................. 3.45% 12/01/27 808,090
1,000,000 Evergy Metro, Inc................................................... 3.65% 08/15/25 1,101,487
1,250,000 Interstate Power & Light Co......................................... 3.25% 12/01/24 1,333,338
400,000 LG&E & KU Energy LLC................................................ 3.75% 11/15/20 403,872
830,000 Metropolitan Edison Co. (f)......................................... 4.00% 04/15/25 903,623
900,000 NextEra Energy Capital Holdings, Inc., 3 Mo. LIBOR + 0.55% (a)...... 2.16% 08/28/21 900,282
1,150,000 PNM Resources, Inc.................................................. 3.25% 03/09/21 1,166,323
825,000 Public Service Co. of New Mexico.................................... 3.85% 08/01/25 895,102
300,000 Southwestern Electric Power Co...................................... 3.55% 02/15/22 310,682
700,000 Trans-Allegheny Interstate Line Co. (f)............................. 3.85% 06/01/25 772,643
750,000 Tucson Electric Power Co............................................ 5.15% 11/15/21 788,233
355,000 Virginia Electric & Power Co........................................ 4.60% 12/01/48 466,387
--------------
13,429,717
--------------
ENTERTAINMENT -- 0.0%
740,000 Churchill Downs, Inc. (f)........................................... 4.75% 01/15/28 741,369
--------------
ENVIRONMENTAL CONTROL -- 0.1%
260,000 Clean Harbors, Inc. (f)............................................. 5.13% 07/15/29 279,265
150,000 Republic Services, Inc.............................................. 2.90% 07/01/26 159,554
987,000 Waste Pro USA, Inc. (f)............................................. 5.50% 02/15/26 964,968
--------------
1,403,787
--------------
FOOD -- 0.9%
1,000,000 Campbell Soup Co., 3 Mo. LIBOR + 0.63% (a).......................... 2.52% 03/15/21 1,001,091
1,500,000 Kraft Heinz Foods Co................................................ 5.00% 07/15/35 1,594,845
2,405,000 Kraft Heinz Foods Co................................................ 5.00% 06/04/42 2,400,299
2,635,000 Kraft Heinz Foods Co................................................ 5.20% 07/15/45 2,712,876
3,845,000 Kraft Heinz Foods Co................................................ 4.38% 06/01/46 3,584,434
2,755,000 Kraft Heinz Foods Co. (f)........................................... 4.88% 10/01/49 2,721,971
97,000 Kroger (The) Co..................................................... 5.40% 01/15/49 126,155
20,000 Lamb Weston Holdings, Inc. (f)...................................... 4.63% 11/01/24 20,842
--------------
14,162,513
--------------
|
See Notes to Financial Statements Page 17
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
GAS -- 0.1%
$ 500,000 Southern Co. Gas Capital Corp....................................... 2.45% 10/01/23 $ 514,349
400,000 Southern Co. Gas Capital Corp....................................... 5.88% 03/15/41 562,851
200,000 Spire, Inc.......................................................... 3.54% 02/27/24 208,083
--------------
1,285,283
--------------
HEALTHCARE-PRODUCTS -- 0.1%
300,000 Boston Scientific Corp.............................................. 3.45% 03/01/24 319,903
180,000 Teleflex, Inc....................................................... 4.63% 11/15/27 189,225
525,000 Zimmer Biomet Holdings, Inc......................................... 2.70% 04/01/20 525,339
--------------
1,034,467
--------------
HEALTHCARE-SERVICES -- 1.0%
150,000 Anthem, Inc......................................................... 3.30% 01/15/23 156,957
120,000 Anthem, Inc......................................................... 3.65% 12/01/27 131,384
2,300,000 Anthem, Inc......................................................... 2.88% 09/15/29 2,372,514
200,000 Centene Corp. (f)................................................... 5.38% 08/15/26 210,750
418,000 Encompass Health Corp............................................... 4.75% 02/01/30 432,275
1,428,000 HCA, Inc............................................................ 4.75% 05/01/23 1,546,388
2,315,000 HCA, Inc............................................................ 5.00% 03/15/24 2,575,007
400,000 HCA, Inc............................................................ 5.13% 06/15/39 465,890
1,540,000 HCA, Inc............................................................ 5.25% 06/15/49 1,798,059
500,000 Humana, Inc......................................................... 3.15% 12/01/22 519,626
360,000 Humana, Inc......................................................... 2.90% 12/15/22 371,790
475,000 Humana, Inc......................................................... 3.95% 08/15/49 516,481
200,000 New York and Presbyterian (The) Hospital............................ 3.56% 08/01/36 224,494
2,165,000 NYU Langone Hospitals, Series 2020.................................. 3.38% 07/01/55 2,326,623
650,000 Partners Healthcare System, Inc., Series 2020....................... 3.34% 07/01/60 721,530
101,000 Tenet Healthcare Corp............................................... 4.63% 07/15/24 101,213
1,440,000 UnitedHealth Group, Inc............................................. 3.75% 07/15/25 1,597,030
605,000 UnitedHealth Group, Inc............................................. 3.70% 08/15/49 675,902
--------------
16,743,913
--------------
HOUSEHOLD PRODUCTS/WARES -- 0.0%
245,000 Spectrum Brands, Inc................................................ 5.75% 07/15/25 251,735
--------------
INSURANCE -- 0.4%
800,000 Berkshire Hathaway Finance Corp..................................... 4.20% 08/15/48 978,939
700,000 Farmers Exchange Capital III (f) (g)................................ 5.45% 10/15/54 846,955
600,000 Farmers Insurance Exchange (f)...................................... 8.63% 05/01/24 736,298
400,000 Nationwide Mutual Insurance Co., 3 Mo. LIBOR + 2.29% (a) (f)........ 4.18% 12/15/24 400,602
620,000 Pricoa Global Funding I (f)......................................... 3.45% 09/01/23 658,951
240,000 Teachers Insurance & Annuity Association of America (f) (g)......... 4.38% 09/15/54 259,371
2,055,000 Willis North America, Inc........................................... 2.95% 09/15/29 2,158,094
--------------
6,039,210
--------------
MEDIA -- 0.4%
633,000 CCO Holdings LLC / CCO Holdings Capital Corp. (f)................... 5.38% 06/01/29 675,126
863,000 CCO Holdings LLC / CCO Holdings Capital Corp. (f)................... 4.50% 08/15/30 874,327
2,475,000 Charter Communications Operating LLC / Charter Communications
Operating Capital................................................ 4.91% 07/23/25 2,786,956
100,000 Comcast Corp........................................................ 3.97% 11/01/47 117,831
850,000 CSC Holdings LLC (f)................................................ 6.63% 10/15/25 890,384
200,000 CSC Holdings LLC (f)................................................ 5.38% 02/01/28 208,530
34,000 CSC Holdings LLC (f)................................................ 6.50% 02/01/29 37,630
|
Page 18 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
MEDIA (CONTINUED)
$ 150,000 Time Warner Cable LLC............................................... 5.88% 11/15/40 $ 179,524
700,000 Time Warner Cable LLC............................................... 5.50% 09/01/41 819,400
300,000 ViacomCBS, Inc...................................................... 2.50% 02/15/23 307,657
200,000 ViacomCBS, Inc...................................................... 3.70% 06/01/28 216,360
--------------
7,113,725
--------------
MISCELLANEOUS MANUFACTURING -- 0.5%
460,000 General Electric Co., Global Medium-Term Note....................... 4.63% 01/07/21 471,096
1,000,000 General Electric Co., Global Medium-Term Note....................... 6.88% 01/10/39 1,394,932
470,000 General Electric Co., Medium-Term Note.............................. 4.65% 10/17/21 490,303
2,775,000 General Electric Co., Medium-Term Note.............................. 6.75% 03/15/32 3,778,585
1,395,000 General Electric Co., Medium-Term Note.............................. 5.88% 01/14/38 1,816,154
--------------
7,951,070
--------------
OIL & GAS -- 0.1%
273,000 Antero Resources Corp............................................... 5.13% 12/01/22 169,746
665,000 Antero Resources Corp............................................... 5.00% 03/01/25 344,137
33,000 Endeavor Energy Resources L.P. / EER Finance, Inc. (f).............. 5.75% 01/30/28 32,309
1,770,000 EQT Corp............................................................ 3.90% 10/01/27 1,141,650
7,000 Gulfport Energy Corp................................................ 6.38% 05/15/25 2,243
400,000 Hess Corp........................................................... 5.60% 02/15/41 432,224
--------------
2,122,309
--------------
OIL & GAS SERVICES -- 0.0%
125,000 USA Compression Partners L.P. / USA Compression Finance
Corp............................................................. 6.88% 04/01/26 121,184
--------------
PACKAGING & CONTAINERS -- 0.1%
650,000 Amcor Finance USA, Inc. (f)......................................... 4.50% 05/15/28 754,318
76,000 Berry Global, Inc. (f).............................................. 4.88% 07/15/26 77,450
50,000 Graphic Packaging International LLC................................. 4.88% 11/15/22 52,266
240,000 Matthews International Corp. (f).................................... 5.25% 12/01/25 238,900
300,000 Reynolds Group Issuer, Inc. / Reynolds Group Issuer LLC /
Reynolds Group Issuer Lu, 3 Mo. LIBOR + 3.50% (a) (f)............ 5.33% 07/15/21 299,700
355,000 WRKCo, Inc.......................................................... 4.90% 03/15/29 416,755
--------------
1,839,389
--------------
PHARMACEUTICALS -- 2.4%
690,000 AbbVie, Inc. (f).................................................... 4.05% 11/21/39 765,641
400,000 AbbVie, Inc......................................................... 4.40% 11/06/42 461,988
1,870,000 AbbVie, Inc......................................................... 4.45% 05/14/46 2,160,884
450,000 AbbVie, Inc......................................................... 4.88% 11/14/48 554,511
3,325,000 AbbVie, Inc. (f).................................................... 4.25% 11/21/49 3,775,785
1,895,000 Bayer US Finance II LLC (f)......................................... 3.88% 12/15/23 2,040,034
1,045,000 Bayer US Finance II LLC (f)......................................... 3.38% 07/15/24 1,098,388
3,160,000 Bayer US Finance II LLC (f)......................................... 4.38% 12/15/28 3,601,002
815,000 Bayer US Finance II LLC (f)......................................... 4.63% 06/25/38 984,247
425,000 Bayer US Finance II LLC (f)......................................... 4.40% 07/15/44 472,629
2,190,000 Bayer US Finance II LLC (f)......................................... 4.88% 06/25/48 2,665,525
460,000 Bayer US Finance LLC (f)............................................ 3.38% 10/08/24 488,999
300,000 Becton Dickinson and Co............................................. 3.25% 11/12/20 303,329
1,000,000 Becton Dickinson and Co............................................. 2.89% 06/06/22 1,025,740
3,385,000 Becton Dickinson and Co............................................. 3.36% 06/06/24 3,590,999
1,000,000 Becton Dickinson and Co............................................. 6.70% 08/01/28 1,291,313
|
See Notes to Financial Statements Page 19
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
PHARMACEUTICALS (CONTINUED)
$ 75,000 Cigna Corp. (f)..................................................... 3.05% 10/15/27 $ 78,665
1,030,000 Cigna Corp. (f)..................................................... 3.88% 10/15/47 1,092,460
2,129,000 Cigna Corp.......................................................... 4.90% 12/15/48 2,643,367
150,000 CVS Health Corp..................................................... 3.88% 07/20/25 164,000
400,000 CVS Health Corp..................................................... 4.30% 03/25/28 448,476
1,850,000 CVS Health Corp..................................................... 5.13% 07/20/45 2,264,808
4,375,000 CVS Health Corp..................................................... 5.05% 03/25/48 5,387,449
535,000 Elanco Animal Health, Inc........................................... 5.02% 08/28/23 573,405
75,000 Johnson & Johnson................................................... 3.63% 03/03/37 86,437
--------------
38,020,081
--------------
PIPELINES -- 1.1%
145,000 Energy Transfer Operating L.P....................................... 5.20% 02/01/22 152,899
198,000 Energy Transfer Operating L.P....................................... 5.50% 06/01/27 224,636
260,000 Energy Transfer Operating L.P....................................... 5.15% 03/15/45 271,864
1,000,000 Energy Transfer Operating L.P....................................... 5.00% 05/15/50 1,013,729
405,000 EQM Midstream Partners L.P.......................................... 5.50% 07/15/28 339,694
650,000 Kinder Morgan, Inc.................................................. 5.30% 12/01/34 774,865
55,000 NGPL PipeCo LLC (f)................................................. 4.38% 08/15/22 57,511
276,390 Pipeline Funding Co. LLC (f)........................................ 7.50% 01/15/30 356,230
150,000 Plains All American Pipeline L.P. / PAA Finance Corp................ 2.85% 01/31/23 152,424
200,000 Plains All American Pipeline L.P. / PAA Finance Corp................ 3.85% 10/15/23 210,160
50,000 Plains All American Pipeline L.P. / PAA Finance Corp................ 4.65% 10/15/25 54,480
650,000 Plains All American Pipeline L.P. / PAA Finance Corp................ 4.50% 12/15/26 708,258
425,000 Plains All American Pipeline L.P. / PAA Finance Corp................ 3.55% 12/15/29 418,680
244,000 Rockies Express Pipeline LLC (f).................................... 5.63% 04/15/20 244,756
1,500,000 Rockies Express Pipeline LLC (f).................................... 4.80% 05/15/30 1,458,152
1,360,000 Rockies Express Pipeline LLC (f).................................... 6.88% 04/15/40 1,396,675
421,068 Ruby Pipeline LLC (f)............................................... 6.50% 04/01/22 426,293
325,000 Sabine Pass Liquefaction LLC........................................ 5.63% 03/01/25 369,816
1,000,000 Sabine Pass Liquefaction LLC........................................ 5.00% 03/15/27 1,106,302
1,200,000 Spectra Energy Partners L.P......................................... 4.60% 06/15/21 1,235,382
400,000 Sunoco Logistics Partners Operations L.P............................ 3.90% 07/15/26 423,305
1,606,000 Sunoco Logistics Partners Operations L.P............................ 5.40% 10/01/47 1,699,837
145,000 TC PipeLines L.P.................................................... 4.65% 06/15/21 148,930
1,000,000 TC PipeLines L.P.................................................... 4.38% 03/13/25 1,079,962
1,250,000 TC PipeLines L.P.................................................... 3.90% 05/25/27 1,334,483
400,000 Williams Cos (The), Inc............................................. 4.50% 11/15/23 433,406
600,000 Williams Cos (The), Inc............................................. 4.55% 06/24/24 655,405
--------------
16,748,134
--------------
REAL ESTATE INVESTMENT TRUSTS -- 1.7%
250,000 Alexandria Real Estate Equities, Inc................................ 4.30% 01/15/26 282,757
800,000 American Campus Communities Operating Partnership L.P............... 4.13% 07/01/24 877,092
250,000 American Campus Communities Operating Partnership L.P............... 3.63% 11/15/27 277,656
215,000 American Tower Corp................................................. 3.00% 06/15/23 224,000
785,000 Boston Properties L.P............................................... 3.20% 01/15/25 843,090
625,000 CC Holdings GS V LLC / Crown Castle GS III Corp..................... 3.85% 04/15/23 663,959
750,000 CubeSmart L.P....................................................... 4.38% 02/15/29 870,862
3,425,000 CyrusOne L.P. / CyrusOne Finance Corp............................... 2.90% 11/15/24 3,477,317
500,000 Digital Realty Trust L.P............................................ 3.63% 10/01/22 522,935
|
Page 20 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
$ 2,210,000 GLP Capital L.P. / GLP Financing II, Inc............................ 3.35% 09/01/24 $ 2,296,488
1,000,000 GLP Capital L.P. / GLP Financing II, Inc............................ 5.25% 06/01/25 1,121,640
750,000 GLP Capital L.P. / GLP Financing II, Inc............................ 5.38% 04/15/26 847,973
1,210,000 GLP Capital L.P. / GLP Financing II, Inc............................ 5.30% 01/15/29 1,401,086
475,000 GLP Capital L.P. / GLP Financing II, Inc............................ 4.00% 01/15/30 505,786
1,175,000 Healthcare Realty Trust, Inc........................................ 3.75% 04/15/23 1,238,971
399,000 Healthpeak Properties, Inc.......................................... 4.25% 11/15/23 434,537
475,000 Healthpeak Properties, Inc.......................................... 3.88% 08/15/24 517,340
600,000 Healthpeak Properties, Inc.......................................... 3.25% 07/15/26 647,933
1,000,000 Hudson Pacific Properties L.P....................................... 4.65% 04/01/29 1,167,734
1,000,000 Kilroy Realty L.P................................................... 3.45% 12/15/24 1,073,008
1,300,000 Kimco Realty Corp................................................... 3.40% 11/01/22 1,360,649
200,000 Life Storage L.P.................................................... 3.88% 12/15/27 222,468
40,000 MGM Growth Properties Operating Partnership L.P. / MGP Finance
Co.-Issuer, Inc.................................................. 5.63% 05/01/24 43,383
80,000 MGM Growth Properties Operating Partnership L.P. / MGP Finance
Co.-Issuer, Inc.................................................. 4.50% 01/15/28 82,228
750,000 National Retail Properties, Inc..................................... 3.80% 10/15/22 795,043
176,000 National Retail Properties, Inc..................................... 3.30% 04/15/23 184,292
350,000 Piedmont Operating Partnership L.P.................................. 3.40% 06/01/23 365,493
750,000 Prologis L.P........................................................ 4.38% 02/01/29 888,582
22,000 SBA Communications Corp............................................. 4.88% 09/01/24 22,655
300,000 SL Green Operating Partnership L.P.................................. 3.25% 10/15/22 311,935
550,000 SL Green Realty Corp................................................ 4.50% 12/01/22 587,604
1,000,000 Ventas Realty L.P................................................... 2.65% 01/15/25 1,037,390
400,000 Ventas Realty L.P................................................... 3.85% 04/01/27 439,295
550,000 WEA Finance LLC (f)................................................. 3.15% 04/05/22 569,702
75,000 Welltower, Inc...................................................... 4.50% 01/15/24 82,387
1,125,000 Welltower, Inc...................................................... 4.00% 06/01/25 1,242,895
--------------
27,528,165
--------------
RETAIL -- 0.1%
488,000 Rite Aid Corp. (f).................................................. 6.13% 04/01/23 448,350
500,000 Walgreens Boots Alliance, Inc....................................... 3.30% 11/18/21 513,159
150,000 Walgreens Boots Alliance, Inc....................................... 3.80% 11/18/24 160,169
--------------
1,121,678
--------------
SEMICONDUCTORS -- 0.4%
2,530,000 Broadcom Corp. / Broadcom Cayman Finance Ltd........................ 3.00% 01/15/22 2,579,658
2,880,000 Broadcom Corp. / Broadcom Cayman Finance Ltd........................ 3.63% 01/15/24 3,024,887
935,000 Broadcom, Inc. (f).................................................. 3.63% 10/15/24 984,198
--------------
6,588,743
--------------
SOFTWARE -- 0.1%
1,400,000 Fiserv, Inc......................................................... 3.20% 07/01/26 1,498,343
440,000 SS&C Technologies, Inc. (f)......................................... 5.50% 09/30/27 461,593
--------------
1,959,936
--------------
TELECOMMUNICATIONS -- 1.3%
200,000 AT&T, Inc........................................................... 4.30% 02/15/30 229,108
1,000,000 AT&T, Inc........................................................... 5.25% 03/01/37 1,238,861
640,000 AT&T, Inc........................................................... 4.30% 12/15/42 719,246
322,000 AT&T, Inc........................................................... 4.80% 06/15/44 381,493
|
See Notes to Financial Statements Page 21
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
TELECOMMUNICATIONS (CONTINUED)
$ 1,630,000 AT&T, Inc........................................................... 4.35% 06/15/45 $ 1,839,958
2,850,000 AT&T, Inc........................................................... 4.75% 05/15/46 3,347,985
500,000 AT&T, Inc........................................................... 5.15% 11/15/46 619,666
1,200,000 AT&T, Inc........................................................... 4.55% 03/09/49 1,392,223
215,000 Level 3 Financing, Inc.............................................. 5.38% 01/15/24 215,093
1,480,000 Level 3 Financing, Inc. (f)......................................... 3.40% 03/01/27 1,541,450
185,000 Qwest Corp.......................................................... 7.25% 09/15/25 216,594
1,000,000 SES GLOBAL Americas Holdings G.P. (f)............................... 5.30% 03/25/44 1,145,969
953,000 Sprint Communications, Inc. (f)..................................... 7.00% 03/01/20 953,000
128,000 Sprint Corp......................................................... 7.88% 09/15/23 146,507
1,419,688 Sprint Spectrum Co. LLC / Sprint Spectrum Co. II LLC / Sprint
Spectrum Co. III LLC (f)......................................... 3.36% 09/20/21 1,432,962
2,835,000 Sprint Spectrum Co. LLC / Sprint Spectrum Co. II LLC / Sprint
Spectrum Co. III LLC (f)......................................... 4.74% 03/20/25 3,041,572
1,335,000 Sprint Spectrum Co. LLC / Sprint Spectrum Co. II LLC / Sprint
Spectrum Co. III LLC (f)......................................... 5.15% 03/20/28 1,512,098
--------------
19,973,785
--------------
TRANSPORTATION -- 0.0%
270,000 Union Pacific Corp.................................................. 3.95% 09/10/28 307,766
--------------
TOTAL CORPORATE BONDS AND NOTES................................................................ 268,595,367
(Cost $257,225,055) --------------
MORTGAGE-BACKED SECURITIES -- 7.7%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 6.2%
Alternative Loan Trust
1,052,908 Series 2005-56, Class 1A1, 1 Mo. LIBOR + 0.73% (a)............... 2.36% 11/25/35 1,088,095
3,647,885 Series 2007-13, Class A1......................................... 6.00% 06/25/47 3,102,736
American Home Mortgage Investment Trust
2,523,255 Series 2005-4, Class 1A1, 1 Mo. LIBOR + 0.58% (a)................ 2.21% 11/25/45 2,487,577
Banc of America Funding Trust
715,000 Series 2014-R6, Class 2A13 (b) (f)............................... 1.92% 07/26/36 703,066
BCAP LLC Trust
492,746 Series 2015-RR5, Class 1A3 (b) (f)............................... 6.05% 08/26/36 488,684
Bear Stearns ALT-A Trust
32,291 Series 2004-6, Class 1A, 1 Mo. LIBOR + 0.64% (a)................. 2.27% 07/25/34 32,411
Bear Stearns Mortgage Funding Trust
203,630 Series 2006-AR1, Class 1A1, 1 Mo. LIBOR + 0.21% (a).............. 1.84% 07/25/36 197,588
3,477,050 Series 2006-AR3, Class 1A1, 1 Mo. LIBOR + 0.18% (a).............. 1.81% 10/25/36 3,356,035
6,726,013 Series 2006-AR5, Class 2A1, 1 Mo. LIBOR + 0.19% (a).............. 1.82% 01/25/37 6,468,998
319,293 Series 2007-AR5, Class 1A1G, 1 Mo. LIBOR + 0.16% (a)............. 1.79% 06/25/47 305,558
CIM Trust
3,003,295 Series 2017-3, Class A1, 1 Mo. LIBOR + 2.00% (a) (f)............. 3.66% 01/25/57 3,074,539
2,748,142 Series 2017-6, Class A1 (a) (f).................................. 3.02% 06/25/57 2,809,730
4,789,853 Series 2019-R1, Class A (a) (f).................................. 3.25% 10/25/58 4,830,574
6,303,484 Series 2019-R4, Class A1 (a) (f)................................. 3.00% 10/25/59 6,344,402
Credit Suisse Mortgage Trust
425,649 Series 2010-7R, Class 1A12 (f)................................... 4.00% 01/26/37 433,015
491,230 Series 2010-8R, Class 4A5 (b) (f)................................ 3.85% 12/26/35 498,448
505,576 Series 2010-8R, Class 10A5 (b) (f)............................... 4.00% 04/26/47 506,788
|
Page 22 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Credit Suisse Mortgage Trust (Continued)
$ 90,887 Series 2011-5R, Class 2A1 (b) (f)................................ 3.66% 08/27/46 $ 91,618
355,375 Series 2014-2R, Class 19A1 (b) (f)............................... 3.00% 05/27/36 353,829
104,333 Series 2015-8R, Class 3A1, 6 Mo. LIBOR + 1.50% (a) (f)........... 3.40% 11/25/37 104,256
3,867,536 Series 2019-RPL8, Class A1 (a) (f)............................... 3.32% 10/25/58 3,928,982
Deephaven Residential Mortgage Trust
175,856 Series 2017-1A, Class A1 (b) (f)................................. 2.73% 12/26/46 176,058
5,143,052 Series 2019-4A, Class A1 (a) (f)................................. 2.79% 10/25/59 5,187,247
GMACM Mortgage Loan Trust
2,098,747 Series 2006-AR1, Class 1A1 (b)................................... 3.82% 04/19/36 1,950,795
2,615,386 Series 2006-J1, Class A4......................................... 5.75% 04/25/36 2,664,371
GreenPoint Mortgage Funding Trust
184,668 Series 2006-AR1, Class A1A, 1 Mo. LIBOR + 0.58% (a).............. 2.21% 02/25/36 181,710
HarborView Mortgage Loan Trust
584,517 Series 2005-10, Class 2A1A, 1 Mo. LIBOR + 0.31% (a).............. 1.96% 11/19/35 564,421
1,749,557 Series 2007-7, Class 1A1, 1 Mo. LIBOR + 1.00% (a)................ 2.63% 10/25/37 1,686,230
HomeBanc Mortgage Trust
1,334,491 Series 2004-2, Class A1, 1 Mo. LIBOR + 0.74% (a)................. 2.37% 12/25/34 1,356,876
Impac CMB Trust
350,507 Series 2005-2, Class 1A1, 1 Mo. LIBOR + 0.52% (a)................ 2.15% 04/25/35 343,873
1,154,910 Series 2005-4, Class 1A1A, 1 Mo. LIBOR + 0.54% (a)............... 2.17% 05/25/35 1,158,203
IndyMac INDX Mortgage Loan Trust
2,090,468 Series 2005-AR14, Class 2A1A, 1 Mo. LIBOR + 0.30% (a)............ 1.93% 07/25/35 2,039,122
5,345,831 Series 2006-AR6, Class 2A1A, 1 Mo. LIBOR + 0.20% (a)............. 1.83% 06/25/46 4,819,906
6,395,932 Series 2007-FLX4, Class 2A2, 1 Mo. LIBOR + 0.25% (a)............. 1.88% 07/25/37 5,985,450
JP Morgan Mortgage Trust
2,808,934 Series 2006-A4, Class 1A1 (b).................................... 4.37% 06/25/36 2,534,710
Lehman XS Trust
360,297 Series 2006-16N, Class A4A, 1 Mo. LIBOR + 0.19% (a).............. 1.82% 11/25/46 346,091
4,167,072 Series 2007-16N, Class 2A1, 1 Mo. LIBOR + 0.40% (a).............. 2.03% 09/25/47 4,074,809
Merrill Lynch Alternative Note Asset Trust
5,609,169 Series 2007-OAR3, Class A1, 1 Mo. LIBOR + 0.19% (a).............. 1.85% 07/25/47 5,388,953
Morgan Stanley Mortgage Loan Trust
801,310 Series 2004-6AR, Class 1M1, 1 Mo. LIBOR + 0.98% (a).............. 2.60% 07/25/34 813,023
79,666 Series 2005-2AR, Class A, 1 Mo. LIBOR + 0.26% (a)................ 1.89% 04/25/35 79,602
Morgan Stanley Resecuritization Trust
148,173 Series 2015-R2, Class 1A1, 12 Mo. Treasury Average +
0.71% (a) (f)................................................. 2.86% 12/27/46 151,354
MortgageIT Trust
124,803 Series 2005-5, Class A1, 1 Mo. LIBOR + 0.52% (a)................. 2.15% 12/25/35 125,012
Opteum Mortgage Acceptance Corp.
1,631,746 Series 2005-5, Class 1A1D, 1 Mo. LIBOR + 0.38% (a)............... 2.01% 12/25/35 1,591,185
533,934 Series 2006-1, Class 1APT, 1 Mo. LIBOR + 0.21% (a)............... 1.84% 04/25/36 517,679
Stanwich Mortgage Loan Co. LLC
5,201,593 Series 2019-RPL1, Class A, steps up to 3.72% after Redemption
Date (f) (h).................................................. 3.72% 03/15/49 5,274,040
Structured Adjustable Rate Mortgage Loan Trust
48,979 Series 2004-12, Class 3A1 (b).................................... 3.98% 09/25/34 50,032
|
See Notes to Financial Statements Page 23
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Structured Asset Mortgage Investments II Trust
$ 3,267,476 Series 2006-AR1, Class 3A1, 1 Mo. LIBOR + 0.23% (a).............. 1.86% 02/25/36 $ 3,065,370
3,435,170 Series 2007-AR6, Class A1, 12 Mo. Treasury Average +
1.50% (a)..................................................... 3.55% 08/25/47 3,393,248
WaMu Mortgage Pass-Through Certificates Trust
141,282 Series 2005-AR1, Class A2A1, 1 Mo. LIBOR + 0.68% (a)............. 2.31% 01/25/45 140,694
254,474 Series 2005-AR15, Class A1A1, 1 Mo. LIBOR + 0.26% (a)............ 1.89% 11/25/45 250,052
365,768 Series 2006-AR3, Class A1A, 12 Mo. Treasury Average +
1.00% (a)..................................................... 3.05% 02/25/46 375,644
524,274 Series 2006-AR4, Class 1A1A, 12 Mo. Treasury Average +
0.94% (a)..................................................... 3.09% 05/25/46 531,063
--------------
98,023,752
--------------
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 1.5%
Banc of America Merrill Lynch Large Loan Commercial Mortgage
Securities Trust
285,000 Series 2015-200P, Class A (f).................................... 3.22% 04/14/33 306,736
1,275,000 Series 2016-ISQ, Class A (f)..................................... 2.85% 08/14/34 1,355,837
1,265,000 Series 2018-PARK, Class A (b) (f)................................ 4.09% 08/10/38 1,480,702
BX Trust
580,000 Series 2019-OC11, Class A (f).................................... 3.20% 12/09/41 637,835
CALI Mortgage Trust
1,125,000 Series 2019-101C, Class A (f).................................... 3.96% 03/10/39 1,309,043
Century Plaza Towers
840,000 Series 2019-CPT, Class A (f)..................................... 2.87% 11/13/39 908,237
COMM Mortgage Trust
225,000 Series 2012-CR5, Class A3........................................ 2.54% 12/10/45 230,811
315,000 Series 2012-CR5, Class A4........................................ 2.77% 12/10/45 325,625
3,000,000 Series 2015-3BP, Class A (f)..................................... 3.18% 02/10/35 3,231,906
DBJPM Mortgage Trust
2,050,000 Series 2016-SFC, Class A (f)..................................... 2.83% 08/10/36 2,159,446
DC Office Trust
900,000 Series 2019-MTC, Class A (f)..................................... 2.97% 09/15/45 976,375
Eleven Madison Mortgage Trust
305,000 Series 2015-11MD, Class A (b) (f)................................ 3.55% 09/10/35 335,114
Hudson Yards Mortgage Trust
1,190,000 Series 2019-30HY, Class A (f).................................... 3.23% 07/10/39 1,324,941
1,200,000 Series 2019-55HY, Class A (a) (f)................................ 2.94% 12/10/41 1,310,023
Irvine Core Office Trust
235,000 Series 2013-IRV, Class A2 (b) (f)................................ 3.17% 05/15/48 245,852
JPMorgan Chase Commercial Mortgage Securities Trust
1,110,000 Series 2019-OSB, Class A (f)..................................... 3.40% 06/05/39 1,243,402
MKT Mortgage Trust
1,730,000 Series 2020-525M, Class A (f).................................... 2.69% 02/12/40 1,846,141
Natixis Commercial Mortgage Securities Trust
1,300,000 Series 2020-2PAC, Class A (f).................................... 2.97% 12/15/38 1,370,942
One Bryant Park Trust
985,000 Series 2019-OBP, Class A (f)..................................... 2.52% 09/15/54 1,028,193
RBS Commercial Funding, Inc. Trust
50,000 Series 2013-GSP, Class A (b) (f)................................. 3.83% 01/15/32 53,788
|
Page 24 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
MORTGAGE-BACKED SECURITIES (CONTINUED)
COMMERCIAL MORTGAGE-BACKED SECURITIES (CONTINUED)
SFAVE Commercial Mortgage Securities Trust
$ 150,000 Series 2015-5AVE, Class A1 (b) (f)............................... 3.87% 01/05/43 $ 165,848
125,000 Series 2015-5AVE, Class A2B (b) (f).............................. 4.14% 01/05/43 138,409
UBS-Barclays Commercial Mortgage Trust
249,678 Series 2013-C6, Class A3......................................... 2.97% 04/10/46 259,353
VNDO Mortgage Trust
250,000 Series 2012-6AVE, Class A (f).................................... 3.00% 11/15/30 259,389
Worldwide Plaza Trust
1,880,000 Series 2017-WWP, Class A (f)..................................... 3.53% 11/10/36 2,097,043
--------------
24,600,991
--------------
TOTAL MORTGAGE-BACKED SECURITIES............................................................... 122,624,743
(Cost $120,594,737) --------------
ASSET-BACKED SECURITIES -- 6.7%
Ajax Mortgage Loan Trust
5,579,816 Series 2019-F, Class A1, steps up to 3.86% after Redemption
Date (f) (h).................................................. 2.86% 07/25/59 5,671,826
Ammc CLO 19 Ltd.
2,300,000 Series 2016-19A, Class AR, 3 Mo. LIBOR + 1.14% (a) (f)........... 2.97% 10/16/28 2,298,461
Argent Securities, Inc.
255,000 Series 2005-W2, Class M1, 1 Mo. LIBOR + 0.49% (a)................ 2.12% 10/25/35 254,075
Asset Backed Funding Certificates Trust
104,316 Series 2006-OPT1, Class A2, 1 Mo. LIBOR + 0.14% (a).............. 1.77% 09/25/36 103,104
Barings CLO Ltd.
400,000 Series 2013-IA, Class AR, 3 Mo. LIBOR + 0.80% (a) (f)............ 2.62% 01/20/28 399,560
767,000 Series 2016-2A, Class AR, 3 Mo. LIBOR + 1.08% (a) (f)............ 2.90% 07/20/28 767,546
BlueMountain CLO Ltd.
550,000 Series 2013-2A, Class A1R, 3 Mo. LIBOR + 1.18% (a) (f)........... 2.98% 10/22/30 549,780
Brazos Higher Education Authority, Inc.
270,000 Series 2011-1, Class A3, 3 Mo. LIBOR + 1.05% (a)................. 2.73% 11/25/33 271,286
300,000 Series 2011-2, Class A3, 3 Mo. LIBOR + 1.00% (a)................. 2.79% 10/27/36 301,876
Carrington Mortgage Loan Trust
1,470,000 Series 2006-OPT1, Class M1, 1 Mo. LIBOR + 0.35% (a).............. 1.98% 02/25/36 1,466,407
Citigroup Mortgage Loan Trust
1,600,000 Series 2006-HE2, Class M1, 1 Mo. LIBOR + 0.29% (a)............... 1.92% 08/25/36 1,585,042
Dryden Senior Loan Fund
900,000 Series 2013-26A, Class AR, 3 Mo. LIBOR + 0.90% (a) (f)........... 2.73% 04/15/29 895,050
572,000 Series 2013-28A, Class A1LR, 3 Mo. LIBOR + 1.20% (a) (f)......... 2.89% 08/15/30 572,057
ECMC Group Student Loan Trust
1,815,145 Series 2017-2A, Class A, 1 Mo. LIBOR + 1.05% (a) (f)............. 2.68% 05/25/67 1,831,551
EFS Volunteer No 3 LLC
165,490 Series 2012-1, Class A3, 1 Mo. LIBOR + 1.00% (a) (f)............. 2.63% 04/25/33 165,082
First Franklin Mortgage Loan Trust
277,048 Series 2006-FF13, Class A2C, 1 Mo. LIBOR + 0.16% (a)............. 1.79% 10/25/36 216,515
GE-WMC Mortgage Securities LLC
1,063,914 Series 2005-1, Class M1, 1 Mo. LIBOR + 0.66% (a)................. 2.29% 10/25/35 1,063,221
Goal Capital Funding Trust
5,100,000 Series 2007-1, Class A5, 3 Mo. LIBOR + 0.16% (a)................. 2.11% 03/25/42 4,426,842
GoldenTree Loan Management US CLO Ltd.
3,000,000 Series 2017-1A, Class AR, 3 Mo. LIBOR + 0.95% (a) (f)............ 2.60% 04/20/29 3,003,200
|
See Notes to Financial Statements Page 25
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
ASSET-BACKED SECURITIES (CONTINUED)
GSAA Home Equity Trust
$ 1,700,000 Series 2005-6, Class M1, 1 Mo. LIBOR + 0.43% (a)................. 2.06% 06/25/35 $ 1,711,543
JP Morgan Mortgage Acquisition Trust
205,674 Series 2006-ACC1, Class M1, 1 Mo. LIBOR + 0.27% (a).............. 1.90% 05/25/36 204,757
2,699,549 Series 2006-WF1, Class A6, steps up to 6.50% after Redemption
Date (h)...................................................... 6.00% 07/25/36 1,325,201
405,000 Series 2007-CH2, Class MV1, 1 Mo. LIBOR + 0.28% (a).............. 1.91% 01/25/37 397,533
Legacy Mortgage Asset Trust
3,425,394 Series 2019-GS1, Class A1 (a) (f)................................ 4.00% 01/25/59 3,494,757
2,289,334 Series 2019-GS4, Class A1 (a) (f)................................ 3.44% 05/25/59 2,327,797
Long Beach Mortgage Loan Trust
917,813 Series 2006-1, Class 1A, 1 Mo. LIBOR + 0.22% (a)................. 1.85% 02/25/36 902,780
Magnetite CLO Ltd.
800,000 Series 2019-21A, Class A, 3 Mo. LIBOR + 1.28% (a) (f)............ 3.10% 04/20/30 801,440
Mastr Asset Backed Securities Trust
8,545,744 Series 2006-WMC3, Class A2, 1 Mo. LIBOR + 0.05% (a).............. 1.68% 08/25/36 4,060,559
Merrill Lynch First Franklin Mortgage Loan Trust
388,635 Series 2007-3, Class A2B, 1 Mo. LIBOR + 0.13% (a)................ 1.76% 06/25/37 315,679
Mid-State Trust
203,049 Series 2003-11, Class A1......................................... 4.86% 07/15/38 218,360
Morgan Stanley ABS Capital I, Inc. Trust
1,000,000 Series 2006-NC1, Class M1, 1 Mo. LIBOR + 0.38% (a)............... 2.01% 12/25/35 995,411
Navient Student Loan Trust
302,416 Series 2014-1, Class A3, 1 Mo. LIBOR + 0.51% (a)................. 2.14% 06/25/31 297,873
243,626 Series 2014-3, Class A, 1 Mo. LIBOR + 0.62% (a).................. 2.25% 03/25/83 238,581
77,380 Series 2014-5, Class A, 1 Mo. LIBOR + 0.62% (a).................. 2.25% 03/25/83 75,523
144,028 Series 2014-8, Class A3, 1 Mo. LIBOR + 0.60% (a)................. 2.23% 05/27/49 140,863
203,917 Series 2015-1, Class A2, 1 Mo. LIBOR + 0.60% (a)................. 2.23% 04/25/40 200,602
1,750,000 Series 2016-2A, Class A3, 1 Mo. LIBOR + 1.50% (a) (f)............ 3.13% 06/25/65 1,799,907
4,142,304 Series 2016-5A, Class A, 1 Mo. LIBOR + 1.25% (a) (f)............. 2.88% 06/25/65 4,176,809
300,000 Series 2017-3A, Class A3, 1 Mo. LIBOR + 1.05% (a) (f)............ 2.68% 07/26/66 300,422
3,774,675 Series 2017-5A, Class A, 1 Mo. LIBOR + 0.80% (a) (f)............. 2.43% 07/26/66 3,728,732
New Century Home Equity Loan Trust
2,600,000 Series 2005-4, Class M3, 1 Mo. LIBOR + 0.55% (a)................. 2.18% 09/25/35 2,588,479
Palmer Square Loan Funding Ltd.
238,367 Series 2019-1A, Class A1, 3 Mo. LIBOR + 1.05% (a) (f)............ 2.87% 04/20/27 238,391
2,093,513 Series 2019-4A, Class A1, 3 Mo. LIBOR + 0.90% (a) (f)............ 2.70% 10/24/27 2,092,884
Residential Asset Mortgage Products, Inc.
230,023 Series 2006-RZ1, Class M2, 1 Mo. LIBOR + 0.42% (a)............... 2.05% 03/25/36 230,790
2,000,000 Series 2006-RZ1, Class M3, 1 Mo. LIBOR + 0.45% (a)............... 2.08% 03/25/36 2,005,329
Residential Asset Securities Corp.
260,000 Series 2006-EMX3, Class A3, 1 Mo. LIBOR + 0.28% (a).............. 1.91% 04/25/36 254,942
1,445,000 Series 2006-KS3, Class M1, 1 Mo. LIBOR + 0.33% (a)............... 1.96% 04/25/36 1,432,018
31,120 Series 2006-KS4, Class A4, 1 Mo. LIBOR + 0.24% (a)............... 1.87% 06/25/36 31,190
Saxon Asset Securities Trust
761,476 Series 2007-2, Class A2C, 1 Mo. LIBOR + 0.24% (a)................ 1.87% 05/25/47 650,218
Securitized Asset-Backed Receivables LLC Trust
205,073 Series 2006-OP1, Class M2, 1 Mo. LIBOR + 0.39% (a)............... 2.02% 10/25/35 205,438
|
Page 26 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
ASSET-BACKED SECURITIES (CONTINUED)
SLC Student Loan Trust
$ 400,000 Series 2005-2, Class A4, 3 Mo. LIBOR + 0.16% (a)................. 2.05% 12/15/39 $ 382,253
5,054,000 Series 2006-1, Class A6, 3 Mo. LIBOR + 0.16% (a)................. 2.05% 03/15/55 4,747,614
130,000 Series 2006-2, Class A6, 3 Mo. LIBOR + 0.16% (a)................. 2.05% 09/15/39 123,634
2,129,228 Series 2008-1, Class A4A, 3 Mo. LIBOR + 1.60% (a)................ 3.49% 12/15/32 2,168,747
SLM Student Loan Trust
161,805 Series 2003-10A, Class A3, 3 Mo. LIBOR + 0.47% (a) (f)........... 2.36% 12/15/27 162,340
250,000 Series 2005-5, Class A5, 3 Mo. LIBOR + 0.75% (a)................. 2.54% 10/25/40 241,561
627,956 Series 2005-9, Class A7A, 3 Mo. LIBOR + 0.60% (a)................ 2.39% 01/25/41 616,285
213,207 Series 2006-2, Class A6, 3 Mo. LIBOR + 0.17% (a)................. 1.96% 01/25/41 205,055
600,000 Series 2006-8, Class A6, 3 Mo. LIBOR + 0.16% (a)................. 1.95% 01/25/41 567,606
72,179 Series 2007-6, Class A4, 3 Mo. LIBOR + 0.38% (a)................. 2.17% 10/25/24 72,234
80,000 Series 2007-7, Class B, 3 Mo. LIBOR + 0.75% (a).................. 2.54% 10/27/70 74,119
957,413 Series 2008-1, Class A4, 3 Mo. LIBOR + 0.65% (a)................. 2.44% 01/25/22 942,625
5,650,145 Series 2008-2, Class A3, 3 Mo. LIBOR + 0.75% (a)................. 2.54% 04/25/23 5,452,393
130,000 Series 2008-2, Class B, 3 Mo. LIBOR + 1.20% (a).................. 2.99% 01/25/83 119,577
700,000 Series 2008-3, Class B, 3 Mo. LIBOR + 1.20% (a).................. 2.99% 04/26/83 649,933
5,776,066 Series 2008-6, Class A4, 3 Mo. LIBOR + 1.10% (a)................. 2.89% 07/25/23 5,722,897
320,000 Series 2008-7, Class B, 3 Mo. LIBOR + 1.85% (a).................. 3.64% 07/26/83 314,550
2,843,486 Series 2008-8, Class A4, 3 Mo. LIBOR + 1.50% (a)................. 3.29% 04/25/23 2,860,647
345,000 Series 2011-1, Class A2, 1 Mo. LIBOR + 1.15% (a)................. 2.78% 10/25/34 347,842
4,150,000 Series 2011-2, Class A2, 1 Mo. LIBOR + 1.20% (a)................. 2.83% 10/25/34 4,207,322
797,535 Series 2012-2, Class A, 1 Mo. LIBOR + 0.70% (a).................. 2.33% 01/25/29 780,080
787,662 Series 2012-3, Class A, 1 Mo. LIBOR + 0.65% (a).................. 2.28% 12/27/38 784,199
299,183 Series 2012-6, Class A3, 1 Mo. LIBOR + 0.75% (a)................. 2.38% 05/26/26 297,424
4,215,323 Series 2012-7, Class A3, 1 Mo. LIBOR + 0.65% (a)................. 2.28% 05/26/26 4,075,929
555,000 Series 2012-7, Class B, 1 Mo. LIBOR + 1.80% (a).................. 3.43% 09/25/43 553,087
150,438 Series 2013-2, Class A, 1 Mo. LIBOR + 0.45% (a).................. 2.08% 06/25/43 148,669
Soundview Home Loan Trust
76,400 Series 2006-2, Class M1, 1 Mo. LIBOR + 0.33% (a)................. 1.96% 03/25/36 76,610
Structured Asset Investment Loan Trust
1,002,759 Series 2004-6, Class A3, 1 Mo. LIBOR + 0.80% (a)................. 2.43% 07/25/34 995,292
291,732 Series 2005-2, Class M2, 1 Mo. LIBOR + 0.74% (a)................. 2.36% 03/25/35 292,642
Structured Asset Securities Corp. Mortgage Loan Trust
1,350,000 Series 2005-NC2, Class M5, 1 Mo. LIBOR + 0.62% (a)............... 2.25% 05/25/35 1,349,239
TCI-Flatiron CLO Ltd.
700,000 Series 2016-1A, Class AR, 3 Mo. LIBOR + 1.22% (a) (f)............ 3.06% 07/17/28 700,140
Towd Point Mortgage Trust
582,833 Series 2015-2, Class 1A13 (a) (f)................................ 2.50% 11/25/60 585,894
Treman Park CLO Ltd.
850,000 Series 2015-1A, Class ARR, 3 Mo. LIBOR + 1.07% (a) (f)........... 2.89% 10/20/28 850,170
Voya CLO Ltd.
180,152 Series 2014-3A, Class A1R, 3 Mo. LIBOR + 0.72% (a) (f)........... 2.51% 07/25/26 180,008
Wachovia Student Loan Trust
1,104,072 Series 2006-1, Class A6, 3 Mo. LIBOR + 0.17% (a) (f)............. 1.96% 04/25/40 1,059,482
--------------
TOTAL ASSET-BACKED SECURITIES.................................................................. 105,995,388
(Cost $106,232,958) --------------
|
See Notes to Financial Statements Page 27
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL
VALUE
(LOCAL STATED STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (U.S. DOLLAR)
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
FOREIGN CORPORATE BONDS AND NOTES -- 4.4%
AIRLINES -- 0.0%
692,400 Air Canada Pass-Through Trust, Series 2017-1, Class AA
(USD) (f)........................................................ 3.30% 01/15/30 $ 752,416
--------------
BANKS -- 0.8%
600,000 Banco Nacional de Comercio Exterior SNC (USD) (f) (g)............... 3.80% 08/11/26 607,715
400,000 Global Bank Corp. (USD) (g) (i)..................................... 5.25% 04/16/29 437,500
1,195,000 Lloyds Banking Group PLC (USD) (g).................................. 2.86% 03/17/23 1,218,372
3,125,000 Lloyds Banking Group PLC (USD) (g).................................. 2.91% 11/07/23 3,199,236
1,870,000 Lloyds Banking Group PLC (USD)...................................... 3.90% 03/12/24 2,011,116
1,800,000 Santander UK Group Holdings PLC (USD)............................... 2.88% 08/05/21 1,832,106
500,000 Santander UK Group Holdings PLC (USD) (g)........................... 3.37% 01/05/24 519,450
1,900,000 Santander UK Group Holdings PLC (USD) (g)........................... 4.80% 11/15/24 2,071,662
--------------
11,897,157
--------------
BEVERAGES -- 0.1%
245,000 Bacardi Ltd. (USD) (f).............................................. 4.70% 05/15/28 280,778
385,000 Bacardi Ltd. (USD) (f).............................................. 5.30% 05/15/48 497,196
--------------
777,974
--------------
COMMERCIAL SERVICES -- 0.4%
600,000 DP World Crescent Ltd. (USD) (f).................................... 4.85% 09/26/28 650,561
889,000 IHS Markit Ltd. (USD) (f)........................................... 5.00% 11/01/22 961,819
2,500,000 IHS Markit Ltd. (USD)............................................... 3.63% 05/01/24 2,653,579
795,000 IHS Markit Ltd. (USD) (f)........................................... 4.75% 02/15/25 883,380
135,000 IHS Markit Ltd. (USD) (f)........................................... 4.00% 03/01/26 147,413
250,000 IHS Markit Ltd. (USD)............................................... 4.75% 08/01/28 291,941
--------------
5,588,693
--------------
DIVERSIFIED FINANCIAL SERVICES -- 1.1%
375,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust
(USD)............................................................ 4.50% 05/15/21 387,473
800,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust
(USD)............................................................ 5.00% 10/01/21 838,418
1,500,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust
(USD)............................................................ 3.95% 02/01/22 1,554,959
1,000,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust
(USD)............................................................ 4.13% 07/03/23 1,064,538
1,000,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust
(USD)............................................................ 4.88% 01/16/24 1,089,425
3,380,000 Avolon Holdings Funding Ltd. (USD) (f).............................. 5.13% 10/01/23 3,625,657
135,000 Avolon Holdings Funding Ltd. (USD) (f).............................. 5.25% 05/15/24 147,274
885,000 Avolon Holdings Funding Ltd. (USD) (f).............................. 2.88% 02/15/25 885,489
840,000 Fondo Mivivienda S.A. (USD) (i)..................................... 3.50% 01/31/23 865,557
3,035,000 GE Capital International Funding Co. Unlimited Co. (USD)............ 2.34% 11/15/20 3,043,611
375,000 GE Capital International Funding Co. Unlimited Co. (USD)............ 4.42% 11/15/35 429,240
1,020,000 Park Aerospace Holdings Ltd. (USD) (f).............................. 5.25% 08/15/22 1,086,108
850,000 Park Aerospace Holdings Ltd. (USD) (f).............................. 4.50% 03/15/23 889,475
750,000 Park Aerospace Holdings Ltd. (USD) (f).............................. 5.50% 02/15/24 825,461
--------------
16,732,685
--------------
|
Page 28 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL
VALUE
(LOCAL STATED STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (U.S. DOLLAR)
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
FOREIGN CORPORATE BONDS AND NOTES (CONTINUED)
ELECTRIC -- 0.0%
400,000 Minejesa Capital B.V. (USD) (f)..................................... 5.63% 08/10/37 $ 449,374
250,000 Mong Duong Finance Holdings B.V. (USD) (i).......................... 5.13% 05/07/29 263,065
--------------
712,439
--------------
ENVIRONMENTAL CONTROL -- 0.0%
745,000 GFL Environmental, Inc. (USD) (f)................................... 5.13% 12/15/26 772,938
--------------
HOUSEHOLD PRODUCTS/WARES -- 0.0%
200,000 Reckitt Benckiser Treasury Services PLC (USD) (f)................... 2.75% 06/26/24 209,777
--------------
MEDIA -- 0.0%
400,000 Virgin Media Secured Finance PLC (USD) (f).......................... 5.50% 08/15/26 412,556
200,000 Virgin Media Secured Finance PLC (USD) (f).......................... 5.50% 05/15/29 205,630
--------------
618,186
--------------
MINING -- 0.2%
64,000 Corp. Nacional del Cobre de Chile (USD) (i)......................... 4.50% 09/16/25 71,408
900,000 Corp. Nacional del Cobre de Chile (USD) (i)......................... 3.63% 08/01/27 966,444
1,110,000 Indonesia Asahan Aluminium Persero PT (USD) (f)..................... 6.53% 11/15/28 1,372,817
--------------
2,410,669
--------------
OIL & GAS -- 0.4%
20,000 Canadian Natural Resources Ltd. (USD)............................... 3.85% 06/01/27 21,268
200,000 Ecopetrol S.A. (USD)................................................ 5.88% 05/28/45 239,687
880,000 KazMunayGas National Co. JSC (USD) (i).............................. 5.38% 04/24/30 1,026,002
75,000 Petrobras Global Finance B.V. (USD) (f)............................. 5.09% 01/15/30 80,344
215,000 Petroleos Mexicanos (USD)........................................... 6.63% 06/15/35 215,846
2,430,000 Petroleos Mexicanos (USD)........................................... 6.75% 09/21/47 2,327,247
1,920,000 Petroleos Mexicanos (USD) (f)....................................... 7.69% 01/23/50 2,006,698
197,895 Transocean Pontus Ltd. (USD) (f).................................... 6.13% 08/01/25 200,367
517,000 Transocean Poseidon Ltd. (USD) (f).................................. 6.88% 02/01/27 526,059
--------------
6,643,518
--------------
OIL & GAS SERVICES -- 0.0%
353,500 Transocean Phoenix 2 Ltd. (USD) (f)................................. 7.75% 10/15/24 364,252
17,500 Transocean Proteus Ltd. (USD) (f)................................... 6.25% 12/01/24 17,726
--------------
381,978
--------------
PACKAGING & CONTAINERS -- 0.0%
400,000 Ardagh Packaging Finance PLC / Ardagh Holdings USA, Inc.
(USD) (f)........................................................ 4.13% 08/15/26 399,250
51,000 OI European Group B.V. (USD) (f).................................... 4.00% 03/15/23 51,723
--------------
450,973
--------------
PHARMACEUTICALS -- 0.2%
1,550,000 Allergan Funding SCS (USD).......................................... 3.80% 03/15/25 1,694,930
300,000 AstraZeneca PLC (USD)............................................... 3.50% 08/17/23 320,782
522,000 Bausch Health Cos., Inc. (USD) (f).................................. 6.50% 03/15/22 529,804
550,000 Bausch Health Cos., Inc. (USD) (f).................................. 7.00% 03/15/24 567,416
--------------
3,112,932
--------------
PIPELINES -- 0.0%
600,000 Peru LNG SRL (USD) (i).............................................. 5.38% 03/22/30 511,709
--------------
|
See Notes to Financial Statements Page 29
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL
VALUE
(LOCAL STATED STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (U.S. DOLLAR)
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
FOREIGN CORPORATE BONDS AND NOTES (CONTINUED)
RETAIL -- 0.1%
100,000 Alimentation Couche-Tard, Inc. (USD) (f)............................ 3.55% 07/26/27 $ 108,425
2,030,000 Alimentation Couche-Tard, Inc. (USD) (f)............................ 3.80% 01/25/50 2,019,554
--------------
2,127,979
--------------
SAVINGS & LOANS -- 0.4%
4,895,000 Nationwide Building Society (USD) (f) (g)........................... 3.62% 04/26/23 5,090,468
360,000 Nationwide Building Society (USD) (f) (g)........................... 3.77% 03/08/24 377,121
300,000 Nationwide Building Society (USD) (f) (g)........................... 4.36% 08/01/24 322,353
--------------
5,789,942
--------------
SEMICONDUCTORS -- 0.1%
1,205,000 NXP B.V. / NXP Funding LLC (USD) (f)................................ 4.13% 06/01/21 1,239,095
--------------
TELECOMMUNICATIONS -- 0.6%
200,000 C&W Senior Financing DAC (USD) (f).................................. 6.88% 09/15/27 211,464
1,970,000 Intelsat Jackson Holdings S.A. (USD) (f)............................ 8.50% 10/15/24 1,704,868
390,000 Intelsat Jackson Holdings S.A. (USD) (f)............................ 9.75% 07/15/25 344,744
725,000 Koninklijke KPN N.V. (USD).......................................... 8.38% 10/01/30 1,017,745
500,000 SES S.A. (USD) (f).................................................. 3.60% 04/04/23 521,364
330,000 Vodafone Group PLC (USD)............................................ 3.75% 01/16/24 355,027
2,777,000 Vodafone Group PLC (USD)............................................ 4.88% 06/19/49 3,344,274
1,375,000 Vodafone Group PLC (USD)............................................ 4.25% 09/17/50 1,519,971
--------------
9,019,457
--------------
TOTAL FOREIGN CORPORATE BONDS AND NOTES........................................................ 69,750,517
(Cost $67,704,694) --------------
FOREIGN SOVEREIGN BONDS AND NOTES -- 0.8%
BAHRAIN -- 0.0%
600,000 Bahrain Government International Bond (USD) (i)..................... 7.00% 10/12/28 695,736
--------------
BRAZIL -- 0.1%
1,100,000 Brazilian Government International Bond (USD)....................... 4.63% 01/13/28 1,210,561
--------------
COLOMBIA -- 0.0%
684,000 Colombia Government International Bond (USD)........................ 4.50% 01/28/26 758,539
--------------
DOMINICAN REPUBLIC -- 0.0%
700,000 Dominican Republic International Bond (USD) (i)..................... 6.00% 07/19/28 775,500
--------------
EGYPT -- 0.1%
800,000 Egypt Government International Bond (USD) (f)....................... 5.58% 02/21/23 829,934
--------------
MEXICO -- 0.1%
900,000 Mexico Government International Bond (USD).......................... 3.25% 04/16/30 925,875
--------------
OMAN -- 0.1%
840,000 Oman Government International Bond (USD) (f)........................ 5.63% 01/17/28 840,142
--------------
PARAGUAY -- 0.0%
600,000 Paraguay Government International Bond (USD) (i).................... 4.63% 01/25/23 637,005
--------------
QATAR -- 0.1%
1,140,000 Qatar Government International Bond (USD) (i)....................... 4.50% 04/23/28 1,322,400
--------------
RUSSIA -- 0.1%
800,000 Russian Foreign Bond - Eurobond (USD) (i)........................... 4.38% 03/21/29 890,210
--------------
SAUDI ARABIA -- 0.1%
1,100,000 Saudi Government International Bond (USD) (i)....................... 3.63% 03/04/28 1,181,542
--------------
|
Page 30 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL
VALUE
(LOCAL STATED STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (U.S. DOLLAR)
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
FOREIGN SOVEREIGN BONDS AND NOTES (CONTINUED)
SOUTH AFRICA -- 0.1%
1,200,000 Republic of South Africa Government International Bond (USD)........ 4.67% 01/17/24 $ 1,258,464
--------------
TURKEY -- 0.0%
400,000 Turkey Government International Bond (USD).......................... 3.25% 03/23/23 381,000
--------------
URUGUAY -- 0.0%
640,000 Uruguay Government International Bond (USD)......................... 4.38% 01/23/31 736,806
--------------
TOTAL FOREIGN SOVEREIGN BONDS AND NOTES........................................................ 12,443,714
(Cost $12,140,709) --------------
|
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
MUNICIPAL BONDS -- 0.6%
CALIFORNIA -- 0.5%
$ 300,000 CA St Build America Bonds........................................... 7.95% 03/01/36 301,536
2,585,000 Los Angeles CA Unified School District.............................. 5.75% 07/01/34 3,542,148
3,910,000 Regents of the University of CA Medical Center Pooled
Revenue.......................................................... 3.26% 05/15/60 4,013,185
--------------
7,856,869
--------------
NEW JERSEY -- 0.1%
500,000 New Jersey St Turnpike Authority Revenue............................ 3.73% 01/01/36 588,690
--------------
NEW YORK -- 0.0%
400,000 New York City NY Transitional Fin Auth Rev Qualified Sch Constr,
Ser BD G-3....................................................... 5.27% 05/01/27 496,492
--------------
TOTAL MUNICIPAL BONDS.......................................................................... 8,942,051
(Cost $8,468,284) --------------
CAPITAL PREFERRED SECURITIES -- 0.0%
ELECTRIC -- 0.0%
300,000 Alabama Power Capital Trust V, 3 Mo. LIBOR + 3.10% (a).............. 5.01% 10/01/42 300,147
--------------
TOTAL CAPITAL PREFERRED SECURITIES............................................................. 300,147
(Cost $290,250) --------------
U.S. TREASURY BILLS -- 2.8%
1,007,000 U.S. Treasury Bill (j).............................................. (k) 03/19/20 1,006,324
43,305,000 U.S. Treasury Bill.................................................. (k) 04/21/20 43,223,352
145,000 U.S. Treasury Bill.................................................. (k) 05/07/20 144,656
--------------
TOTAL U.S. TREASURY BILLS...................................................................... 44,374,332
(Cost $44,360,729) --------------
|
SHARES DESCRIPTION VALUE
-------------- ----------------------------------------------------------------------------------------------- --------------
MONEY MARKET FUNDS -- 8.0%
127,216,564 JPMorgan 100% U.S. Treasury Securities Money Market - Fund Institutional Class - 1.41% (l)..... 127,216,564
(Cost $127,216,564) --------------
TOTAL INVESTMENTS -- 116.3%.................................................................... 1,848,297,594
(Cost $1,801,787,871) (m)
NET OTHER ASSETS AND LIABILITIES -- (16.3)%.................................................... (259,384,038)
--------------
NET ASSETS -- 100.0%........................................................................... $1,588,913,556
==============
|
See Notes to Financial Statements Page 31
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
FUTURES CONTRACTS AT FEBRUARY 29, 2020 (see Note 2C - Futures Contracts in the
Notes to Financial Statements):
UNREALIZED
APPRECIATION
NUMBER OF EXPIRATION NOTIONAL (DEPRECIATION)/
FUTURES CONTRACTS POSITION CONTRACTS DATE VALUE VALUE
------------------------------ ------------ --------------- -------------- ------------- --------------
U.S. 2-Year Treasury Notes Long 165 Jun-2020 $ 36,024,141 $ 315,242
U.S. 5-Year Treasury Notes Long 1,169 Jun-2020 143,494,750 2,789,326
------------- --------------
$ 179,518,891 $ 3,104,568
============= ==============
|
INTEREST RATE SWAP AGREEMENTS AT FEBRUARY 29, 2020 (see Note 2E - Swap
Agreements in the Notes to Financial Statements):
UNREALIZED
APPRECIATION
FLOATING EXPIRATION NOTIONAL FIXED (DEPRECIATION)/
COUNTERPARTY RATE DATE VALUE RATE VALUE
------------------------------ ----------------- --------------- -------------- ------------- --------------
Citibank, Global Markets, Inc. 3 month LIBOR(1) 1/21/2023 $ 105,720,000 1.580%(1) $ 1,550,254
Citibank, Global Markets, Inc. 3 month LIBOR(2) 1/21/2026 43,005,000 1.675%(2) (1,537,795)
-------------- --------------
$ 148,725,000 $ 12,459
============== ==============
|
(1) The Fund pays the floating rate and receives the fixed rate. The floating
rate is not effective until 1/21/2021 and no interest is being accrued
until that date.
(2) The Fund pays the fixed rate and receives the floating rate. The floating
rate is not effective until 1/21/2021 and no interest is being accrued
until that date.
(a) Floating or variable rate security.
(b) Collateral Strip Rate security. Coupon is based on the weighted net
interest rate of the investment's underlying collateral. The interest rate
resets periodically.
(c) This security is fair valued by the Advisor's Pricing Committee in
accordance with procedures adopted by the Trust's Board of Trustees, and
in accordance with provisions of the Investment Company Act of 1940, as
amended. At February 29, 2020, securities noted as such are valued at
$2,114,700 or 0.1% of net assets.
(d) All or a portion of this security is part of a mortgage dollar roll
agreement (see Note 2I - Mortgage Dollar Rolls in the Notes to Financial
Statements).
(e) Security whose principal value is adjusted in accordance with changes to
the country's Consumer Price Index. Interest is calculated on the basis of
the current adjusted principal value.
(f) This security, sold within the terms of a private placement memorandum, is
exempt from registration upon resale under Rule 144A of the Securities Act
of 1933, as amended (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 First Trust Advisors L.P.,
the Fund's 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 February 29, 2020, securities noted as
such amounted to $181,914,557 or 11.4% of net assets.
(g) Fixed-to-floating security. At a predetermined date, the fixed rate will
change to a floating rate.
(h) Step-up security. A security where the coupon increases or steps up at a
predetermined date.
(i) This security may be resold to qualified foreign investors and foreign
institutional buyers under Regulation S of the 1933 Act.
(j) All or a portion of this security is segregated as collateral for open
futures contracts.
(k) Zero coupon security.
(l) Rate shown reflects yield as of February 29, 2020.
Page 32 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
(m) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of February 29, 2020, the
aggregate gross unrealized appreciation for all investments in which there
was an excess of value over tax cost was $53,929,303 and the aggregate
gross unrealized depreciation for all investments in which there was an
excess of tax cost over value was $4,302,553. The net unrealized
appreciation was $49,626,750. The amounts presented are inclusive of
derivative contracts.
LIBOR - London Interbank Offered Rate
SOFR - Secured Overnight Financing Rate
TBA - To-Be-Announced Security
Currency Abbreviations:
USD United States Dollar
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of February 29,
2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
ASSETS TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
2/29/2020 PRICES INPUTS INPUTS
-------------- -------------- -------------- --------------
U.S. Government Agency Mortgage-Backed
Securities.................................... $ 649,027,092 $ -- $ 649,027,092 $ --
U.S. Government Bonds and Notes.................. 439,027,679 -- 439,027,679 --
Corporate Bonds and Notes*....................... 268,595,367 -- 268,595,367 --
Mortgage-Backed Securities....................... 122,624,743 -- 122,624,743 --
Asset-Backed Securities.......................... 105,995,388 -- 105,995,388 --
Foreign Corporate Bonds and Notes*............... 69,750,517 -- 69,750,517 --
Foreign Sovereign Bonds and Notes**.............. 12,443,714 -- 12,443,714 --
Municipal Bonds***............................... 8,942,051 -- 8,942,051 --
Capital Preferred Securities*.................... 300,147 -- 300,147 --
U.S. Treasury Bills.............................. 44,374,332 -- 44,374,332 --
Money Market Funds............................... 127,216,564 127,216,564 -- --
-------------- -------------- -------------- --------------
Total Investments................................ 1,848,297,594 127,216,564 1,721,081,030 --
Futures Contracts****............................ 3,104,568 3,104,568 -- --
Interest Rate Swap Agreements.................... 1,550,254 -- 1,550,254 --
-------------- -------------- -------------- --------------
Total............................................ $1,852,952,416 $ 130,321,132 $1,722,631,284 $ --
============== ============== ============== ==============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
2/29/2020 PRICES INPUTS INPUTS
-------------- -------------- -------------- --------------
Interest Rate Swap Agreements.................... $ (1,537,795) $ -- $ (1,537,795) $ --
============== ============== ============== ==============
|
* See Portfolio of Investments for industry breakout.
** See Portfolio of Investments for country breakout.
*** See Portfolio of Investments for state breakout.
**** Includes cumulative appreciation/depreciation on futures contracts as
reported in the Futures Contracts table. Only the current day's variation
margin is presented on the Statements of Assets and Liabilities.
See Notes to Financial Statements Page 33
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
CORPORATE BONDS AND NOTES -- 33.6%
AEROSPACE/DEFENSE -- 0.3%
$ 200,000 BAE Systems Holdings, Inc. (a)...................................... 2.85% 12/15/20 $ 201,337
510,000 Northrop Grumman Corp............................................... 2.93% 01/15/25 540,857
--------------
742,194
--------------
AGRICULTURE -- 0.4%
250,000 BAT Capital Corp.................................................... 4.54% 08/15/47 260,677
645,000 Reynolds American, Inc.............................................. 5.85% 08/15/45 772,178
--------------
1,032,855
--------------
AIRLINES -- 0.8%
363,265 American Airlines Pass-Through Trust, Series 2014-1, Class A........ 3.70% 10/01/26 395,270
323,605 Continental Airlines Pass-Through Trust, Series 2007-1, Class A..... 5.98% 04/19/22 342,020
318,073 Delta Air Lines Pass-Through Trust, Series 2002-1, Class G1......... 6.72% 01/02/23 340,059
545,795 United Airlines Pass-Through Trust, Series 2013-1, Class A.......... 4.30% 08/15/25 599,781
45,698 US Airways Pass-Through Trust, Series 2001-011G..................... 7.08% 03/20/21 47,466
146,255 US Airways Pass-Through Trust, Series 2012-1, Class A............... 5.90% 10/01/24 165,736
--------------
1,890,332
--------------
AUTO MANUFACTURERS -- 2.1%
310,000 Daimler Finance North America LLC (a)............................... 2.20% 10/30/21 312,434
520,000 Daimler Finance North America LLC, 3 Mo. LIBOR +
0.90% (a) (b).................................................... 2.59% 02/15/22 524,921
350,000 Ford Motor Credit Co. LLC........................................... 3.20% 01/15/21 352,354
30,000 Ford Motor Credit Co. LLC........................................... 5.75% 02/01/21 30,873
125,000 Ford Motor Credit Co. LLC, 3 Mo. LIBOR + 0.81% (b).................. 2.71% 04/05/21 124,290
945,000 Ford Motor Credit Co. LLC........................................... 5.88% 08/02/21 987,433
300,000 Ford Motor Credit Co. LLC, 3 Mo. LIBOR + 0.88% (b).................. 2.73% 10/12/21 296,760
170,000 Ford Motor Credit Co. LLC........................................... 3.81% 10/12/21 173,512
600,000 Ford Motor Credit Co. LLC........................................... 3.22% 01/09/22 602,644
300,000 Ford Motor Credit Co. LLC........................................... 3.34% 03/28/22 303,161
250,000 General Motors Financial Co., Inc................................... 4.20% 03/01/21 253,843
475,000 General Motors Financial Co., Inc................................... 3.55% 04/09/21 482,774
405,000 General Motors Financial Co., Inc................................... 3.20% 07/06/21 409,887
65,000 General Motors Financial Co., Inc................................... 4.38% 09/25/21 67,215
80,000 General Motors Financial Co., Inc................................... 3.45% 04/10/22 82,058
--------------
5,004,159
--------------
BANKS -- 5.7%
65,000 Bank of America Corp. (c)........................................... 3.00% 12/20/23 67,385
1,245,000 Bank of America Corp., Medium-Term Note (c)......................... 3.50% 05/17/22 1,273,562
200,000 Bank of America Corp., Medium-Term Note (c)......................... 3.97% 03/05/29 224,221
5,000 Bank of America Corp., Medium-Term Note (c)......................... 4.27% 07/23/29 5,756
465,000 Bank of America Corp., Medium-Term Note (c)......................... 3.97% 02/07/30 528,214
420,000 Bank of New York Mellon (The) Corp., Medium-Term Note (c)........... 2.66% 05/16/23 430,152
1,360,000 Citigroup, Inc...................................................... 2.90% 12/08/21 1,388,240
100,000 Citigroup, Inc. (c)................................................. 2.88% 07/24/23 102,831
500,000 Citigroup, Inc. (c)................................................. 3.35% 04/24/25 529,532
525,000 Citigroup, Inc. (c)................................................. 4.08% 04/23/29 597,417
300,000 Goldman Sachs Group, (The), Inc. (c)................................ 2.88% 10/31/22 306,054
640,000 Goldman Sachs Group, (The), Inc..................................... 2.60% 02/07/30 650,032
200,000 JPMorgan Chase & Co. (c)............................................ 4.01% 04/23/29 225,581
1,460,000 JPMorgan Chase & Co. (c)............................................ 4.20% 07/23/29 1,683,806
250,000 Morgan Stanley, 3 Mo. LIBOR + 0.93% (b)............................. 2.73% 07/22/22 251,755
|
Page 34 See Notes to Financial Statements
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$ 1,710,000 Morgan Stanley, Global Medium-Term Note............................. 3.70% 10/23/24 $ 1,855,132
125,000 Wells Fargo & Co.................................................... 3.07% 01/24/23 128,263
500,000 Wells Fargo & Co., Global Medium-Term Note.......................... 2.60% 07/22/20 501,857
510,000 Wells Fargo & Co., Medium-Term Note (c)............................. 3.58% 05/22/28 554,853
250,000 Wells Fargo & Co., Medium-Term Note................................. 4.15% 01/24/29 288,473
1,345,000 Wells Fargo Bank N.A., Bank Note (c)................................ 2.08% 09/09/22 1,355,372
250,000 Wells Fargo Bank N.A., Bank Note, SOFR + 0.48% (b).................. 2.06% 03/25/20 250,040
475,000 Wells Fargo Bank N.A., Bank Note (c)................................ 3.33% 07/23/21 478,239
--------------
13,676,767
--------------
BEVERAGES -- 0.4%
390,000 Constellation Brands, Inc........................................... 4.25% 05/01/23 421,579
420,000 Molson Coors Brewing Co............................................. 2.25% 03/15/20 420,023
--------------
841,602
--------------
BIOTECHNOLOGY -- 0.1%
190,000 Amgen, Inc.......................................................... 4.40% 05/01/45 220,420
--------------
CHEMICALS -- 0.2%
400,000 International Flavors & Fragrances, Inc............................. 4.45% 09/26/28 459,248
--------------
COMMERCIAL SERVICES -- 0.5%
500,000 Global Payments, Inc................................................ 3.80% 04/01/21 511,310
600,000 RELX Capital, Inc................................................... 4.00% 03/18/29 687,200
61,000 Service Corp. International......................................... 4.63% 12/15/27 64,039
--------------
1,262,549
--------------
COMPUTERS -- 0.1%
160,000 Dell International LLC / EMC Corp. (a).............................. 4.42% 06/15/21 164,881
--------------
DIVERSIFIED FINANCIAL SERVICES -- 0.6%
75,000 Air Lease Corp...................................................... 4.75% 03/01/20 75,000
570,000 Air Lease Corp...................................................... 3.88% 07/03/23 602,180
50,000 International Lease Finance Corp.................................... 4.63% 04/15/21 51,497
615,000 Raymond James Financial, Inc........................................ 3.63% 09/15/26 678,375
--------------
1,407,052
--------------
ELECTRIC -- 1.5%
75,000 Alliant Energy Finance LLC (a)...................................... 3.75% 06/15/23 79,817
150,000 Duke Energy Progress LLC............................................ 3.70% 09/01/28 170,292
100,000 Duquesne Light Holdings, Inc. (a)................................... 6.40% 09/15/20 102,341
600,000 Duquesne Light Holdings, Inc. (a)................................... 5.90% 12/01/21 640,376
100,000 Evergy Metro, Inc................................................... 4.20% 06/15/47 126,561
75,000 Florida Power & Light Co............................................ 3.95% 03/01/48 92,844
100,000 Metropolitan Edison Co. (a)......................................... 3.50% 03/15/23 105,538
500,000 Pennsylvania Electric Co. (a)....................................... 4.15% 04/15/25 550,433
900,000 PNM Resources, Inc.................................................. 3.25% 03/09/21 912,775
100,000 Puget Sound Energy, Inc............................................. 4.22% 06/15/48 123,242
450,000 Southwestern Electric Power Co., Series M........................... 4.10% 09/15/28 515,949
75,000 Tucson Electric Power Co............................................ 5.15% 11/15/21 78,823
--------------
3,498,991
--------------
ENTERTAINMENT -- 0.0%
95,000 Churchill Downs, Inc. (a)........................................... 4.75% 01/15/28 95,176
--------------
|
See Notes to Financial Statements Page 35
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
ENVIRONMENTAL CONTROL -- 0.3%
$ 200,000 Clean Harbors, Inc. (a)............................................. 4.88% 07/15/27 $ 209,310
75,000 Republic Services, Inc.............................................. 3.95% 05/15/28 86,118
500,000 Waste Management, Inc............................................... 3.20% 06/15/26 542,715
--------------
838,143
--------------
FOOD -- 1.8%
250,000 Campbell Soup Co., 3 Mo. LIBOR + 0.63% (b).......................... 2.52% 03/15/21 250,273
250,000 Conagra Brands, Inc., 3 Mo. LIBOR + 0.50% (b)....................... 2.38% 10/09/20 250,264
250,000 Conagra Brands, Inc................................................. 4.60% 11/01/25 280,394
650,000 General Mills, Inc.................................................. 4.00% 04/17/25 718,885
105,000 General Mills, Inc.................................................. 4.70% 04/17/48 131,428
70,000 Kraft Heinz Foods Co................................................ 5.00% 07/15/35 74,426
100,000 Kraft Heinz Foods Co. (a)........................................... 7.13% 08/01/39 122,361
55,000 Kraft Heinz Foods Co................................................ 5.00% 06/04/42 54,892
65,000 Kraft Heinz Foods Co................................................ 5.20% 07/15/45 66,921
765,000 Kraft Heinz Foods Co................................................ 4.38% 06/01/46 713,158
960,000 Kraft Heinz Foods Co. (a)........................................... 4.88% 10/01/49 948,491
249,000 Kroger (The) Co..................................................... 5.40% 01/15/49 323,842
387,000 Smithfield Foods, Inc. (a).......................................... 5.20% 04/01/29 442,192
--------------
4,377,527
--------------
FOREST PRODUCTS & PAPER -- 0.2%
540,000 Georgia-Pacific LLC (a)............................................. 5.40% 11/01/20 552,756
--------------
GAS -- 0.3%
70,000 NiSource, Inc....................................................... 3.65% 06/15/23 73,992
500,000 Southern Co. Gas Capital Corp....................................... 5.88% 03/15/41 703,563
--------------
777,555
--------------
HEALTHCARE-PRODUCTS -- 0.4%
500,000 Boston Scientific Corp.............................................. 3.45% 03/01/24 533,171
150,000 Fresenius US Finance II, Inc. (a)................................... 4.25% 02/01/21 153,450
208,000 Hologic, Inc. (a)................................................... 4.63% 02/01/28 217,432
--------------
904,053
--------------
HEALTHCARE-SERVICES -- 1.8%
615,000 Anthem, Inc......................................................... 3.35% 12/01/24 655,277
635,000 Barnabas Health, Inc., Series 2012.................................. 4.00% 07/01/28 705,119
99,000 Centene Corp. (a)................................................... 5.25% 04/01/25 102,094
320,000 Encompass Health Corp............................................... 4.75% 02/01/30 330,928
525,000 Fresenius Medical Care US Finance II, Inc. (a)...................... 4.13% 10/15/20 529,620
260,000 HCA, Inc............................................................ 5.00% 03/15/24 289,202
90,000 HCA, Inc............................................................ 5.25% 04/15/25 102,346
535,000 HCA, Inc............................................................ 5.25% 06/15/49 624,650
100,000 Humana, Inc......................................................... 3.15% 12/01/22 103,925
105,000 Humana, Inc......................................................... 3.13% 08/15/29 110,985
90,000 Humana, Inc......................................................... 4.95% 10/01/44 111,030
340,000 Quest Diagnostics, Inc.............................................. 4.20% 06/30/29 390,848
150,000 Tenet Healthcare Corp............................................... 4.63% 07/15/24 150,316
150,000 UnitedHealth Group, Inc............................................. 3.70% 08/15/49 167,579
--------------
4,373,919
--------------
HOUSEHOLD PRODUCTS/WARES -- 0.0%
60,000 Spectrum Brands, Inc................................................ 6.13% 12/15/24 61,775
--------------
|
Page 36 See Notes to Financial Statements
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
INSURANCE -- 0.8%
$ 205,000 Berkshire Hathaway Finance Corp..................................... 4.20% 08/15/48 $ 250,853
140,000 Farmers Insurance Exchange (a) (c).................................. 4.75% 11/01/57 153,289
750,000 MassMutual Global Funding II (a).................................... 3.40% 03/08/26 824,621
150,000 Pricoa Global Funding I (a)......................................... 3.45% 09/01/23 159,424
175,000 Teachers Insurance & Annuity Association of America (a) (c)......... 4.38% 09/15/54 189,125
325,000 Willis North America, Inc........................................... 2.95% 09/15/29 341,304
--------------
1,918,616
--------------
MEDIA -- 1.0%
589,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)................... 4.50% 08/15/30 596,731
600,000 Charter Communications Operating LLC / Charter Communications
Operating Capital................................................ 5.75% 04/01/48 715,533
287,000 CSC Holdings LLC (a)................................................ 6.50% 02/01/29 317,644
100,000 NBCUniversal Media LLC.............................................. 2.88% 01/15/23 104,518
150,000 Sirius XM Radio, Inc. (a)........................................... 3.88% 08/01/22 150,019
390,000 Walt Disney (The) Co................................................ 4.00% 10/01/23 425,004
--------------
2,309,449
--------------
MISCELLANEOUS MANUFACTURING -- 0.3%
100,000 General Electric Co., Global Medium-Term Note....................... 4.63% 01/07/21 102,412
205,000 General Electric Co., Medium-Term Note.............................. 5.88% 01/14/38 266,890
300,000 Ingersoll-Rand Co................................................... 9.00% 08/15/21 327,314
--------------
696,616
--------------
OIL & GAS -- 0.2%
88,000 Antero Resources Corp............................................... 5.13% 12/01/22 54,717
100,000 Antero Resources Corp............................................... 5.63% 06/01/23 54,250
236,000 Antero Resources Corp............................................... 5.00% 03/01/25 122,130
435,000 EQT Corp............................................................ 3.90% 10/01/27 280,575
120,000 Range Resources Corp................................................ 4.88% 05/15/25 76,164
--------------
587,836
--------------
OIL & GAS SERVICES -- 0.0%
70,000 USA Compression Partners L.P. / USA Compression Finance
Corp............................................................. 6.88% 04/01/26 67,863
--------------
PACKAGING & CONTAINERS -- 0.6%
490,000 Amcor Finance USA, Inc. (a)......................................... 4.50% 05/15/28 568,640
58,000 Ball Corp........................................................... 4.00% 11/15/23 59,742
41,000 Berry Global, Inc. (a).............................................. 4.88% 07/15/26 41,782
58,000 Graphic Packaging International LLC................................. 4.88% 11/15/22 60,628
75,000 Matthews International Corp. (a).................................... 5.25% 12/01/25 74,656
60,000 Sealed Air Corp. (a)................................................ 5.50% 09/15/25 65,425
405,000 WRKCo, Inc.......................................................... 4.65% 03/15/26 466,738
--------------
1,337,611
--------------
PHARMACEUTICALS -- 2.6%
85,000 AbbVie, Inc. (a).................................................... 3.20% 11/21/29 89,839
105,000 AbbVie, Inc. (a).................................................... 4.05% 11/21/39 116,511
200,000 AbbVie, Inc......................................................... 4.88% 11/14/48 246,449
610,000 AbbVie, Inc. (a).................................................... 4.25% 11/21/49 692,701
100,000 Bayer US Finance II LLC (a)......................................... 3.50% 06/25/21 102,275
1,055,000 Bayer US Finance II LLC (a)......................................... 4.38% 12/15/28 1,202,233
265,000 Bayer US Finance II LLC (a)......................................... 4.63% 06/25/38 320,031
100,000 Bayer US Finance II LLC (a)......................................... 4.40% 07/15/44 111,207
|
See Notes to Financial Statements Page 37
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
PHARMACEUTICALS (CONTINUED)
$ 400,000 Becton Dickinson and Co............................................. 3.25% 11/12/20 $ 404,439
375,000 Becton Dickinson and Co., 3 Mo. LIBOR + 0.88% (b)................... 2.84% 12/29/20 375,239
75,000 Cigna Corp. (a)..................................................... 3.05% 10/15/27 78,665
795,000 Cigna Corp.......................................................... 4.38% 10/15/28 905,928
70,000 Cigna Corp.......................................................... 4.90% 12/15/48 86,912
970,000 CVS Health Corp..................................................... 5.05% 03/25/48 1,194,475
182,000 Elanco Animal Health, Inc........................................... 5.02% 08/28/23 195,065
--------------
6,121,969
--------------
PIPELINES -- 1.7%
70,000 Cheniere Energy Partners L.P........................................ 5.25% 10/01/25 70,327
145,000 EQM Midstream Partners L.P.......................................... 5.50% 07/15/28 121,619
370,000 Kinder Morgan, Inc.................................................. 5.55% 06/01/45 440,372
92,130 Pipeline Funding Co. LLC (a)........................................ 7.50% 01/15/30 118,743
145,000 Plains All American Pipeline L.P. / PAA Finance Corp................ 4.65% 10/15/25 157,992
436,000 Rockies Express Pipeline LLC (a).................................... 5.63% 04/15/20 437,352
250,000 Rockies Express Pipeline LLC (a).................................... 4.95% 07/15/29 248,809
100,000 Rockies Express Pipeline LLC (a).................................... 6.88% 04/15/40 102,697
66,136 Ruby Pipeline LLC (a)............................................... 6.50% 04/01/22 66,957
100,000 Sabine Pass Liquefaction LLC........................................ 5.63% 03/01/25 113,790
400,000 Spectra Energy Partners L.P......................................... 4.60% 06/15/21 411,794
50,000 Sunoco Logistics Partners Operations L.P............................ 4.00% 10/01/27 52,408
930,000 Sunoco Logistics Partners Operations L.P............................ 5.40% 10/01/47 984,339
75,000 TC PipeLines L.P.................................................... 3.90% 05/25/27 80,069
54,000 TransMontaigne Partners L.P. / TLP Finance Corp..................... 6.13% 02/15/26 53,576
510,000 Williams Cos., (The), Inc........................................... 3.75% 06/15/27 535,623
--------------
3,996,467
--------------
REAL ESTATE INVESTMENT TRUSTS -- 5.9%
450,000 Alexandria Real Estate Equities, Inc................................ 3.80% 04/15/26 498,818
75,000 Alexandria Real Estate Equities, Inc., Class E...................... 3.45% 04/30/25 81,253
75,000 American Campus Communities Operating Partnership L.P............... 3.75% 04/15/23 79,858
500,000 American Campus Communities Operating Partnership L.P............... 4.13% 07/01/24 548,183
300,000 Boston Properties L.P............................................... 4.13% 05/15/21 307,749
250,000 Boston Properties L.P............................................... 2.75% 10/01/26 264,779
200,000 Boston Properties L.P............................................... 3.40% 06/21/29 219,994
550,000 Camden Property Trust............................................... 2.95% 12/15/22 566,699
500,000 CubeSmart L.P....................................................... 4.38% 02/15/29 580,575
515,000 CyrusOne L.P. / CyrusOne Finance Corp............................... 2.90% 11/15/24 522,867
420,000 CyrusOne L.P. / CyrusOne Finance Corp............................... 3.45% 11/15/29 428,975
250,000 Digital Realty Trust L.P............................................ 3.95% 07/01/22 262,419
500,000 Digital Realty Trust L.P............................................ 3.63% 10/01/22 522,935
325,000 Essex Portfolio L.P................................................. 3.63% 08/15/22 340,048
285,000 GLP Capital L.P. / GLP Financing II, Inc............................ 4.88% 11/01/20 288,708
200,000 GLP Capital L.P. / GLP Financing II, Inc............................ 5.38% 11/01/23 218,688
250,000 GLP Capital L.P. / GLP Financing II, Inc............................ 5.38% 04/15/26 282,658
185,000 GLP Capital L.P. / GLP Financing II, Inc............................ 5.30% 01/15/29 214,216
115,000 GLP Capital L.P. / GLP Financing II, Inc............................ 4.00% 01/15/30 122,453
575,000 Healthcare Realty Trust, Inc........................................ 3.75% 04/15/23 606,305
575,000 Healthcare Trust of America Holdings L.P............................ 3.70% 04/15/23 606,085
47,000 Healthpeak Properties, Inc.......................................... 4.25% 11/15/23 51,186
75,000 Healthpeak Properties, Inc.......................................... 4.00% 06/01/25 83,311
|
Page 38 See Notes to Financial Statements
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
$ 500,000 Hudson Pacific Properties L.P....................................... 3.95% 11/01/27 $ 554,136
175,000 Hudson Pacific Properties L.P....................................... 4.65% 04/01/29 204,353
400,000 Kilroy Realty L.P................................................... 3.45% 12/15/24 429,203
400,000 Kilroy Realty L.P................................................... 4.38% 10/01/25 449,950
500,000 Kimco Realty Corp................................................... 3.40% 11/01/22 523,327
325,000 Liberty Property L.P................................................ 4.13% 06/15/22 343,569
117,000 MGM Growth Properties Operating Partnership L.P. / MGP Finance
Co.-Issuer, Inc.................................................. 5.63% 05/01/24 126,896
200,000 National Retail Properties, Inc..................................... 3.80% 10/15/22 212,011
250,000 National Retail Properties, Inc..................................... 3.90% 06/15/24 271,817
400,000 Reckson Operating Partnership L.P................................... 7.75% 03/15/20 400,803
40,000 SBA Communications Corp............................................. 4.88% 09/01/24 41,192
225,000 SL Green Operating Partnership L.P., 3 Mo. LIBOR + 0.98% (b)........ 2.67% 08/16/21 225,049
325,000 SL Green Operating Partnership L.P.................................. 3.25% 10/15/22 337,930
300,000 Ventas Realty L.P................................................... 3.75% 05/01/24 322,872
250,000 Ventas Realty L.P................................................... 2.65% 01/15/25 259,348
75,000 Ventas Realty L.P................................................... 4.00% 03/01/28 83,397
250,000 VEREIT Operating Partnership L.P.................................... 4.63% 11/01/25 280,812
1,000,000 WEA Finance LLC (a)................................................. 3.15% 04/05/22 1,035,821
250,000 Welltower, Inc...................................................... 3.75% 03/15/23 264,960
--------------
14,066,208
--------------
RETAIL -- 0.5%
100,000 Family Dollar Stores, Inc........................................... 5.00% 02/01/21 102,677
75,000 Home Depot (The), Inc............................................... 3.90% 12/06/28 86,276
173,000 Rite Aid Corp. (a).................................................. 6.13% 04/01/23 158,944
75,000 Starbucks Corp...................................................... 3.80% 08/15/25 82,778
100,000 Walgreen Co......................................................... 3.10% 09/15/22 103,065
300,000 Walgreens Boots Alliance, Inc....................................... 3.30% 11/18/21 307,896
435,000 Walgreens Boots Alliance, Inc....................................... 4.80% 11/18/44 454,485
--------------
1,296,121
--------------
SEMICONDUCTORS -- 0.4%
545,000 Broadcom Corp. / Broadcom Cayman Finance Ltd........................ 3.63% 01/15/24 572,418
205,000 Broadcom, Inc. (a).................................................. 3.13% 04/15/21 208,213
205,000 Broadcom, Inc. (a).................................................. 3.63% 10/15/24 215,787
--------------
996,418
--------------
TELECOMMUNICATIONS -- 1.8%
594,000 AT&T, Inc........................................................... 4.85% 03/01/39 713,505
655,000 AT&T, Inc........................................................... 4.75% 05/15/46 769,449
289,000 Level 3 Financing, Inc.............................................. 5.38% 01/15/24 289,126
54,000 Qwest Corp.......................................................... 6.75% 12/01/21 57,122
125,000 Qwest Corp.......................................................... 7.25% 09/15/25 146,347
335,000 SES GLOBAL Americas Holdings G.P. (a)............................... 5.30% 03/25/44 383,900
311,000 Sprint Communications, Inc. (a)..................................... 7.00% 03/01/20 311,000
20,000 Sprint Corp......................................................... 7.88% 09/15/23 22,892
1,005,000 Sprint Spectrum Co. LLC / Sprint Spectrum Co. II LLC / Sprint
Spectrum Co. III LLC (a)......................................... 4.74% 03/20/25 1,078,229
90,000 T-Mobile USA, Inc................................................... 6.00% 03/01/23 91,313
130,000 T-Mobile USA, Inc................................................... 6.50% 01/15/24 133,411
238,000 T-Mobile USA, Inc................................................... 6.00% 04/15/24 243,579
74,000 T-Mobile USA, Inc................................................... 4.75% 02/01/28 77,189
--------------
4,317,062
--------------
|
See Notes to Financial Statements Page 39
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
TRUCKING & LEASING -- 0.2%
$ 500,000 Aviation Capital Group LLC, 3 Mo. LIBOR + 0.95% (a) (b)............. 2.86% 06/01/21 $ 503,304
--------------
WATER -- 0.1%
250,000 American Water Capital Corp......................................... 3.45% 06/01/29 278,390
--------------
TOTAL CORPORATE BONDS AND NOTES................................................................ 80,675,884
(Cost $75,477,745) --------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 23.3%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.1%
Federal Home Loan Mortgage Corporation
34,606 Series 2018-4824, Class ZC....................................... 4.00% 09/15/48 34,650
Federal National Mortgage Association
3,934,411 Series 2011-116, Class SA, IO, 1 Mo. LIBOR (x) -1 + 6.00% (d).... 4.37% 11/25/41 635,097
532,547 Series 2011-130, Class NW, 1 Mo. LIBOR + 1.20% (b)............... 2.86% 12/25/41 555,743
549,682 Series 2012-128, Class UA........................................ 2.50% 06/25/42 566,653
2,645,819 Series 2013-18, Class MI, IO..................................... 3.00% 02/25/33 187,299
Government National Mortgage Association
1,729,258 Series 2003-110, Class S, IO, 1 Mo. LIBOR (x) -1 + 6.60% (d)..... 4.95% 10/20/33 289,227
2,480,474 Series 2018-63, Class IO.......................................... 4.00% 09/20/47 369,859
--------------
2,638,528
--------------
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 12.0%
Brean Murray Structured Product
650,000 Series BM-7289, Class A (h)...................................... 2.38% 03/25/30 663,000
Federal National Mortgage Association
20,749 Series 2010-M4, Class A3......................................... 3.82% 06/25/20 20,787
5,896,176 Series 2012-M4, Class X1, IO (e) (f)............................. 0.42% 04/25/22 52,100
2,519,341 Series 2014-M6, Class X2, IO (e) (g)............................. 0.26% 05/25/21 6,566
29,589,173 Series 2015-M4, Class X2, IO (e)................................. 0.39% 07/25/22 233,914
720,001 Series 2016-M2, Class AL......................................... 3.47% 04/25/36 822,468
300,611 Series 2016-M2, Class X3, IO (e)................................. 2.02% 04/25/36 7,787
3,120,187 Series 2016-M4, Class X2, IO (e)................................. 2.65% 01/25/39 237,894
492,126 Series 2016-M11, Class AL........................................ 2.94% 07/25/39 505,966
514,496 Series 2016-M11, Class X2, IO (e)................................ 2.73% 07/25/39 16,052
1,125,037 Series 2017-M5, Class A1......................................... 2.74% 04/25/29 1,197,416
1,202,669 Series 2017-M14, Class A1 (f).................................... 2.88% 11/25/27 1,270,606
1,323,775 Series 2017-M15, Class A1 (f).................................... 2.96% 09/25/27 1,410,095
6,100,000 Series 2019-M29, Class X4, IO (b)................................ 0.70% 03/25/29 328,189
3,900,000 Series 2019-M32, Class X2, IO (e)................................ 1.06% 10/25/29 331,804
Freddie Mac Multifamily PC REMIC Trust
4,095,000 Series 2019-P002, Class X, IO (e)................................ 1.14% 07/25/33 459,930
Freddie Mac Multifamily Structured Pass Through Certificates
156,158 Series 2010-K007, Class X1, IO (e)............................... 0.89% 04/25/20 9
2,000,000 Series 2011-K010, Class X3, IO (e)............................... 4.62% 11/25/44 36,696
3,000,000 Series 2011-K011, Class X3, IO (e)............................... 2.57% 12/25/43 40,132
5,413,749 Series 2011-K012, Class X3, IO (e)............................... 2.25% 01/25/41 72,023
550,000 Series 2011-KAIV, Class X2, IO (e)............................... 3.61% 06/25/41 19,800
8,139,000 Series 2012-K021, Class X3, IO (e)............................... 1.97% 07/25/40 326,878
2,500,000 Series 2012-K022, Class X3, IO (e)............................... 1.81% 08/25/40 98,691
11,075,000 Series 2013-K025, Class X3, IO (e)............................... 1.75% 11/25/40 478,532
77,598,532 Series 2013-K031, Class X1, IO (e)............................... 0.21% 04/25/23 484,285
18,041,802 Series 2013-K035, Class X1, IO (e)............................... 0.38% 08/25/23 210,081
|
Page 40 See Notes to Financial Statements
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COMMERCIAL MORTGAGE-BACKED SECURITIES (CONTINUED)
Freddie Mac Multifamily Structured Pass Through Certificates
(Continued)
$ 4,000,000 Series 2013-K035, Class X3, IO (e)............................... 1.79% 12/25/41 $ 235,664
2,500,000 Series 2014-K037, Class X3, IO (e)............................... 2.21% 01/25/42 188,367
37,598,715 Series 2014-K714, Class X3, IO (e)............................... 1.82% 01/25/42 285,848
11,000,000 Series 2014-K715, Class X3, IO (e)............................... 2.01% 02/25/41 236,004
30,235,000 Series 2014-K716, Class X3, IO (e)............................... 1.80% 08/25/42 724,428
9,631,846 Series 2015-K042, Class X1, IO (e)............................... 1.05% 12/25/24 419,007
14,519,447 Series 2015-K044, Class X1, IO (e)............................... 0.74% 01/25/25 434,107
8,740,952 Series 2015-K045, Class X1, IO (e)............................... 0.45% 01/25/25 167,248
1,195,428 Series 2015-K719, Class X1, IO (e) (g)........................... 0.41% 06/25/22 1,474
1,402,173 Series 2015-K720, Class X1, IO (e)............................... 0.52% 08/25/22 13,353
3,527,726 Series 2016-K054, Class X1, IO (e)............................... 1.17% 01/25/26 214,979
3,894,820 Series 2016-K056, Class X1, IO (e)............................... 1.26% 05/25/26 261,835
11,351,383 Series 2016-K057, Class X1, IO (e)............................... 1.19% 07/25/26 738,850
1,900,000 Series 2016-K060, Class X3, IO (e)............................... 1.89% 12/25/44 215,593
5,145,622 Series 2016-KIR1, Class X, IO (e)................................ 1.07% 03/25/26 288,744
403,398 Series 2016-KJ03, Class A1....................................... 1.67% 01/25/21 403,936
10,076,029 Series 2016-KS05, Class X, IO (e)................................ 0.76% 01/25/23 154,380
3,783,094 Series 2016-KS06, Class X, IO (e)................................ 1.07% 08/25/26 197,272
5,000,000 Series 2016-KS07, Class X, IO (e)................................ 0.65% 09/25/25 167,531
6,949,962 Series 2016-KW01, Class X1, IO (e)............................... 0.97% 01/25/26 323,330
12,718,517 Series 2017-K726, Class X1, IO (e)............................... 0.88% 04/25/24 394,130
2,230,000 Series 2017-K728, Class X3, IO (e)............................... 1.95% 11/25/45 178,830
311,330 Series 2017-Q004, Class A2H (b).................................. 2.94% 01/25/46 313,804
694,464 Series 2017-Q006, Class APT1 (b)................................. 2.66% 07/25/26 722,728
118,233 Series 2018-K155, Class A1....................................... 3.75% 11/25/29 131,790
125,000 Series 2018-K155, Class A3....................................... 3.75% 04/25/33 149,742
1,097,801 Series 2018-KJ21, Class A1....................................... 3.11% 06/25/25 1,172,128
423,472 Series 2018-Q007, Class APT1 (f)................................. 2.98% 10/25/47 435,484
125,000 Series 2018-W5FX, Class AFX (e).................................. 3.34% 04/25/28 139,087
2,330,000 Series 2019-K093, Class XAM, IO (e).............................. 1.19% 05/25/29 235,470
1,365,000 Series 2019-KC04, Class X1, IO (e)............................... 1.25% 12/25/26 90,003
7,197,748 Series 2019-KC05, Class X1, IO (e)............................... 1.20% 06/25/27 481,616
15,500,000 Series 2019-KC07, Class X1, IO (e)............................... 0.85% 09/25/26 595,631
4,696,529 Series 2019-K734, Class X1, IO (e)............................... 0.65% 02/25/26 161,149
9,298,956 Series 2019-K736, Class X1, IO (e)............................... 1.31% 07/25/26 668,702
2,900,000 Series 2019-K736, Class XAM, IO (e).............................. 1.71% 07/25/26 286,477
1,121,346 Series 2019-KJ24, Class A1....................................... 2.28% 05/25/26 1,168,735
484,067 Series 2019-KJ25, Class A1....................................... 2.15% 11/25/24 500,228
1,253,841 Series 2019-KJ26, Class A1....................................... 2.14% 07/25/25 1,283,122
1,800,000 Series 2019-KS11, Class XFX, IO (e).............................. 1.60% 06/25/29 220,135
1,486,095 Series 2019-Q010, Class APT1 (e)................................. 2.88% 04/25/46 1,506,612
432,487 Series 2019-Q010, Class APT2 (e)................................. 2.99% 12/25/47 445,282
4,649,385 Series 2020-K737, Class X1, IO (f)............................... 0.64% 10/25/26 176,999
2,750,000 Series 2020-K737, Class XAM, IO (f).............................. 1.00% 10/25/26 175,486
1,960,000 Series 2020-KHG2, Class X, IO (e) (h)............................ 0.41% 02/25/30 52,651
1,500,000 Series 2020-KJ28, Class A1....................................... 1.77% 02/25/25 1,523,472
FRESB Mortgage Trust
57,718 Series 2016-SB24, Class A5H, 1 Mo. LIBOR (x) 0 + 2.00% (b)....... 2.00% 10/25/36 58,043
|
See Notes to Financial Statements Page 41
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COMMERCIAL MORTGAGE-BACKED SECURITIES (CONTINUED)
Government National Mortgage Association
$ 362,595 Series 2009-80, Class C (f)...................................... 5.04% 04/16/50 $ 375,992
768,506 Series 2013-125, Class IO, IO (f)................................ 0.67% 10/16/54 22,086
3,232,773 Series 2014-125, Class IO, IO (f)................................ 0.96% 11/16/54 187,088
--------------
28,856,353
--------------
PASS-THROUGH SECURITIES -- 10.2%
Federal Home Loan Mortgage Corporation
442,800 Pool WA3208...................................................... 3.98% 04/01/34 521,592
296,114 Pool WA3303...................................................... 3.83% 05/01/35 343,788
580,556 Pool WN0006...................................................... 3.42% 07/01/30 654,987
Federal National Mortgage Association
88,816 Pool 466551...................................................... 3.75% 07/01/21 90,785
125,000 Pool 466893...................................................... 4.05% 01/01/21 126,136
490,607 Pool AM2974...................................................... 4.10% 04/01/43 557,250
1,056,830 Pool AM4865...................................................... 4.24% 12/01/29 1,245,520
678,211 Pool AM8745...................................................... 2.81% 05/01/27 731,508
295,000 Pool AM9440...................................................... 3.05% 07/01/27 323,966
353,826 Pool AM9830...................................................... 3.19% 09/01/27 390,253
747,473 Pool AM9897...................................................... 3.50% 09/01/35 860,994
53,224 Pool AN0026...................................................... 3.48% 11/01/35 61,527
44,323 Pool AN0976...................................................... 3.26% 02/01/28 49,450
865,729 Pool AN5096...................................................... 3.32% 04/01/32 975,543
1,050,000 Pool AN5942...................................................... 3.10% 07/01/32 1,191,892
625,000 Pool AN9164...................................................... 3.55% 05/01/30 720,908
100,000 Pool AN9297...................................................... 3.69% 05/01/30 116,752
1,025,000 Pool AN9447...................................................... 3.78% 07/01/33 1,240,040
900,000 Pool AN9502...................................................... 3.96% 06/01/33 1,106,312
500,000 Pool AN9540...................................................... 3.75% 06/01/33 603,609
860,000 Pool AN9706...................................................... 3.76% 07/01/33 1,037,448
612,854 Pool AN9756...................................................... 3.94% 07/01/33 739,319
335,000 Pool BL0004...................................................... 3.50% 09/01/28 377,112
350,000 Pool BL0242...................................................... 3.82% 11/01/30 413,864
130,000 Pool BL0530...................................................... 4.03% 11/01/33 157,253
100,000 Pool BL0640...................................................... 4.10% 11/01/33 124,592
600,000 Pool BL0651...................................................... 3.95% 06/01/29 703,273
1,141,871 Pool BL0661...................................................... 3.99% 11/01/33 1,384,060
855,000 Pool BL0878...................................................... 3.94% 06/01/29 1,001,432
1,000,000 Pool BL0900...................................................... 4.08% 02/01/34 1,250,719
450,000 Pool BL1052...................................................... 3.95% 12/01/28 523,581
495,000 Pool BL1132...................................................... 3.73% 01/01/29 572,698
140,000 Pool BL1163...................................................... 4.17% 01/01/34 173,166
450,000 Pool BL1301...................................................... 3.69% 01/01/29 519,147
670,000 Pool BL1414...................................................... 3.96% 01/01/34 825,191
493,304 Pool BL1416...................................................... 3.86% 01/01/29 568,216
200,000 Pool BL1452...................................................... 3.90% 01/01/34 243,891
1,350,000 Pool BL1857...................................................... 3.53% 04/01/29 1,538,579
326,000 Pool BL1882...................................................... 3.60% 03/01/34 390,084
--------------
24,456,437
--------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES........................................ 55,951,318
(Cost $52,804,576) --------------
|
Page 42 See Notes to Financial Statements
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
MORTGAGE-BACKED SECURITIES -- 10.7%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 10.4%
Adjustable Rate Mortgage Trust
$ 142,672 Series 2005-8, Class 3A21 (e).................................... 4.14% 11/25/35 $ 130,292
Alternative Loan Trust
339,077 Series 2005-16, Class A3, 1 Mo. LIBOR + 0.50% (b)................ 2.13% 06/25/35 327,592
113,240 Series 2005-76, Class 1A1, 12 Mo. Treasury Average +
1.48% (b)..................................................... 3.53% 01/25/36 114,317
381,812 Series 2006-33CB, Class 2A1...................................... 6.00% 11/25/36 319,452
351,539 Series 2007-OA6, Class A1B, 1 Mo. LIBOR + 0.20% (b).............. 1.83% 06/25/37 338,181
American Home Mortgage Assets Trust
961,610 Series 2007-1, Class A1, 12 Mo. Treasury Average + 0.70% (b)..... 2.75% 02/25/47 579,837
American Home Mortgage Investment Trust
848,731 Series 2005-4, Class 1A1, 1 Mo. LIBOR + 0.58% (b)................ 2.21% 11/25/45 836,730
BCAP LLC Trust
429,207 Series 2007-AA3, Class 1A1A, 1 Mo. LIBOR + 0.21% (b)............. 1.84% 04/25/37 425,419
1,000,000 Series 2015-RR2, Class 25A3 (a) (e).............................. 2.48% 10/28/36 971,795
Bear Stearns ALT-A Trust
969,935 Series 2004-8, Class M1, 1 Mo. LIBOR + 0.92% (b)................. 2.54% 09/25/34 986,070
Bear Stearns Mortgage Funding Trust
1,125,325 Series 2006-AR1, Class 1A1, 1 Mo. LIBOR + 0.21% (b).............. 1.84% 07/25/36 1,091,933
617,489 Series 2006-AR3, Class 1A1, 1 Mo. LIBOR + 0.18% (b).............. 1.81% 10/25/36 595,998
363,034 Series 2007-AR1, Class 1A1, 1 Mo. LIBOR + 0.16% (b).............. 1.79% 01/25/37 343,457
292,839 Series 2007-AR3, Class 1A1, 1 Mo. LIBOR + 0.14% (b).............. 1.77% 03/25/37 279,634
CIM Trust
290,765 Series 2017-7, Class A (a)....................................... 3.00% 04/25/57 296,067
240,353 Series 2017-8, Class A1 (a)...................................... 3.00% 12/25/65 243,449
304,559 Series 2018-R6, Class A1, 1 Mo. LIBOR + 1.08% (a) (b)............ 2.73% 09/25/58 303,584
Credit Suisse Mortgage Trust
345,840 Series 2010-7R, Class 1A12 (a)................................... 4.00% 01/26/37 351,825
98,669 Series 2014-2R, Class 28A1 (a) (e)............................... 3.00% 06/27/37 100,010
DSLA Mortgage Loan Trust
89,372 Series 2004-AR4, Class 2A1A, 1 Mo. LIBOR + 0.36% (b)............. 2.01% 01/19/45 81,240
First Horizon Alternative Mortgage Securities Trust
66,999 Series 2004-AA4, Class A1 (e).................................... 3.91% 10/25/34 67,599
GreenPoint Mortgage Funding Trust
101,886 Series 2006-AR1, Class A1A, 1 Mo. LIBOR + 0.58% (b).............. 2.21% 02/25/36 100,253
585,023 Series 2007-AR1, Class 2A1A, 1 Mo. LIBOR + 0.20% (b)............. 1.83% 03/25/47 578,097
GreenPoint MTA Trust
576,167 Series 2005-AR3, Class 1A1, 1 Mo. LIBOR + 0.24% (b).............. 1.87% 08/25/45 563,848
HarborView Mortgage Loan Trust
245,186 Series 2005-9, Class 2A1A, 1 Mo. LIBOR + 0.34% (b)............... 1.99% 06/20/35 243,983
98,074 Series 2005-9, Class 2A1C, 1 Mo. LIBOR + 0.45% (b)............... 2.10% 06/20/35 98,160
777,581 Series 2007-7, Class 1A1, 1 Mo. LIBOR + 1.00% (b)................ 2.63% 10/25/37 749,436
HomeBanc Mortgage Trust
355,072 Series 2005-4, Class A1, 1 Mo. LIBOR + 0.27% (b)................. 1.90% 10/25/35 361,267
Impac CMB Trust
101,003 Series 2005-1, Class 1A1, 1 Mo. LIBOR + 0.52% (b)................ 2.15% 04/25/35 100,687
IndyMac INDX Mortgage Loan Trust
534,746 Series 2005-16IP, Class A1, 1 Mo. LIBOR + 0.64% (b).............. 2.27% 07/25/45 506,674
763,635 Series 2006-AR4, Class A1A, 1 Mo. LIBOR + 0.21% (b).............. 1.84% 05/25/46 756,122
318,505 Series 2006-AR21, Class A1, 1 Mo. LIBOR + 0.12% (b).............. 1.75% 08/25/36 293,740
|
See Notes to Financial Statements Page 43
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
IndyMac INDX Mortgage Loan Trust (Continued)
$ 201,175 Series 2007-FLX2, Class A1C, 1 Mo. LIBOR + 0.19% (b)............. 1.82% 04/25/37 $ 192,269
JP Morgan Alternative Loan Trust
111,463 Series 2007-S1, Class A2, 1 Mo. LIBOR + 0.34% (b)................ 1.97% 04/25/47 107,171
Lehman XS Trust
430,146 Series 2005-5N, Class 3A1A, 1 Mo. LIBOR + 0.30% (b).............. 1.93% 11/25/35 425,133
MASTR Adjustable Rate Mortgages Trust
597,857 Series 2007-2, Class A1, 1 Mo. LIBOR + 0.15% (b)................. 1.78% 03/25/47 576,068
Merrill Lynch Mortgage Investors Trust
238,434 Series 2003-D, Class A, 1 Mo. LIBOR + 0.62% (b).................. 2.25% 08/25/28 238,359
403,984 Series 2004-E, Class A2B, 6 Mo. LIBOR + 0.72% (b)................ 2.78% 11/25/29 410,390
Morgan Stanley Resecuritization Trust
93,768 Series 2014-R8, Class 3B1, 12 Mo. Treasury Average +
0.75% (a) (b)................................................. 2.64% 06/26/47 93,716
Opteum Mortgage Acceptance Corp. Trust
752,553 Series 2006-1, Class 1AC1, 1 Mo. LIBOR + 0.30% (b)............... 1.93% 04/25/36 724,871
Structured Adjustable Rate Mortgage Loan Trust
63,868 Series 2005-12, Class 3A1 (e).................................... 4.02% 06/25/35 64,764
673,329 Series 2006-11, Class 1A1, 1 Mo. LIBOR + 0.16% (b)............... 1.79% 12/25/36 663,777
906,837 Series 2007-4, Class 1A2, 1 Mo. LIBOR + 0.22% (b)................ 1.85% 05/25/37 886,696
Structured Asset Mortgage Investments II Trust
446,614 Series 2005-AR2, Class 2A1, 1 Mo. LIBOR + 0.46% (b).............. 2.09% 05/25/45 448,514
616,738 Series 2006-AR1, Class 3A1, 1 Mo. LIBOR + 0.23% (b).............. 1.86% 02/25/36 578,590
587,831 Series 2006-AR3, Class 12A1, 1 Mo. LIBOR + 0.22% (b)............. 1.85% 05/25/36 579,330
652,947 Series 2006-AR4, Class 3A1, 1 Mo. LIBOR + 0.19% (b).............. 1.82% 06/25/36 641,631
78,922 Series 2006-AR5, Class 1A1, 1 Mo. LIBOR + 0.21% (b).............. 1.84% 05/25/36 72,950
1,101,828 Series 2006-AR8, Class A1A, 1 Mo. LIBOR + 0.20% (b).............. 1.83% 10/25/36 1,060,631
829,263 Series 2007-AR1, Class 1A1, 1 Mo. LIBOR + 0.16% (b).............. 1.79% 01/25/37 790,663
327,292 Series 2007-AR1, Class 2A1, 1 Mo. LIBOR + 0.18% (b).............. 1.81% 01/25/37 311,042
Structured Asset Mortgage Investments Trust
214,358 Series 2003-AR3, Class A1, 1 Mo. LIBOR + 0.68% (b)............... 2.33% 11/19/33 212,731
WaMu Mortgage Pass-Through Certificates Trust
207,170 Series 2004-AR12, Class A2A, 1 Mo. LIBOR + 0.78% (b)............. 2.41% 10/25/44 207,817
68,661 Series 2005-AR8, Class 2A1A, 1 Mo. LIBOR + 0.58% (b)............. 2.21% 07/25/45 68,310
81,329 Series 2005-AR11, Class A1A, 1 Mo. LIBOR + 0.32% (b)............. 1.95% 08/25/45 81,343
221,282 Series 2005-AR15, Class A1A1, 1 Mo. LIBOR + 0.26% (b)............ 1.89% 11/25/45 217,437
515,672 Series 2006-AR3, Class A1A, 12 Mo. Treasury Average +
1.00% (b)..................................................... 3.05% 02/25/46 529,597
75,992 Series 2006-AR11, Class 1A, 12 Mo. Treasury Average +
0.96% (b)..................................................... 3.01% 09/25/46 70,819
1,176,221 Series 2007-OA5, Class 1A, 12 Mo. Treasury Average +
0.75% (b)..................................................... 2.80% 06/25/47 1,134,985
Wells Fargo Mortgage Backed Securities Trust
449,463 Series 2007-AR5, Class A1 (e).................................... 4.56% 10/25/37 432,410
--------------
24,958,762
--------------
COMMERCIAL MORTGAGE-BACKED OBLIGATIONS -- 0.3%
BAMLL Commercial Mortgage Securities Trust
355,000 Series 2020-BOC, Class A (a)..................................... 2.63% 01/15/32 376,133
Benchmark Mortgage Trust
1,680,000 Series 2020-IG1, Class XA, IO (e)................................ 0.51% 03/15/53 74,381
|
Page 44 See Notes to Financial Statements
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
MORTGAGE-BACKED SECURITIES (CONTINUED)
COMMERCIAL MORTGAGE-BACKED OBLIGATIONS (CONTINUED)
COMM Mortgage Trust
$ 1,559,660 Series 2012-CR4, Class XA, IO (e)................................ 1.70% 10/15/45 $ 53,500
5,600,000 Series 2020-CBM, Class XCP, IO (a) (e)........................... 0.49% 02/10/37 131,110
GS Mortgage Securities Corp Trust
2,600,000 Series 2020-UPTN, Class XA, IO (a) (e)........................... 0.35% 02/10/37 45,311
--------------
680,435
--------------
TOTAL MORTGAGE-BACKED SECURITIES............................................................... 25,639,197
(Cost $25,183,736) --------------
ASSET-BACKED SECURITIES -- 8.8%
321 Henderson Receivables LLC
337,832 Series 2013-2A, Class A (a)...................................... 4.21% 03/15/62 382,813
ABFC Trust
109,505 Series 2007-NC1, Class A2, 1 Mo. LIBOR + 0.30% (a) (b)........... 1.93% 05/25/37 107,817
ACE Securities Corp. Home Equity Loan Trust
1,089,898 Series 2006-HE3, Class A2C, 1 Mo. LIBOR + 0.15% (b).............. 1.78% 06/25/36 888,368
Argent Securities, Inc.
160,000 Series 2005-W3, Class M1, 1 Mo. LIBOR + 0.44% (b)................ 2.07% 11/25/35 158,937
BCMSC Trust
2,369,065 Series 2000-A, Class A5.......................................... 8.32% 06/15/30 920,583
Carrington Mortgage Loan Trust
69,645 Series 2005-NC5, Class M1, 1 Mo. LIBOR + 0.48% (b)............... 2.11% 10/25/35 69,934
Citigroup Mortgage Loan Trust
1,274,469 Series 2006-HE3, Class A2B, 1 Mo. LIBOR + 0.10% (b).............. 1.76% 12/25/36 1,006,253
Citigroup Mortgage Loan Trust, Inc.
31,672 Series 2005-HE4, Class M1, 1 Mo. LIBOR + 0.41% (b)............... 2.04% 10/25/35 32,083
15,226 Series 2007-WFH2, Class A4, 1 Mo. LIBOR + 0.35% (b).............. 1.98% 03/25/37 15,262
425,000 Series 2007-WFH3, Class M1, 1 Mo. LIBOR + 0.26% (b).............. 1.89% 06/25/37 414,416
Conseco Finance Corp.
56,925 Series 1996-7, Class M1.......................................... 7.70% 09/15/26 59,897
1,638,494 Series 1999-3, Class A8.......................................... 7.06% 02/01/31 1,632,566
Countrywide Asset-Backed Certificates
226,971 Series 2006-6, Class 1A1, 1 Mo. LIBOR + 0.17% (b)................ 1.80% 09/25/36 224,871
Credit-Based Asset Servicing & Securitization LLC
957,000 Series 2006-MH1, Class B1 (a) (i)................................ 6.25% 10/25/36 1,014,238
EquiFirst Mortgage Loan Trust
130,300 Series 2005-1, Class M3, 1 Mo. LIBOR + 0.72% (b)................. 2.35% 04/25/35 130,580
First Franklin Mortgage Loan Trust
136,692 Series 2006-FF11, Class 2A3, 1 Mo. LIBOR + 0.15% (b)............. 1.78% 08/25/36 122,038
Fremont Home Loan Trust
23,461 Series 2005-A, Class M3, 1 Mo. LIBOR + 0.74% (b)................. 2.36% 01/25/35 23,451
86,067 Series 2005-D, Class 2A4, 1 Mo. LIBOR + 0.34% (b)................ 1.97% 11/25/35 86,418
GSAMP Trust
1,300,000 Series 2006-HE4, Class A2D, 1 Mo. LIBOR + 0.26% (b).............. 1.89% 06/25/36 1,267,930
JP Morgan Mortgage Acquisition Trust
727,374 Series 2006-WF1, Class A5, steps up to 6.91% after Redemption
Date (j)...................................................... 6.41% 07/25/36 356,844
Mastr Asset Backed Securities Trust
156,541 Series 2006-HE5, Class A3, 1 Mo. LIBOR + 0.16% (b)............... 1.79% 11/25/36 114,942
|
See Notes to Financial Statements Page 45
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
ASSET-BACKED SECURITIES (CONTINUED)
Mid-State Capital Trust
$ 25,761 Series 2010-1, Class A (a)....................................... 3.50% 12/15/45 $ 26,536
Morgan Stanley ABS Capital I, Inc. Trust
2,313,313 Series 2006-HE8, Class A2B, 1 Mo. LIBOR + 0.10% (b).............. 1.73% 10/25/36 1,435,722
Navient Student Loan Trust
33,192 Series 2014-1, Class A3, 1 Mo. LIBOR + 0.51% (b)................. 2.14% 06/25/31 32,693
New Century Home Equity Loan Trust
700,000 Series 2005-3, Class M4, 1 Mo. LIBOR + 0.96% (b)................. 2.59% 07/25/35 701,036
NovaStar Mortgage Funding Trust
1,149,490 Series 2007-2, Class A1A, 1 Mo. LIBOR + 0.20% (b)................ 1.83% 09/25/37 1,125,261
Residential Asset Mortgage Product, Inc.
160,000 Series 2005-RZ3, Class M3, 1 Mo. LIBOR + 0.55% (b)............... 2.18% 09/25/35 160,452
900,000 Series 2006-RZ1, Class M3, 1 Mo. LIBOR + 0.45% (b)............... 2.08% 03/25/36 902,398
Residential Asset Securities Corp.
150,000 Series 2005-KS11, Class M2, 1 Mo. LIBOR + 0.42% (b).............. 2.05% 12/25/35 150,523
150,000 Series 2006-KS3, Class M1, 1 Mo. LIBOR + 0.33% (b)............... 1.96% 04/25/36 148,653
SLM Student Loan Trust
905,000 Series 2007-7, Class B, 3 Mo. LIBOR + 0.75% (b).................. 2.54% 10/27/70 838,470
300,000 Series 2008-2, Class B, 3 Mo. LIBOR + 1.20% (b).................. 2.99% 01/25/83 275,946
300,000 Series 2008-3, Class B, 3 Mo. LIBOR + 1.20% (b).................. 2.99% 04/26/83 278,543
650,000 Series 2008-5, Class B, 3 Mo. LIBOR + 1.85% (b).................. 3.64% 07/25/73 645,311
300,000 Series 2008-6, Class B, 3 Mo. LIBOR + 1.85% (b).................. 3.64% 07/26/83 293,635
220,000 Series 2008-8, Class B, 3 Mo. LIBOR + 2.25% (b).................. 4.04% 10/25/75 218,427
800,000 Series 2008-9, Class B, 3 Mo. LIBOR + 2.25% (b).................. 4.04% 10/25/83 802,994
100,000 Series 2012-7, Class B, 1 Mo. LIBOR + 1.80% (b).................. 3.43% 09/25/43 99,655
Soundview Home Loan Trust
680,000 Series 2005-OPT3, Class M1, 1 Mo. LIBOR + 0.47% (b).............. 2.10% 11/25/35 673,873
135,055 Series 2007-OPT2, Class 2A4, 1 Mo. LIBOR + 0.25% (b)............. 1.88% 07/25/37 123,456
Structured Receivables Finance LLC
152,433 Series 2010-B, Class A (a)....................................... 3.73% 08/15/36 156,191
United States Small Business Administration
737,575 Series 2007-20A, Class 1......................................... 5.32% 01/01/27 796,176
897,889 Series 2008-20F, Class 1......................................... 5.68% 06/01/28 994,565
1,058,297 Series 2008-20H, Class 1......................................... 6.02% 08/01/28 1,172,612
--------------
TOTAL ASSET-BACKED SECURITIES.................................................................. 21,083,369
(Cost $21,616,109) --------------
|
PRINCIPAL
VALUE
(LOCAL STATED STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (U.S. DOLLAR)
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
FOREIGN CORPORATE BONDS AND NOTES -- 7.0%
BANKS -- 0.9%
200,000 Global Bank Corp. (USD) (c) (k)..................................... 5.25% 04/16/29 218,750
125,000 Lloyds Bank PLC (USD)............................................... 3.30% 05/07/21 127,682
665,000 Lloyds Banking Group PLC (USD) (c).................................. 2.91% 11/07/23 680,798
200,000 Lloyds Banking Group PLC (USD)...................................... 3.90% 03/12/24 215,093
250,000 Santander UK Group Holdings PLC (USD) (c)........................... 4.80% 11/15/24 272,587
650,000 Santander UK PLC (USD).............................................. 3.40% 06/01/21 666,707
--------------
2,181,617
--------------
|
Page 46 See Notes to Financial Statements
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL
VALUE
(LOCAL STATED STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (U.S. DOLLAR)
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
FOREIGN CORPORATE BONDS AND NOTES (CONTINUED)
BEVERAGES -- 0.2%
170,000 Bacardi Ltd. (USD) (a).............................................. 4.70% 05/15/28 $ 194,825
15,000 Bacardi Ltd. (USD) (a).............................................. 5.30% 05/15/48 19,371
125,000 Pernod Ricard S.A. (USD) (a)........................................ 4.45% 01/15/22 131,711
--------------
345,907
--------------
COMMERCIAL SERVICES -- 0.4%
200,000 DP World Crescent Ltd. (USD) (a).................................... 4.85% 09/26/28 216,854
250,000 IHS Markit Ltd. (USD) (a)........................................... 4.75% 02/15/25 277,792
465,000 IHS Markit Ltd. (USD)............................................... 4.75% 08/01/28 543,010
--------------
1,037,656
--------------
DIVERSIFIED FINANCIAL SERVICES -- 1.6%
600,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust
(USD)......................................................... 4.50% 05/15/21 619,957
20,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust
(USD)......................................................... 3.95% 02/01/22 20,733
55,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust
(USD)......................................................... 4.13% 07/03/23 58,550
74,000 Avolon Holdings Funding Ltd. (USD) (a).............................. 5.13% 10/01/23 79,378
20,000 Avolon Holdings Funding Ltd. (USD) (a).............................. 5.25% 05/15/24 21,818
100,000 Avolon Holdings Funding Ltd. (USD) (a).............................. 3.95% 07/01/24 103,776
185,000 Avolon Holdings Funding Ltd. (USD) (a).............................. 2.88% 02/15/25 185,102
1,065,000 GE Capital International Funding Co. Unlimited Co. (USD)............ 2.34% 11/15/20 1,068,022
785,000 GE Capital International Funding Co. Unlimited Co. (USD)............ 4.42% 11/15/35 898,541
250,000 Park Aerospace Holdings Ltd. (USD) (a).............................. 3.63% 03/15/21 252,340
135,000 Park Aerospace Holdings Ltd. (USD) (a).............................. 5.25% 08/15/22 143,750
90,000 Park Aerospace Holdings Ltd. (USD) (a).............................. 4.50% 03/15/23 94,180
255,000 Park Aerospace Holdings Ltd. (USD) (a).............................. 5.50% 02/15/24 280,657
--------------
3,826,804
--------------
ELECTRIC -- 0.1%
250,000 Mong Duong Finance Holdings B.V. (USD) (k).......................... 5.13% 05/07/29 263,065
--------------
ENVIRONMENTAL CONTROL -- 0.1%
114,000 GFL Environmental, Inc. (USD) (a)................................... 5.13% 12/15/26 118,275
--------------
INTERNET -- 0.1%
300,000 Tencent Holdings Ltd. (USD) (a)..................................... 3.98% 04/11/29 340,853
--------------
MACHINERY-DIVERSIFIED -- 0.0%
110,000 Titan Acquisition Ltd. / Titan Co.-Borrower LLC (USD) (a)........... 7.75% 04/15/26 105,070
--------------
MEDIA -- 0.1%
200,000 Virgin Media Secured Finance PLC (USD) (a).......................... 5.50% 08/15/26 206,278
--------------
MINING -- 0.3%
250,000 Corp. Nacional del Cobre de Chile (USD) (k)......................... 3.63% 08/01/27 268,456
300,000 Indonesia Asahan Aluminium Persero PT (USD) (a)..................... 6.53% 11/15/28 371,032
--------------
639,488
--------------
MISCELLANEOUS MANUFACTURING -- 0.0%
40,000 Ingersoll-Rand Luxembourg Finance S.A. (USD)........................ 3.55% 11/01/24 43,236
--------------
OIL & GAS -- 1.0%
440,000 KazMunayGas National Co. JSC (USD) (k).............................. 5.38% 04/24/30 513,001
75,000 Petrobras Global Finance B.V. (USD) (a)............................. 5.09% 01/15/30 80,344
|
See Notes to Financial Statements Page 47
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL
VALUE
(LOCAL STATED STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (U.S. DOLLAR)
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
FOREIGN CORPORATE BONDS AND NOTES (CONTINUED)
OIL & GAS (CONTINUED)
200,000 Petroleos del Peru S.A. (USD) (k)................................... 4.75% 06/19/32 $ 224,430
370,000 Petroleos Mexicanos (USD)........................................... 6.63% 06/15/35 371,456
325,000 Petroleos Mexicanos (USD)........................................... 6.75% 09/21/47 311,257
419,000 Petroleos Mexicanos (USD) (a)....................................... 7.69% 01/23/50 437,920
111,890 Transocean Pontus Ltd. (USD) (a).................................... 6.13% 08/01/25 113,288
293,000 Transocean Poseidon Ltd. (USD) (a).................................. 6.88% 02/01/27 298,134
--------------
2,349,830
--------------
PACKAGING & CONTAINERS -- 0.0%
18,000 OI European Group B.V. (USD) (a).................................... 4.00% 03/15/23 18,255
--------------
PHARMACEUTICALS -- 0.3%
390,000 Allergan Funding SCS (USD).......................................... 4.55% 03/15/35 467,091
6,000 Bausch Health Cos., Inc. (USD) (a).................................. 5.75% 08/15/27 6,393
225,000 Shire Acquisitions Investments Ireland DAC (USD).................... 2.40% 09/23/21 228,056
--------------
701,540
--------------
PIPELINES -- 0.2%
200,000 Peru LNG SRL (USD) (k).............................................. 5.38% 03/22/30 170,570
200,000 Southern Gas Corridor CJSC (USD) (k)................................ 6.88% 03/24/26 239,202
--------------
409,772
--------------
RETAIL -- 0.2%
510,000 Alimentation Couche-Tard, Inc. (USD) (a)............................ 3.55% 07/26/27 552,968
--------------
SAVINGS & LOANS -- 0.5%
630,000 Nationwide Building Society (USD) (a) (c)........................... 3.62% 04/26/23 655,157
135,000 Nationwide Building Society (USD) (a) (c)........................... 3.77% 03/08/24 141,420
325,000 Nationwide Building Society (USD) (a) (c)........................... 4.36% 08/01/24 349,216
--------------
1,145,793
--------------
SEMICONDUCTORS -- 0.2%
500,000 NXP B.V. / NXP Funding LLC (USD) (a)................................ 4.13% 06/01/21 514,147
--------------
TELECOMMUNICATIONS -- 0.8%
200,000 C&W Senior Financing DAC (USD) (a).................................. 6.88% 09/15/27 211,465
625,000 Intelsat Jackson Holdings S.A. (USD) (a)............................ 8.50% 10/15/24 540,884
18,000 Intelsat Jackson Holdings S.A. (USD) (a)............................ 9.75% 07/15/25 15,911
125,000 Koninklijke KPN N.V. (USD).......................................... 8.38% 10/01/30 175,473
200,000 SES S.A. (USD) (a).................................................. 3.60% 04/04/23 208,546
100,000 Vodafone Group PLC (USD)............................................ 3.75% 01/16/24 107,584
250,000 Vodafone Group PLC (USD)............................................ 5.25% 05/30/48 315,626
228,000 Vodafone Group PLC (USD)............................................ 4.88% 06/19/49 274,575
80,000 Vodafone Group PLC (USD)............................................ 4.25% 09/17/50 88,435
--------------
1,938,499
--------------
TOTAL FOREIGN CORPORATE BONDS AND NOTES........................................................ 16,739,053
(Cost $15,670,095) --------------
FOREIGN SOVEREIGN BONDS AND NOTES -- 1.5%
BAHRAIN -- 0.1%
200,000 Bahrain Government International Bond (USD) (k)..................... 7.00% 10/12/28 231,912
--------------
BRAZIL -- 0.1%
250,000 Brazilian Government International Bond (USD)....................... 4.63% 01/13/28 275,128
--------------
|
Page 48 See Notes to Financial Statements
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL
VALUE
(LOCAL STATED STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (U.S. DOLLAR)
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
FOREIGN SOVEREIGN BONDS AND NOTES (CONTINUED)
COLOMBIA -- 0.2%
400,000 Colombia Government International Bond (USD)........................ 3.88% 04/25/27 $ 430,939
--------------
DOMINICAN REPUBLIC -- 0.1%
200,000 Dominican Republic International Bond (USD) (k)..................... 6.00% 07/19/28 221,571
--------------
EGYPT -- 0.1%
200,000 Egypt Government International Bond (USD) (a)....................... 5.58% 02/21/23 207,484
--------------
INDONESIA -- 0.1%
200,000 Perusahaan Penerbit SBSN Indonesia III (USD) (k).................... 4.15% 03/29/27 220,150
--------------
MEXICO -- 0.1%
200,000 Mexico Government International Bond (USD).......................... 3.25% 04/16/30 205,750
--------------
OMAN -- 0.1%
200,000 Oman Government International Bond (USD) (a)........................ 5.63% 01/17/28 200,034
--------------
QATAR -- 0.2%
400,000 Qatar Government International Bond (USD) (k)....................... 4.50% 04/23/28 464,000
--------------
RUSSIA -- 0.1%
200,000 Russian Foreign Bond - Eurobond (USD) (k)........................... 4.75% 05/27/26 225,261
--------------
SAUDI ARABIA -- 0.1%
400,000 Saudi Government International Bond (USD) (k)....................... 3.63% 03/04/28 429,652
--------------
SOUTH AFRICA -- 0.1%
250,000 Republic of South Africa Government International Bond (USD)........ 4.88% 04/14/26 261,700
--------------
URUGUAY -- 0.1%
200,000 Uruguay Government International Bond (USD)......................... 4.38% 01/23/31 230,252
--------------
TOTAL FOREIGN SOVEREIGN BONDS AND NOTES........................................................ 3,603,833
(Cost $3,357,408) --------------
|
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
MUNICIPAL BONDS -- 0.8%
CALIFORNIA -- 0.8%
$ 500,000 Los Angeles CA Unified School District.............................. 5.75% 07/01/34 685,135
500,000 Los Angeles Department of Water..................................... 6.01% 07/01/39 694,895
510,000 Regents of the University of California Medical Center Pooled
Revenue.......................................................... 3.26% 05/15/60 523,459
75,000 Univ of CA Rev TXBL Gen Ref, Ser AJ................................. 4.60% 05/15/31 90,826
--------------
TOTAL MUNICIPAL BONDS.......................................................................... 1,994,315
(Cost $1,846,402) --------------
|
ANNUALIZED
PRINCIPAL STATED YIELD ON DATE
VALUE DESCRIPTION COUPON OF PURCHASE VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
COMMERCIAL PAPER -- 0.3%
AUTO MANUFACTURERS -- 0.3%
310,000 Ford Motor Credit Co. LLC........................................... 3.25% 10/08/20 305,412
295,000 Ford Motor Credit Co. LLC........................................... 2.88% 01/08/21 288,348
--------------
TOTAL COMMERCIAL PAPER......................................................................... 593,760
(Cost $591,846) --------------
|
See Notes to Financial Statements Page 49
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
U.S. GOVERNMENT BONDS AND NOTES -- 0.1%
$ 275,000 Federal Home Loan Banks............................................. 4.05% 09/21/33 $ 278,770
--------------
TOTAL U.S. GOVERNMENT BONDS AND NOTES.......................................................... 278,770
(Cost $274,863) --------------
U.S. TREASURY BILLS -- 10.6%
1,750,000 U.S. Treasury Bill.................................................. (l) 03/17/20 1,748,932
768,000 U.S. Treasury Bill (m).............................................. (l) 03/19/20 767,485
1,935,000 U.S. Treasury Bill.................................................. (l) 04/09/20 1,932,160
6,310,000 U.S. Treasury Bill.................................................. (l) 04/14/20 6,299,616
5,475,000 U.S. Treasury Bill.................................................. (l) 04/21/20 5,464,677
4,445,000 U.S. Treasury Bill.................................................. (l) 05/14/20 4,433,416
4,800,000 U.S. Treasury Bill.................................................. (l) 07/16/20 4,778,988
--------------
TOTAL U.S. TREASURY BILLS...................................................................... 25,425,274
(Cost $25,412,571) --------------
|
SHARES DESCRIPTION VALUE
-------------- ----------------------------------------------------------------------------------------------- --------------
MONEY MARKET FUNDS -- 3.0%
7,292,609 JPMorgan 100% U.S. Treasury Securities Money Market - Fund Institutional Class - 1.41% (n)..... 7,292,609
(Cost $7,292,609) --------------
TOTAL INVESTMENTS -- 99.7%..................................................................... 239,277,382
(Cost $229,527,960) (o)
NET OTHER ASSETS AND LIABILITIES -- 0.3%....................................................... 668,721
--------------
NET ASSETS -- 100.0%........................................................................... $ 239,946,103
==============
|
FUTURES CONTRACTS AT FEBRUARY 29, 2020 (see Note 2C - Futures Contracts in the
Notes to Financial Statements):
UNREALIZED
APPRECIATION
NUMBER OF EXPIRATION NOTIONAL (DEPRECIATION)/
FUTURES CONTRACTS POSITION CONTRACTS DATE VALUE VALUE
------------------------------ ------------ --------------- -------------- ------------- --------------
U.S. 5-Year Treasury Notes Long 140 Jun-2020 $ 17,185,000 $ 283,248
U.S. 10-Year Ultra Treasury
Notes Short 238 Jun-2020 (35,752,063) (1,145,278)
Ultra U.S. Treasury Bond
Futures Short 64 Jun-2020 (13,280,000) (691,040)
------------- --------------
$ (31,847,063) $ (1,553,070)
============= ==============
|
Page 50 See Notes to Financial Statements
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
INTEREST RATE SWAP AGREEMENTS AT FEBRUARY 29, 2020 (see Note 2E - Swap
Agreements in the Notes to Financial Statements):
UNREALIZED
APPRECIATION
FLOATING EXPIRATION NOTIONAL FIXED (DEPRECIATION)/
COUNTERPARTY RATE DATE VALUE RATE VALUE
------------------------------ ----------------- --------------- -------------- ------------- --------------
Citibank, Global Markets, Inc. 3 month LIBOR(1) 1/21/2023 $ 9,900,000 1.580%(1) $ 145,171
Citibank, Global Markets, Inc. 3 month LIBOR(2) 1/21/2026 4,030,000 1.675%(2) (144,107)
Goldman Sachs and Co. 3 month LIBOR(1) 1/21/2023 7,405,000 1.573%(1) 106,158
Goldman Sachs and Co. 3 month LIBOR(2) 1/21/2026 3,010,000 1.667%(2) (105,479)
-------------- --------------
$ 24,345,000 $ 1,743
============== ==============
|
(1) The Fund pays the floating rate and receives the fixed rate. The floating
rate is not effective until 1/21/2021 and no interest is being accrued
until that date.
(2) The Fund pays the fixed rate and receives the floating rate. The floating
rate is not effective until 1/21/2021 and no interest is being accrued
until that date.
(a) This security, sold within the terms of a private placement memorandum, is
exempt from registration upon resale under Rule 144A of the Securities Act
of 1933, as amended (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 First Trust Advisors L.P.,
the Fund's advisor (the "Advisor"). Although market instability can result
in periods of increased overall market illiquidity, liquidity for each
security is determined based on security specific factors and assumptions,
which require subjective judgment. At February 29, 2020, securities noted
as such amounted to $29,074,757 or 12.1% of net assets.
(b) Floating or variable rate security.
(c) Fixed-to-floating security. At a predetermined date, the fixed rate will
change to a floating rate.
(d) Inverse floating rate security.
(e) Collateral Strip Rate security. Coupon is based on the weighted net
interest rate of the investment's underlying collateral. The interest rate
resets periodically.
(f) Weighted Average Coupon security. Coupon is based on the blended interest
rate of the underlying holdings, which may have different coupons. The
coupon may change in any period.
(g) Pursuant to procedures adopted by the Trust's Board of Trustees, this
security has been determined to be illiquid by the Advisor.
(h) This security is fair valued by the Advisor's Pricing Committee in
accordance with procedures adopted by the Trust's Board of Trustees, and
in accordance with provisions of the Investment Company Act of 1940, as
amended. At February 29, 2020, securities noted as such are valued at
$715,651 or 0.3% of net assets.
(i) Step security. The coupon rate is determined based on the underlying
investments. The coupon rate resets periodically.
(j) Step-up security. A security where the coupon increases or steps up at a
predetermined date.
(k) This security may be resold to qualified foreign investors and foreign
institutional buyers under Regulation S of the 1933 Act.
(l) Zero coupon security.
(m) All or a portion of this security is segregated as collateral for open
futures contracts.
(n) Rate shown reflects yield as of February 29, 2020.
(o) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of February 29, 2020, the
aggregate gross unrealized appreciation for all investments in which there
was an excess of value over tax cost was $11,551,110 and the aggregate
gross unrealized depreciation for all investments in which there was an
excess of tax cost over value was $3,353,015. The net unrealized
appreciation was $8,198,095. The amounts presented are inclusive of
derivative contracts.
IO - Interest-Only Security - Principal amount shown represents par value on
which interest payments are based.
LIBOR - London Interbank Offered Rates
SOFR - Secured Overnight Financing Rate
Currency Abbreviations:
USD United States Dollar
See Notes to Financial Statements Page 51
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of February 29,
2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
ASSETS TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
2/29/2020 PRICES INPUTS INPUTS
-------------- -------------- -------------- --------------
Corporate Bonds and Notes*....................... $ 80,675,884 $ -- $ 80,675,884 $ --
U.S. Government Agency Mortgage-Backed
Securities.................................... 55,951,318 -- 55,951,318 --
Mortgage-Backed Securities....................... 25,639,197 -- 25,639,197 --
Asset-Backed Securities.......................... 21,083,369 -- 21,083,369 --
Foreign Corporate Bonds and Notes*............... 16,739,053 -- 16,739,053 --
Foreign Sovereign Bonds and Notes**.............. 3,603,833 -- 3,603,833 --
Municipal Bonds***............................... 1,994,315 -- 1,994,315 --
Commercial Paper*................................ 593,760 -- 593,760 --
U.S. Government Bonds and Notes.................. 278,770 -- 278,770 --
U.S. Treasury Bills.............................. 25,425,274 -- 25,425,274 --
Money Market Funds............................... 7,292,609 7,292,609 -- --
-------------- -------------- -------------- --------------
Total Investments................................ 239,277,382 7,292,609 231,984,773 --
Futures Contracts****............................ 283,248 283,248 -- --
Interest Rate Swap Agreements.................... 251,329 -- 251,329 --
-------------- -------------- -------------- --------------
Total............................................ $ 239,811,959 $ 7,575,857 $ 232,236,102 $ --
============== ============== ============== ==============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
2/29/2020 PRICES INPUTS INPUTS
-------------- -------------- -------------- --------------
Futures Contracts****............................ $ (1,836,318) $ (1,836,318) $ -- $ --
Interest Rate Swap Agreements.................... (249,586) -- (249,586) --
-------------- -------------- -------------- --------------
Total............................................ $ (2,085,904) $ (1,836,318) $ (249,586) $ --
============== ============== ============== ==============
|
* See Portfolio of Investments for industry breakout.
** See Portfolio of Investments for country breakout.
*** See Portfolio of Investments for state breakout.
**** Includes cumulative appreciation/depreciation on futures contracts as
reported in the Futures Contracts table. Only the current day's variation
margin is presented on the Statements of Assets and Liabilities.
Page 52 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF ASSETS AND LIABILITIES
FEBRUARY 29, 2020 (UNAUDITED)
FIRST TRUST TCW FIRST TRUST TCW
OPPORTUNISTIC FIXED UNCONSTRAINED
INCOME ETF PLUS BOND ETF
(FIXD) (UCON)
------------------- -------------------
ASSETS:
Investments, at value.................................................. $ 1,848,297,594 $ 239,277,382
Swap contracts, at value............................................... 1,550,254 251,329
Cash................................................................... 130,627 --
Cash segregated as collateral for open swap contracts.................. 283,110 46,342
Receivables:
Investment securities sold ......................................... 130,037,914 1,658,887
Capital shares sold ................................................ 18,695,104 1,299,127
Interest............................................................ 5,952,814 1,715,347
Variation margin.................................................... 1,243,109 133,437
Dividends........................................................... 47,129 6,255
--------------- ---------------
Total Assets........................................................ 2,006,237,655 244,388,106
--------------- ---------------
LIABILITIES:
Swap contracts, at value............................................... 1,537,795 249,586
Due to custodian....................................................... -- 1,744
Due to custodian foreign currency...................................... -- 135
Payables:
Investment securities purchased .................................... 415,131,647 3,309,586
Investment advisory fees............................................ 654,657 138,620
Variation margin.................................................... -- 742,332
--------------- ---------------
Total Liabilities................................................... 417,324,099 4,442,003
--------------- ---------------
NET ASSETS............................................................. $ 1,588,913,556 $ 239,946,103
=============== ===============
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $ 1,531,737,294 $ 233,463,190
Par value.............................................................. 297,500 92,500
Accumulated distributable earnings (loss).............................. 56,878,762 6,390,413
--------------- ---------------
NET ASSETS............................................................. $ 1,588,913,556 $ 239,946,103
=============== ===============
NET ASSET VALUE, per share............................................. $ 53.41 $ 25.94
=============== ===============
Number of shares outstanding (unlimited number of shares authorized,
par value $0.01 per share).......................................... 29,750,002 9,250,002
=============== ===============
Investments, at cost................................................... $ 1,801,787,871 $ 229,527,960
=============== ===============
Foreign currency, at cost (proceeds)................................... $ -- $ (130)
=============== ===============
|
See Notes to Financial Statements Page 53
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 29, 2020 (UNAUDITED)
FIRST TRUST TCW FIRST TRUST TCW
OPPORTUNISTIC FIXED UNCONSTRAINED
INCOME ETF PLUS BOND ETF
(FIXD) (UCON)
------------------- -------------------
INVESTMENT INCOME:
Interest............................................................... $ 15,645,124 $ 3,786,835
Dividends.............................................................. 228,498 54,392
--------------- ---------------
Total investment income............................................. 15,873,622 3,841,227
--------------- ---------------
EXPENSES:
Investment advisory fees............................................... 3,832,317 908,544
--------------- ---------------
Total expenses...................................................... 3,832,317 908,544
Less fees waived by the investment advisor............................. (589,587) (106,896)
--------------- ---------------
Net expenses........................................................... 3,242,730 801,648
--------------- ---------------
NET INVESTMENT INCOME (LOSS)........................................... 12,630,892 3,039,579
--------------- ---------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments......................................................... 12,128,189 2,446,827
Futures contracts................................................... 1,176,829 119,293
Forward foreign currency contracts.................................. -- 73,958
Foreign currency transactions....................................... -- (4,159)
Swap contracts...................................................... (52,703) (15,364)
--------------- ---------------
Net realized gain (loss)............................................... 13,252,315 2,620,555
--------------- ---------------
Net change in unrealized appreciation (depreciation) on:
Investments......................................................... 20,315,003 227,534
Futures contracts................................................... 2,823,770 (1,398,827)
Foreign currency transactions....................................... -- (5)
Swap contracts...................................................... 97,748 33,546
--------------- ---------------
Net change in unrealized appreciation (depreciation)................... 23,236,521 (1,137,752)
--------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ 36,488,836 1,482,803
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ 49,119,728 $ 4,522,382
=============== ===============
|
Page 54
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST TCW FIRST TRUST TCW
OPPORTUNISTIC FIXED UNCONSTRAINED
INCOME ETF PLUS BOND ETF
(FIXD) (UCON)
------------------------------- -------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR
2/29/2020 ENDED 2/29/2020 ENDED
(UNAUDITED) 8/31/2019 (UNAUDITED) 8/31/2019
-------------- -------------- -------------- --------------
OPERATIONS:
Net investment income (loss).............................. $ 12,630,892 $ 13,110,777 $ 3,039,579 $ 5,213,728
Net realized gain (loss).................................. 13,252,315 16,057,033 2,620,555 (3,737,035)
Net change in unrealized appreciation (depreciation)...... 23,236,521 28,429,040 (1,137,752) 9,204,698
-------------- -------------- -------------- --------------
Net increase (decrease) in net assets resulting from
operations............................................. 49,119,728 57,596,850 4,522,382 10,681,391
-------------- -------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations..................................... (29,058,328) (14,132,128) (3,361,126) (5,539,586)
-------------- -------------- -------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................. 676,265,554 545,941,078 50,511,188 191,160,543
Cost of shares redeemed................................... (7,872,419) (7,551,313) (19,332,144) (13,821,447)
-------------- -------------- -------------- --------------
Net increase (decrease) in net assets resulting from
shareholder transactions............................... 668,393,135 538,389,765 31,179,044 177,339,096
-------------- -------------- -------------- --------------
Total increase (decrease) in net assets................... 688,454,535 581,854,487 32,340,300 182,480,901
NET ASSETS:
Beginning of period....................................... 900,459,021 318,604,534 207,605,803 25,124,902
-------------- -------------- -------------- --------------
End of period............................................. $1,588,913,556 $ 900,459,021 $ 239,946,103 $ 207,605,803
============== ============== ============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................... 17,000,002 6,450,002 8,050,002 1,000,002
Shares sold............................................... 12,900,000 10,700,000 1,950,000 7,600,000
Shares redeemed........................................... (150,000) (150,000) (750,000) (550,000)
-------------- -------------- -------------- --------------
Shares outstanding, end of period......................... 29,750,002 17,000,002 9,250,002 8,050,002
============== ============== ============== ==============
|
Page 55
FIRST TRUST EXCHANGE-TRADED FUND VIII
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
SIX MONTHS
ENDED YEAR ENDED AUGUST 31, PERIOD
2/29/2020 ----------------------------- ENDED
(UNAUDITED) 2019 2018 8/31/2017 (a)
------------- ------------- ------------- -------------
Net asset value, beginning of period........................... $ 52.97 $ 49.40 $ 51.01 $ 50.00
----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... 0.59 1.39 1.15 0.49
Net realized and unrealized gain (loss)........................ 1.12 3.63 (1.46) 1.12
----------- ----------- ----------- -----------
Total from investment operations............................... 1.71 5.02 (0.31) 1.61
----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.......................................... (0.67) (1.45) (1.30) (0.60)
Net realized gain.............................................. (0.60) -- (0.00) (b) --
----------- ----------- ----------- -----------
Total distributions............................................ (1.27) (1.45) (1.30) (0.60)
----------- ----------- ----------- -----------
Net asset value, end of period................................. $ 53.41 $ 52.97 $ 49.40 $ 51.01
=========== =========== =========== ===========
TOTAL RETURN (c)............................................... 3.30% 10.33% (0.57)% 3.23%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 1,588,914 $ 900,459 $ 318,605 $ 51,011
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets.................. 0.65% (d) 0.65% 0.65% 0.65% (d)
Ratio of net expenses to average net assets.................... 0.55% (d) 0.55% 0.55% 0.55% (d)
Ratio of net investment income (loss) to average net assets.... 2.14% (d) 2.29% 2.29% 1.81% (d)
Portfolio turnover rate (e).................................... 184% (f) 246% (f) 358% (f) 231% (f)
|
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
SIX MONTHS
ENDED YEAR PERIOD
2/29/2020 ENDED ENDED
(UNAUDITED) 8/31/2019 8/31/2018 (a)
------------- ------------- -------------
Net asset value, beginning of period........................... $ 25.79 $ 25.12 $ 25.00
----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... 0.36 0.77 0.17
Net realized and unrealized gain (loss)........................ 0.19 0.75 0.10
----------- ----------- -----------
Total from investment operations............................... 0.55 1.52 0.27
----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.......................................... (0.40) (0.81) (0.15)
Net realized gain.............................................. -- (0.04) --
----------- ----------- -----------
Total distributions............................................ (0.40) (0.85) (0.15)
----------- ----------- -----------
Net asset value, end of period................................. $ 25.94 $ 25.79 $ 25.12
=========== =========== ===========
TOTAL RETURN (c)............................................... 2.16% 6.15% 1.06%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 239,946 $ 207,606 $ 25,125
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets.................. 0.85% (d) 0.85% 0.85% (d)
Ratio of net expenses to average net assets.................... 0.75% (d) 0.75% 0.75% (d)
Ratio of net investment income (loss) to average net assets.... 2.84% (d) 3.16% 2.68% (d)
Portfolio turnover rate (e).................................... 28% (g) 40% (g) 70%
|
(a) Inception dates for FIXD and UCON are February 14, 2017 and June 4, 2018,
respectively, which are consistent with the respective Fund's commencement
of investment operations and are the dates the initial creation units were
established.
(b) Amount is less than $0.01.
(c) 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. The total returns would have been lower if certain
fees had not been waived by the investment advisor.
(d) Annualized.
(e) 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.
(f) The portfolio turnover rate not including mortgage dollar rolls was 138%,
223%, 241% and 158% for the periods ending February 29, 2020, August 31,
2019, August 31, 2018 and August 31, 2017, respectively.
(g) The portfolio turnover rate not including mortgage dollar rolls was 27%
and 39% for the periods ending February 29, 2020 and August 31, 2019.
Page 56
NOTES TO FINANCIAL STATEMENTS
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
1. ORGANIZATION
First Trust Exchange-Traded Fund VIII (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on February 22,
2016, 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 sixteen funds that are offering shares. This
report covers the two funds listed below:
First Trust TCW Opportunistic Fixed Income ETF - (The Nasdaq Stock Market
LLC ("Nasdaq") ticker "FIXD")
First Trust TCW Unconstrained Plus Bond ETF - (NYSE Arca, Inc.
("NYSE Arca") ticker "UCON")
Each fund represents a separate series of shares of beneficial interest in the
Trust (each a "Fund" and collectively, the "Funds"). Unlike conventional mutual
funds, each Fund issues and redeems shares on a continuous basis, at net asset
value ("NAV"), only in large specified blocks consisting of 50,000 shares called
a "Creation Unit." Each Fund's Creation Units are generally issued and redeemed
for cash and, in certain circumstances, in-kind for securities in which a Fund
invests, and only to and from broker-dealers and large institutional investors
that have entered into participation agreements. Except when aggregated in
Creation Units, each Fund's shares are not redeemable securities.
Each Fund is an actively managed exchange-traded fund. Each Fund's investment
objective is to seek to maximize long-term total return. Each Fund seeks to
achieve its investment objective by investing, under normal market conditions,
at least 80% of its net assets (including investment borrowings) in fixed income
securities. Each Fund's investments principally include securities issued or
guaranteed by the U.S. government or its agencies, instrumentalities or U.S.
government-sponsored entities; Treasury Inflation Protected Securities;
residential and commercial mortgage-backed securities; asset-backed securities;
U.S. corporate bonds; fixed income securities issued by non-U.S. corporations
and governments, including issuers with significant ties to emerging market
countries; bank loans, including first lien senior secured floating rate bank
loans ("Senior Loans")(1); municipal bonds; collateralized loan obligations
(CLOs); Rule 144A securities, and other debt securities bearing fixed, floating
or variable interest rates of any maturity. In addition, UCON may also invest in
preferred stock and common stock. Each Fund may invest in to-be-announced
transactions ("TBA Transactions"). FIXD may invest up to 20% of its assets
invested in fixed income investments in non-agency, non-government sponsored
entity securities and privately-issued mortgage-related and other asset-backed
securities. FIXD may invest up to 35% of its net assets in corporate, non-U.S.
and non-agency debt and other securities rated below investment grade by one or
more nationally recognized statistical rating organization ("NRSRO"), or, if
unrated, judged to be of comparable quality by TCW Investment Management Company
LLC ("TCW" or the "Sub-Advisor") (commonly referred to as "high yield" or "junk"
bonds). FIXD may also invest up to 20% of its net assets in securities
denominated in non-U.S. currencies and securities of issuers with significant
ties to emerging market countries, as determined by the Sub-Advisor. UCON may
invest up to 50% of its assets invested in fixed income investments in
non-agency, non-government sponsored entity securities and privately-issued
mortgage-backed securities including residential mortgage-backed securities,
commercial mortgage-backed securities, asset-backed securities and CLOs. UCON
may invest up to 70% of its net assets in securities rated below investment
grade by one or more NRSRO, or, if unrated, judged to be of comparable quality
by the Sub-Advisor (commonly referred to as "high yield" or "junk" bonds). UCON
may also invest up to 60% of its net assets in securities issued by issuers with
significant ties to emerging market countries, as determined by the Sub-Advisor,
and up to 50% of its net assets in securities denominated in non-U.S.
currencies.
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds are each considered an investment company and follow accounting and
reporting guidance under Financial Accounting Standards Board Accounting
Standards Codification Topic 946, "Financial Services-Investment Companies." The
following is a summary of significant accounting policies consistently followed
by the Funds in the preparation of the financial statements. The preparation of
the financial statements in accordance with accounting principles generally
accepted in the United States of America ("U.S. GAAP") requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
Each Fund's NAV is determined daily as of the close of regular trading on the
New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day
the NYSE is open for trading. If the NYSE closes early on a valuation day, the
NAV is determined as of that time. Domestic debt securities and 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 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.
(1) The terms "security" and "securities" used throughout the Notes to
Financial Statements include Senior Loans.
Page 57
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
Each 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 Funds'
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. Each Fund's investments
are valued as follows:
Corporate bonds, corporate notes, U.S. government securities,
mortgage-backed securities, asset-backed securities, municipal securities,
capital preferred securities, and other debt securities are fair valued on
the basis of valuations provided by dealers who make markets in such
securities or by a third-party pricing 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.
Shares of open-end funds are valued at fair value which is based on NAV
per share.
Senior Loans in which the Funds invest are not listed on any securities
exchange or board of trade. Senior Loans are typically bought and sold by
institutional investors in individually negotiated private transactions
that function in many respects like an over-the-counter secondary market,
although typically no formal market-makers exist. This market, while
having grown substantially since its inception, generally has fewer trades
and less liquidity than the secondary market for other types of
securities. Some Senior Loans have few or no trades, or trade
infrequently, and information regarding a specific Senior Loan may not be
widely available or may be incomplete. Accordingly, determinations of the
market value of Senior Loans may be based on infrequent and dated
information. Because there is less reliable, objective data available,
elements of judgment may play a greater role in valuation of Senior Loans
than for other types of securities. Typically, Senior Loans are valued
using information provided by a third-party pricing service. The
third-party pricing service primarily uses over-the-counter pricing from
dealer runs and broker quotes from indicative sheets to value the Senior
Loans.
Forward foreign currency contracts are fair valued at the current day's
interpolated foreign exchange rate, as calculated using the current day's
spot rate, and the thirty, sixty, ninety, and one-hundred eighty day
forward rates provided by a third-party pricing service.
Exchange-traded futures contracts are valued at the closing price in the
market where such contracts are principally traded. If no closing price is
available, exchange-traded futures contracts are 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
sixty days or less when purchased are fair valued at cost adjusted for
amortization of premiums and accretion of discounts (amortized cost),
provided the Advisor's Pricing Committee has determined that the use of
amortized cost is an appropriate reflection of fair value given market and
issuer-specific conditions existing at the time of the determination.
Factors that may be considered in determining the appropriateness of the
use of amortized cost include, but are not limited to, the following:
1) the credit conditions in the relevant market and changes
thereto;
2) the liquidity conditions in the relevant market and changes
thereto;
3) the interest rate conditions in the relevant market and
changes thereto (such as significant changes in interest
rates);
4) issuer-specific conditions (such as significant credit
deterioration); and
5) any other market-based data the Advisor's Pricing Committee
considers relevant. In this regard, the Advisor's Pricing
Committee may use last-obtained market-based data to assist it
when valuing portfolio securities using amortized cost.
Page 58
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
Swaps are fair valued utilizing quotations provided by a third-party
pricing service or, if the third-party pricing service does not provide a
value, by quotes provided by the selling dealer or financial institution.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Trust's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities
which may not be publicly sold without registration under the Securities Act of
1933, as amended) for which a third-party pricing service is unable to provide a
market price; securities whose trading has been formally suspended; a security
whose market or fair value price is not available from a pre-established pricing
source; a security with respect to which an event has occurred that is likely to
materially affect the value of the security after the market has closed but
before the calculation of a Fund's NAV or make it difficult or impossible to
obtain a reliable market quotation; and a security whose price, as provided by
the third-party pricing service, does not reflect the security's fair value. As
a general principle, the current fair value of a security would appear to be the
amount which the owner might reasonably expect to receive for the security upon
its current sale. When fair value prices are used, generally they will differ
from market quotations or official closing prices on the applicable exchanges. A
variety of factors may be considered in determining the fair value of such
securities, including, but not limited to, the following:
1) the 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 a 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
of the issuer, 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 economic, political and social prospects/developments of
the country of issue and the assessment of the country's
government leaders/officials (for sovereign debt only);
12) the prospects for the issuer's industry, and multiples (of
earnings and/or cash flows) being paid for similar businesses
in that industry (for corporate debt only); and
13) other relevant factors.
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 the 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 February 29, 2020, is
included with each Fund's Portfolio of Investments.
Page 59
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income is recorded
daily on the accrual basis. Amortization of premiums and accretion of discounts
are recorded using the effective interest method.
On July 27, 2017, the Financial Conduct Authority ("FCA") announced that it will
no longer persuade or compel banks to submit rates for the calculation of the
London Interbank Offered Rates ("LIBOR") after 2021 (the "FCA Announcement").
Furthermore, in the United States, efforts to identify a set of alternative U.S.
dollar reference interest rates include proposals by the Alternative Reference
Rates Committee of the Federal Reserve Board and the Federal Reserve Bank of New
York. On August 24, 2017, the Federal Reserve Board requested public comment on
a proposal by the Federal Reserve Bank of New York, in cooperation with the
Office of Financial Research, to produce three new reference rates intended to
serve as alternatives to LIBOR. These alternative rates are based on overnight
repurchase agreement transactions secured by U.S. Treasury Securities. On
December 12, 2017, following consideration of public comments, the Federal
Reserve Board concluded that the public would benefit if the Federal Reserve
Bank of New York published the three proposed reference rates as alternatives to
LIBOR (the "Federal Reserve Board Notice").
At this time, it is not possible to predict the effect of the FCA Announcement,
the Federal Reserve Board Notice, or other regulatory changes or announcements,
any establishment of alternative reference rates or any other reforms to LIBOR
that may be enacted in the United Kingdom, the United States or elsewhere. As
such, the potential effect of any such event on each Fund cannot yet be
determined.
Withholding taxes and tax reclaims on foreign dividends have been provided for
in accordance with each Fund's understanding of the applicable country's tax
rules and rates.
Securities purchased or sold on a when-issued, delayed-delivery or forward
purchase commitment basis may have extended settlement periods. The value of the
security so purchased is subject to market fluctuations during this period. Each
Fund maintains liquid assets with a current value at least equal to the amount
of its when-issued, delayed-delivery or forward purchase commitments until
payment is made. At February 29, 2020, the Funds had no when-issued or
delayed-delivery securities. At February 29, 2020, FIXD held $158,456,495 of
forward purchase commitments.
C. FUTURES CONTRACTS
Each Fund may purchase or sell (i.e., is long or short) exchange-listed futures
contracts to hedge against changes in interest rates (interest rate risk).
Futures contracts are agreements between a Fund and a counterparty to buy or
sell a specific quantity of an underlying instrument at a specified price and at
a specified date. Depending on the terms of the contract, futures contracts are
settled either through physical delivery of the underlying instrument on the
settlement date or by payment of a cash settlement amount on the settlement
date. Open futures contracts can also be closed out prior to settlement by
entering into an offsetting transaction in a matching futures contract. If a
Fund is not able to enter into an offsetting transaction, the Fund will continue
to be required to maintain margin deposits on the futures contract. When the
contract is closed or expires, a Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed or expired. This gain or loss is included in
"Net realized gain (loss) on futures contracts" on the Statements of Operations.
Upon entering into a futures contract, a Fund must deposit funds, called margin,
with its custodian in the name of the clearing broker equal to a specified
percentage of the current value of the contract. Open futures contacts are
marked-to-market daily with the change in value recognized as a component of
"Net change in unrealized appreciation (depreciation) on futures contracts" on
the Statements of Operations. Pursuant to the contract, a Fund agrees to receive
from or pay to the broker an amount of cash equal to the daily fluctuation in
value of the contract. Such receipts or payments are known as variation margin
and are included in "Variation margin" receivable or payable on the Statements
of Assets and Liabilities. If market conditions change unexpectedly, a Fund may
not achieve the anticipated benefits of the futures contract and may realize a
loss. The use of futures contracts involves the risk of imperfect correlation in
movements in the price of the futures contracts, interest rates and the
underlying instruments.
D. FORWARD FOREIGN CURRENCY CONTRACTS
Each Fund is subject to foreign currency risk in the normal course of pursuing
its investment objective. Forward foreign currency contracts are agreements
between two parties ("Counterparties") to exchange one currency for another at a
future date and at a specified price. Each Fund uses forward foreign currency
contracts to facilitate transactions in foreign securities and to manage the
Fund's foreign currency exposure. These contracts are valued daily, and a Fund's
net equity therein, representing unrealized gain or loss on the contracts as
measured by the difference between the forward foreign exchange rates at the
dates of entry into the contracts and the forward rates at the reporting date,
is included in "Unrealized appreciation (depreciation) on forward foreign
currency contracts" on the Statements of Assets and Liabilities. The change in
unrealized appreciation/(depreciation) is included in "Net change in unrealized
appreciation (depreciation) on forward foreign currency contracts" on the
Statements of Operations. When the forward contract is closed, a Fund records a
realized gain or loss equal to the difference between the proceeds from (or the
cost of) the closing transaction and the Fund's basis in the contract. This
realized gain or loss is included in "Net realized gain (loss) on forward
Page 60
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
foreign currency contracts" on the Statements of Operations. Risks arise from
the possible inability of Counterparties to meet the terms of their contracts
and from movement in currency and securities values and interest rates. Due to
the risks, a Fund could incur losses in excess of the net unrealized value shown
on the forward foreign currency contracts table in the Fund's Portfolio of
Investments. In the event of default by the Counterparty, a Fund will provide
notice to the Counterparty of the Fund's intent to convert the currency held by
the Fund into the currency that the Counterparty agreed to exchange with the
Fund. If a Counterparty becomes bankrupt or otherwise fails to perform its
obligations due to financial difficulties, a Fund may experience significant
delays in obtaining any recovery in a bankruptcy or other reorganization
proceeding. The Fund may obtain only limited recovery or may obtain no recovery
in such circumstances.
As of February 29, 2020, the Funds had no open forward foreign currency
contracts.
E. SWAP AGREEMENTS
Each Fund may enter into swap agreements. A swap is a financial instrument that
typically involves the exchange of cash flows between two parties on specified
dates (settlement dates), where the cash flows are based on agreed upon prices,
rates, etc. Payment received or made by the Fund for interest rate swaps, if
any, are recorded on the Statements of Operations as "Net realized gain (loss)
on swap contracts." When an interest rate swap is terminated, the Fund will
record a realized gain or loss equal to the difference between the proceeds from
(or cost of) the closing transaction and the Fund's basis in the contract, if
any. Generally, the basis of the contracts, if any, is the premium received or
paid. Swap agreements are individually negotiated and involve the risk of the
potential inability of the Counterparties to meet the terms of the agreement. In
connection with these agreements, cash and securities may be identified as
collateral in accordance with the terms of the respective swap agreements to
provide assets of value and recourse in the event of default under the swap
agreement or bankruptcy/insolvency of a party to the swap agreement. In the
event of a default by a Counterparty, the Fund will seek withdrawal of the
collateral and may incur certain costs exercising its rights with respect to the
collateral. If a Counterparty becomes bankrupt or otherwise fails to perform its
obligations due to financial difficulties, the Fund may experience significant
delays in obtaining any recovery in a bankruptcy or other reorganization
proceeding. The Fund may obtain only limited recovery or may obtain no recovery
in such circumstances.
Swap agreements may increase or decrease the overall volatility of the
investments of the Fund. The performance of swap agreements may be affected by
changes in the specific interest rate, security, currency, or other factors that
determine the amounts of payments due to and from the Fund. The Fund's maximum
interest rate risk to meet its future payments under swap agreements outstanding
at February 29, 2020, is equal to the total notional amount as shown on the
Portfolio of Investments. The notional amount represents the U.S. dollar value
of the contract as of the day of the opening transaction or contract reset. When
the Fund enters into a swap agreement, any premium paid is included in "Swap
contracts, at value" on the Statements of Assets and Liabilities.
Each Fund held interest rate swap agreements at February 29, 2020. An interest
rate swap agreement involves the Fund's agreement to exchange a stream of
interest payments for another party's stream of cash flows. Interest rate swaps
do not involve the delivery of securities or other underlying assets or
principal. Accordingly, the risk of loss with respect to interest rate swaps is
limited to the net amount of interest payments that the Fund is contractually
obligated to make.
F. OFFSETTING ON THE STATEMENTS OF ASSETS AND LIABILITIES
Offsetting Assets and Liabilities requires entities to disclose both gross and
net information about instruments and transactions eligible for offset on the
Statements of Assets and Liabilities, and disclose instruments and transactions
subject to master netting or similar agreements. These disclosure requirements
are intended to help investors and other financial statement users better assess
the effect or potential effect of offsetting arrangements on a fund's financial
position. The transactions subject to offsetting disclosures are derivative
instruments, repurchase agreements and reverse repurchase agreements, and
securities borrowing and securities lending transactions.
For financial reporting purposes, the Funds do not offset financial assets and
financial liabilities that are subject to master netting arrangements ("MNAs")
or similar agreements on the Statements of Assets and Liabilities. MNAs provide
the right, in the event of default (including bankruptcy and insolvency) for the
non-defaulting Counterparty to liquidate the collateral and calculate the net
exposure to the defaulting party or request additional collateral.
The Funds do not have the right to offset financial assets and financial
liabilities related to futures contracts or swap contracts on the Statements of
Assets and Liabilities.
G. FOREIGN CURRENCY
The books and records of the Funds are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated into
U.S. dollars at the exchange rates prevailing at the end of the period.
Purchases and sales of investments and items of income and expense are
translated on the respective dates of such transactions. Unrealized gains and
losses on assets and liabilities, other than investments in securities, which
result from changes in foreign currency exchange rates have been included in
"Net change in unrealized appreciation (depreciation) on foreign currency
translation" on the Statements of Operations. Unrealized gains and losses on
Page 61
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
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 are 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
fluctuation in exchange rates between the initial purchase settlement date and
subsequent sale trade date for fixed-income securities is included in "Net
realized gain (loss) on investments" on the Statements of Operations.
H. INTEREST-ONLY SECURITIES
An interest-only security ("IO Security") is the interest-only portion of a
mortgage-backed security that receives some or all of the interest portion of
the underlying mortgage-backed security and little or no principal. A reference
principal value called a notional value is used to calculate the amount of
interest due to the IO Security. IO Securities are sold at a deep discount to
their notional principal amount. Generally speaking, when interest rates are
falling and prepayment rates are increasing, the value of an IO Security will
fall. Conversely, when interest rates are rising and prepayment rates are
decreasing, generally the value of an IO Security will rise. These securities,
if any, are identified on each Fund's Portfolio of Investments.
I. MORTGAGE DOLLAR ROLLS
Each Fund may invest, without limitation, in mortgage dollar rolls. The Funds
intend to enter into mortgage dollar rolls only with high quality securities
dealers and banks, as determined by the Funds' Sub-Advisor. In a mortgage dollar
roll, a Fund will sell (or buy) mortgage-backed securities for delivery on a
specified date and simultaneously contract to repurchase (or sell) substantially
similar (same type, coupon and maturity) securities on a future date. Mortgage
dollar rolls are recorded as separate purchases and sales in a Fund.
J. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income of each Fund, if any, are declared and paid
monthly, or as the Board of Trustees may determine from time to time.
Distributions of net realized gains earned by each Fund, if any, are distributed
at least annually.
Distributions in cash may be reinvested automatically in additional whole shares
only if the broker through whom the shares were purchased makes such option
available. Such shares will generally be reinvested by the broker based upon the
market price of those shares and investors may be subject to customary brokerage
commissions charged by the broker.
Distributions from net investment income and realized capital gains are
determined in accordance with federal income tax regulations, which may differ
from U.S. GAAP. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These permanent differences are primarily due to the varying
treatment of income and gain/loss on portfolio securities held by the 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 August 31, 2019 was as follows:
Distributions Distributions Distributions
paid from paid from paid from
Ordinary Capital Return of
Income Gains Capital
------------- ------------- -------------
First Trust TCW Opportunistic Fixed Income ETF $ 14,132,128 $ -- $ --
First Trust TCW Unconstrained Plus Bond ETF 5,422,118 117,468 --
|
As of August 31, 2019, the components of distributable earnings on a tax basis
for each Fund were as follows:
Accumulated Net
Undistributed Capital and Unrealized
Ordinary Other Appreciation
Income Gain (Loss) (Depreciation)
------------- ------------- -------------
First Trust TCW Opportunistic Fixed Income ETF $ 10,189,503 $ 1,305,048 $ 25,322,811
First Trust TCW Unconstrained Plus Bond ETF 162,765 (4,167,198) 9,233,590
|
Page 62
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
K. INCOME TAXES
Each Fund intends to continue to qualify as a regulated investment company by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no
provision has been made for federal and state income taxes. However, due to the
timing and amount of distributions, each Fund may be subject to an excise tax of
4% of the amount by which approximately 98% of each Fund's taxable income
exceeds the distributions from such taxable income for the calendar year.
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 FIXD, the taxable years
ending 2017, 2018, and 2019 remain open to federal and state audit. For UCON,
the taxable years ending 2018 and 2019 remain open to federal and state audit.
As of February 29, 2020, 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.
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 August 31, 2019, the
Funds had no capital loss carryforwards for federal income tax purposes.
During the taxable year ended August 31, 2019, the Funds utilized Post-enactment
capital loss carryforwards in the following amounts:
Capital Loss
Carryforward Utilized
-------------------------------
First Trust TCW Opportunistic Fixed Income ETF $ 4,035,664
First Trust TCW Unconstrained Plus Bond ETF 57,275
|
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 August 31, 2019, the Funds listed
below incurred and elected to defer net late year ordinary or capital losses as
follows:
Qualified Late Year Losses
---------------------------------
Ordinary Losses Capital Losses
--------------------- ---------------------
First Trust TCW Opportunistic Fixed Income ETF $ -- $ --
First Trust TCW Unconstrained Plus Bond ETF -- 4,167,198
|
L. 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 selection and 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.
TCW serves as the Funds' sub-advisor and manages each Fund's portfolio subject
to First Trust's supervision. Pursuant to the Investment Management Agreement,
between the Trust, on behalf of the Funds, and the Advisor, and the Investment
Sub-Advisory Agreement among the Trust, on behalf of the Funds, the Advisor and
TCW, First Trust will supervise TCW and its management of the investment of each
Fund's assets and will pay TCW 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, sub-advisory, 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. FIXD and UCON have each agreed to pay
First Trust an annual unitary management fee equal to 0.65% and 0.85%,
respectively, of its average daily net assets. Pursuant to a contractual
agreement, First Trust has agreed to waive management fees of 0.10% of average
daily net assets until December 31, 2020 for each Fund. The waiver agreement may
be terminated by action of the Trust's Board of Trustees at any time upon 60
days' written notice by the Trust on behalf of each Fund or by the Funds'
investment advisor only after December 31, 2020. During the six months ended
February 29, 2020, the Advisor waived fees of $589,587 and $106,896 for FIXD and
UCON, respectively.
Page 63
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
each Fund. As custodian, BNYM is responsible for custody of each Fund's assets.
As fund accountant and administrator, BNYM is responsible for maintaining the
books and records of each Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for each Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
a defined-outcome fund or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen 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
Chairmen 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 six months ended February 29, 2020, the cost of purchases and proceeds
from sales and paydowns of U.S. Government securities and non-U.S. Government
securities for each Fund, excluding short-term investments, were as follows:
Purchases Sales
------------------ ------------------
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF
U.S. Government securities $2,725,300,521 $2,243,201,620
Non-U.S. Government securities 310,119,047 66,414,807
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF
U.S. Government securities 27,291,939 21,761,117
Non-U.S. Government securities 38,809,933 31,509,099
|
For the six months ended February 29, 2020, the Funds had no in-kind
transactions.
5. DERIVATIVE TRANSACTIONS
The following table presents the types of derivatives held by each Fund at
February 29, 2020, the primary underlying risk exposure and the location of
these instruments as presented on the Statements of Assets and Liabilities.
ASSET DERIVATIVES LIABILITY DERIVATIVES
--------------------------------------- ---------------------------------------
DERIVATIVES STATEMENTS OF ASSETS AND STATEMENTS OF ASSETS AND
INSTRUMENT RISK EXPOSURE LIABILITIES LOCATION VALUE LIABILITIES LOCATION VALUE
------------------ ------------------ -------------------------- ----------- -------------------------- -----------
FIXD
Unrealized appreciation on Unrealized depreciation on
Futures contracts Interest rate risk futures contracts* $ 3,104,568 futures contracts* $ --
Interest rate swap
agreements Interest rate risk Swap contracts, at value 1,550,254 Swap contracts, at value 1,537,795
UCON
Unrealized appreciation on Unrealized depreciation on
Futures contracts Interest rate risk futures contracts* 283,248 futures contracts* 1,836,318
Interest rate swap
agreements Interest rate risk Swap contracts, at value 251,329 Swap contracts, at value 249,586
|
* Includes cumulative appreciation/depreciation on futures contracts as reported
in each Fund's Portfolio of Investments. Only the current day's variation margin
is reported within the Statements of Assets and Liabilities.
Page 64
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
The following table presents the amount of net realized gain (loss) and change
in net unrealized appreciation (depreciation) recognized for the six months
ended February 29, 2020, on each Fund's derivative instruments, as well as the
primary underlying risk exposure associated with the instruments.
STATEMENTS OF OPERATIONS LOCATION FIXD UCON
----------------------------------------------------------------------------------------------
CURRENCY RISK EXPOSURE
Net realized gain (loss) on forward foreign currency contracts $ -- $ 73,958
INTEREST RATE RISK EXPOSURE
Net realized gain (loss) on futures contracts 1,176,829 119,293
Net realized gain (loss) on swap contracts (52,703) (15,364)
Net change in unrealized appreciation (depreciation) on
futures contracts 2,823,770 (1,398,827)
Net change in unrealized appreciation (depreciation) on
swap contracts 97,748 33,546
|
FIXD
During the six months ended February 29, 2020, there were no forward foreign
currency contracts opened or closed.
During the six months ended February 29, 2020, the notional value of futures
contracts opened and closed were $421,836,937 and $346,747,761, respectively.
For the six months ended February 29, 2020, the average volume of interest rate
swaps was $87,409,780.
UCON
During the six months ended February 29, 2020, the notional value of forward
foreign currency contracts opened and closed were $4,094,304 and $4,094,304,
respectively.
During the six months ended February 29, 2020, the notional value of futures
contracts opened and closed were $43,938,261 and $51,065,259, respectively.
For the six months ended February 29, 2020, the average volume of interest rate
swaps was $21,535,714.
6. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
Shares are created and redeemed by each Fund only in Creation Unit size
aggregations of 50,000 shares in transactions with broker-dealers or large
institutional investors that have entered into a participation agreement (an
"Authorized Participant"). In order to purchase Creation Units of each Fund, an
Authorized Participant must deposit (i) a designated portfolio of securities
determined by First Trust (the "Deposit Securities") and generally make or
receive a cash payment referred to as the "Cash Component," which is an amount
equal to the difference between the NAV of the Fund Shares (per Creation Unit
Aggregation) and the market value of the Deposit Securities, and/or (ii) cash in
lieu of all or a portion of the Deposit Securities. Each Fund's Creation Units
are generally issued and redeemed for cash. If the Cash Component is a positive
number (i.e., the NAV per Creation Unit Aggregation exceeds the Deposit Amount),
the Authorized Participant will deliver the Cash Component. If the Cash
Component is a negative number (i.e., the NAV per Creation Unit Aggregation is
less than the Deposit Amount), the Authorized Participant will receive the Cash
Component. Authorized Participants purchasing Creation Units must pay to BNYM,
as transfer agent, a creation transaction fee (the "Creation Transaction Fee")
regardless of the number of Creation Units purchased in the transaction. The
Creation Transaction Fee may vary and is based on the composition of the
securities included in each Fund's portfolio and the countries in which the
transactions are settled. The Creation Transaction Fee may increase or decrease
with changes in each Fund's portfolio. The price for each Creation Unit will
equal the daily NAV per share 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 or stamp taxes. When a Fund permits an Authorized
Participant to substitute cash or a different security in lieu of depositing one
or more of the requisite Deposit Securities, the Authorized Participant may also
be assessed an amount to cover the cost of purchasing the Deposit Securities
and/or disposing of the substituted securities, including 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 such Deposit
Securities and/or substitute securities.
Authorized Participants redeeming Creation Units must pay to BNYM, as transfer
agent, a redemption transaction fee (the "Redemption Transaction Fee"),
regardless of the number of Creation Units redeemed in the transaction. The
Redemption Transaction Fee may vary and is based on the composition of the
securities included in each Fund's portfolio and the countries in which the
transactions are settled. The Redemption Transaction Fee may increase or
decrease with changes in each Fund's portfolio. Each Fund reserves the right to
effect redemptions in cash. An Authorized Participant may request cash
redemption in lieu of securities; however, a Fund may, in its discretion, reject
any such request.
Page 65
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
7. DISTRIBUTION PLAN
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the 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 December 31, 2020.
8. 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.
9. 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:
Beginning in December 2019, the outbreak of the respiratory disease designated
as COVID-19 has caused significant volatility and declines in global financial
markets, which have caused losses for investors. The impact of this COVID-19
pandemic may be short-term or may last for an extended period of time and, in
either case, could result in a substantial economic downturn or recession.
Management is continuing to monitor this event.
Page 66
ADDITIONAL INFORMATION
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (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 large
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
not concentrated.
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.
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.
Page 67
ADDITIONAL INFORMATION (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
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 CONSTITUENT RISK. Certain funds may be a constituent of one or more
indices. 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
significantly 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.
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. In 2017, the United Kingdom's
Financial Conduct Authority announced that LIBOR will cease to be available for
use after 2021. The unavailability or replacement of LIBOR may affect the value,
liquidity or return on certain fund investments and may result in costs incurred
in connection with closing out positions and entering into new trades. Any
potential effects of the transition away from LIBOR on the fund or on certain
instruments in which the fund invests can be difficult to ascertain, and they
may vary depending on a variety of factors. Any such effects of the transition
away from LIBOR, as well as other unforeseen effects, could result in losses to
the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are
subject to market fluctuations caused by factors such as general economic
conditions, political events, regulatory or market developments, changes in
interest rates and perceived trends in securities prices. Shares of a fund could
decline in value or underperform other investments as a result of the risk of
loss associated with these market fluctuations. In addition, local, regional or
global events such as war, acts of terrorism, spread of infectious diseases or
other public health issues, recessions, or other events could have a significant
negative impact on a fund and its investments. Such events may affect certain
geographic regions, countries, sectors and industries more significantly than
others. The outbreak of the respiratory disease designated as COVID-19 in
December 2019 has caused significant volatility and declines in global financial
markets, which have caused losses for investors. The impact of this COVID-19
pandemic may be short term or may last for an extended period of time, and in
either case could result in a substantial economic downturn or recession.
Page 68
ADDITIONAL INFORMATION (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
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; lack
of liquidity; currency exchange rates; excessive taxation; government seizure of
assets; 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.
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
Page 69
This page intentionally left blank.
This page intentionally left blank.
This page intentionally left blank.
FIRST TRUST
First Trust Exchange-Traded Fund VIII
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
INVESTMENT SUB-ADVISOR
TCW Investment Management Company LLC
865 South Figueroa Street
Los Angeles, CA 90017
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
[BLANK BACK COVER]
FIRST TRUST
First Trust Exchange-Traded Fund VIII
EquityCompass Risk Manager ETF (ERM)
EquityCompass Tactical Risk Manager ETF (TERM)
Semi-Annual Report
For the Six Months Ended
February 29, 2020
TABLE OF CONTENTS
FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL REPORT
FEBRUARY 29, 2020
Shareholder Letter........................................................... 1
Fund Performance Overview
EquityCompass Risk Manager ETF (ERM)...................................... 2
EquityCompass Tactical Risk Manager ETF (TERM)............................ 4
Notes to Fund Performance Overview........................................... 6
Portfolio Management......................................................... 7
Understanding Your Fund Expenses............................................. 8
Portfolio of Investments
EquityCompass Risk Manager ETF (ERM)...................................... 9
EquityCompass Tactical Risk Manager ETF (TERM)............................ 12
Statements of Assets and Liabilities......................................... 15
Statements of Operations..................................................... 16
Statements of Changes in Net Assets.......................................... 17
Financial Highlights......................................................... 18
Notes to Financial Statements................................................ 19
Additional Information....................................................... 24
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
|
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and/or EquityCompass Investment Management LLC (the
"Sub-Advisor") and their 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 VIII (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 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 objectives. 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 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 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 its prospectus, statement of
additional information, and other Fund regulatory filings.
SHAREHOLDER LETTER
FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
FEBRUARY 29, 2020
Dear Shareholders:
First Trust is pleased to provide you with the semi-annual report for the
EquityCompass Risk Manager ETF ("ERM") and the EquityCompass Tactical Risk
Manager ETF ("TERM" and together with ERM, the "Funds"), each a series of the
First Trust Exchange-Traded Fund VIII, which contains detailed information about
the Funds for the six months ended February 29, 2020.
To say that much has transpired over the past six months would be an
understatement. Prior to the onset of the coronavirus (COVID-19) in Wuhan, China
this past December, my message to investors would have sounded quite bullish,
focusing on such accomplishments as the progress in the trade negotiations
between the U.S. and China, where a "Phase One" deal was signed into law on
January 15, 2020. The main takeaway from the deal is that China agreed to
purchase an additional $200 billion of goods and services from the U.S. over the
next several years in exchange for the U.S. cutting some of its tariffs on
Chinese goods. The deal marked the first breakthrough since the Trump
Administration launched its new tariff initiative in March 2018. On top of that
news, the S&P 500(R) Index was setting new all-time highs all the way up through
the close of trading on February 19, 2020, the day it peaked.
Unfortunately, the good news has been overshadowed by the escalation and spread
of the COVID-19 pandemic. As of April 16, 2020, this disease had spread to 213
countries, areas or territories, had infected 1,991,562 people (confirmed cases)
and was responsible for 130,885 confirmed deaths, according to the World Health
Organization. These numbers are expected to trend higher in the days and weeks
ahead. A growing number of U.S. state governors and foreign leaders have issued
shelter in place orders to their citizens to help slow the spread of this new
virus. The primary objective in doing so is to slow down the number of cases so
that hospitals and health care workers are not overwhelmed by too many patients.
The cost is high because it requires shutting down large chunks of the economy,
which in turn negatively impacts the financial well-being of workers and
companies. In the U.S., Congress passed a financial stimulus package valued at
$2.0 trillion to help backstop workers and companies in the near-term. The
faster we can end the shutdown, consistent with general health and welfare, the
better, according to Brian Wesbury, Chief Economist at First Trust Advisors L.P.
Here is what we think we know. Brian Wesbury believes the U.S. could experience
a modest decline in real gross domestic product of 1.5% (annualized) in the
first quarter of 2020, followed by a massive decline of 20% (annualized) in the
second quarter. The good news is that he sees the economy growing at a 3.0% and
3.5% annual pace in the third and fourth quarters of 2020, respectively. In
other words, we are expecting a healthy rebound in the second half of this year.
As I noted earlier, the stock market was still at a record high in the third
week of February. From February 19 through March 23, however, the S&P 500(R)
Index posted a total return of -33.79%, putting it in bear market territory
(price decline of 20% or more from the most recent peak). Sorry to say it, but
the nearly 11-year bull market is no more. While we do not have a projection for
where stocks will be at year-end, we do know this: excluding the current bear
market, the S&P 500(R) Index has never failed to recoup all the losses sustained
in any sell-off, pullback, correction or bear market. So, while I am
understandably not bullish on the first half of 2020, I will be a bull once
again after we put the worst of COVID-19 behind us. I continue to urge investors
to stay the course. This too shall pass.
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
FUND PERFORMANCE OVERVIEW (UNAUDITED)
EQUITYCOMPASS RISK MANAGER ETF (ERM)
The EquityCompass Risk Manager ETF (the "Fund") seeks to provide long term
capital appreciation with capital preservation as a secondary objective. Under
normal market conditions, the Fund seeks to achieve its investment objectives by
investing in equity securities of companies domiciled in the U.S. or listed on a
U.S. exchange. During periods when the U.S. equity market is determined to be
unfavorable by the Fund's Sub-Advisor, the Fund may invest all or a portion of
its assets in cash, cash-equivalents, money market funds and/or short-term fixed
income exchange-traded funds ("ETFs"), or the Fund may invest all or a portion
of its assets in a single short-term fixed income ETF, the First Trust Enhanced
Short Maturity ETF (FTSM). Certain of the ETFs in which the Fund invests may be
advised by First Trust. The Fund is classified as "non-diversified" under the
Investment Company Act of 1940, as amended. The shares of the Fund are listed
and traded on the NYSE Arca, Inc., under the ticker symbol "ERM."
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months Ended 1 Year Ended Inception (4/10/17) Inception (4/10/17)
2/29/20 2/29/20 to 2/29/20 to 2/29/20
FUND PERFORMANCE
NAV -0.19% -2.03% 0.59% 1.71%
Market Price 0.37% -1.53% 0.73% 2.12%
INDEX PERFORMANCE
S&P 500(R) Index 1.92% 8.19% 10.28% 32.69%
Hedge Fund Research HFRI Equity Hedge Index(1) 1.68% 2.09% 3.66% 10.75%
------------------------------------------------------------------------------------------------------------------------------------
|
(1) Cumulative total return for the period April 30, 2017 through February 29,
2020. Performance data is not available for the entire period shown in the
table for the index because performance data for the index is only
available on a month-end basis. Performance data for the index may be
updated on an ongoing basis and is subject to change.
(See Notes to Fund Performance Overview on page 6.)
----------------------------------------------------------
% OF TOTAL
LONG-TERM
SECTOR CLASSIFICATION INVESTMENTS
----------------------------------------------------------
Information Technology 20.34%
Health Care 14.51
Financials 12.73
Consumer Discretionary 10.00
Industrials 9.75
Communication Services 8.98
Consumer Staples 8.23
Energy 4.50
Utilities 4.41
Real Estate 3.40
Materials 3.15
--------
Total 100.00%
========
----------------------------------------------------------
% OF TOTAL
LONG-TERM
TOP TEN HOLDINGS INVESTMENTS
----------------------------------------------------------
L Brands, Inc. 0.90%
NVIDIA Corp. 0.84
Albemarle Corp. 0.84
Netflix, Inc. 0.83
Gilead Sciences, Inc. 0.80
Biogen, Inc. 0.79
NextEra Energy, Inc. 0.78
Jack Henry & Associates, Inc. 0.78
DaVita, Inc. 0.78
Adobe, Inc. 0.77
--------
Total 8.11%
========
|
Page 2
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
EQUITYCOMPASS RISK MANAGER ETF (ERM) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
APRIL 10, 2017 - FEBRUARY 29, 2020
EquityCompass S&P 500(R)
Risk Manager ETF Index
4/10/17 $10,000 $10,000
8/31/17 10,244 10,571
2/28/18 11,107 11,716
8/31/18 11,804 12,649
2/28/19 10,382 12,264
8/31/19 10,190 13,019
2/29/19 10,171 13,269
|
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
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period April 11, 2017 (commencement
of trading) through February 29, 2020. Shareholders may pay more than NAV when
they buy Fund shares and receive less than NAV when they sell those shares
because shares are bought and sold at current market price. Data presented
represents past performance and cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
4/11/17 - 8/31/17 89 0 0 0
9/1/17 - 8/31/18 225 0 0 0
9/1/18 - 8/31/19 146 4 0 0
9/1/19 - 2/29/20 105 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
4/11/17 - 8/31/17 11 0 0 0
9/1/17 - 8/31/18 27 0 0 0
9/1/18 - 8/31/19 98 2 0 0
9/1/19 - 2/29/20 18 0 0 1
|
Page 3
FUND PERFORMANCE OVERVIEW (UNAUDITED)
EQUITYCOMPASS TACTICAL RISK MANAGER ETF (TERM)
The EquityCompass Tactical Risk Manager ETF (the "Fund") seeks to provide long
term capital appreciation with capital preservation as a secondary objective.
Under normal market conditions, the Fund seeks to achieve its investment
objectives by investing in equity securities of companies domiciled in the U.S.
or listed on a U.S. exchange. During periods when the U.S. equity market is
determined to be unfavorable by the Fund's Sub-Advisor, the Fund may invest all
or a portion of its assets in cash, cash equivalents, money market funds and/or
short-term fixed income exchange-traded funds ("ETFs"), or the Fund may invest
all or a portion of its assets in a single short-term fixed income ETF, the
First Trust Enhanced Short Maturity ETF (FTSM). During such periods, the Fund
may also invest a significant portion of its assets in securities designed to
provide short exposure to broad U.S. market indices including by investing in
inverse ETFs. Certain of the ETFs in which the Fund invests may be advised by
First Trust. The Fund is classified as "non-diversified" under the Investment
Company Act of 1940, as amended. The shares of the Fund are listed and traded on
the NYSE Arca, Inc., under the ticker symbol "TERM."
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months Ended 1 Year Ended Inception (4/10/17) Inception (4/10/17)
2/29/20 2/29/20 to 2/29/20 to 2/29/20
FUND PERFORMANCE
NAV -0.24% -2.93% -4.20% -11.65%
Market Price 0.18% -2.31% -4.10% -11.39%
INDEX PERFORMANCE
S&P 500(R) Index 1.92% 8.19% 10.28% 32.69%
Hedge Fund Research HFRI Equity Hedge Index(1) 1.68% 2.09% 3.66% 10.75%
------------------------------------------------------------------------------------------------------------------------------------
|
(1) Cumulative total return for the period April 30, 2017 through February 29,
2020. Performance data is not available for the entire period shown in the
table for the index because performance data for the index is only
available on a month-end basis. Performance data for the index may be
updated on an ongoing basis and is subject to change.
(See Notes to Fund Performance Overview on page 6.)
----------------------------------------------------------
% OF TOTAL
LONG-TERM
SECTOR CLASSIFICATION INVESTMENTS
----------------------------------------------------------
Information Technology 20.35%
Health Care 14.51
Financials 12.72
Consumer Discretionary 9.99
Industrials 9.74
Communication Services 8.98
Consumer Staples 8.23
Energy 4.50
Utilities 4.41
Real Estate 3.41
Materials 3.16
--------
Total 100.00%
========
----------------------------------------------------------
% OF TOTAL
LONG-TERM
TOP TEN HOLDINGS INVESTMENTS
----------------------------------------------------------
L Brands, Inc. 0.90%
NVIDIA Corp. 0.84
Albemarle Corp. 0.84
Netflix, Inc. 0.83
Gilead Sciences, Inc. 0.81
Biogen, Inc. 0.79
NextEra Energy, Inc. 0.79
Adobe, Inc. 0.78
Jack Henry & Associates, Inc. 0.78
DaVita, Inc. 0.78
--------
Total 8.14%
========
|
Page 4
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
EQUITYCOMPASS TACTICAL RISK MANAGER ETF (TERM) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
APRIL 10, 2017 - FEBRUARY 29, 2020
EquityCompass Tactical S&P 500(R)
Risk Manager ETF Index
4/10/17 $10,000 $10,000
8/31/17 10,244 10,571
2/28/18 11,107 11,716
8/31/18 11,805 12,649
2/28/19 9,102 12,264
8/31/19 8,856 13,019
2/29/20 8,835 13,269
|
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
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period April 11, 2017 (commencement
of trading) through February 29, 2020. Shareholders may pay more than NAV when
they buy Fund shares and receive less than NAV when they sell those shares
because shares are bought and sold at current market price. Data presented
represents past performance and cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
4/11/17 - 8/31/17 83 0 0 0
9/1/17 - 8/31/18 229 0 0 0
9/1/18 - 8/31/19 116 3 0 0
9/1/19 - 2/29/20 16 1 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
4/11/17 - 8/31/17 17 0 0 0
9/1/17 - 8/31/18 23 0 0 0
9/1/18 - 8/31/19 129 2 0 0
9/1/19 - 2/29/20 107 0 0 0
|
Page 5
NOTES TO FUND PERFORMANCE OVERVIEW (UNAUDITED)
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. The total returns would have been lower if certain fees had not been
waived by the advisor.
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 between the highest bid and the lowest offer on the stock
exchange on which shares of the Fund are 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 6
PORTFOLIO MANAGEMENT
FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL REPORT
FEBRUARY 29, 2020 (UNAUDITED)
INVESTMENT ADVISOR
First Trust Advisors L.P. ("First Trust" or the "Advisor") is the investment
advisor to EquityCompass Risk Manager ETF ("ERM") and EquityCompass Tactical
Risk Manager ETF ("TERM") (each a "Fund" and, collectively, the "Funds"). First
Trust is responsible for the selection and ongoing monitoring of the securities
in the Funds' portfolio and certain other services necessary for the management
of the portfolios.
SUB-ADVISOR
EquityCompass Investment Management, LLC ("EquityCompass Investment Management"
or the "Sub-Advisor") serves as the investment sub-advisor to the Funds.
PORTFOLIO MANAGEMENT
ADVISOR'S INVESTMENT COMMITTEE
The Advisor's Investment Committee (the "Investment Committee"), which manages
the Funds' investments, consists of:
DANIEL J. LINDQUIST, MANAGING DIRECTOR OF FIRST TRUST
JON C. ERICKSON, SENIOR VICE PRESIDENT OF FIRST TRUST
DAVID G. MCGAREL, CHIEF INVESTMENT OFFICER, CHIEF OPERATING OFFICER AND MANAGING
DIRECTOR OF FIRST TRUST
ROGER F. TESTIN, SENIOR VICE PRESIDENT OF FIRST TRUST
TODD LARSON, CFA, VICE PRESIDENT OF FIRST TRUST
CHRIS A. PETERSON, CFA, SENIOR VICE PRESIDENT OF FIRST TRUST
JOHN GAMBLA, SENIOR PORTFOLIO MANAGER, ALTERNATIVES INVESTMENT TEAM OF FIRST
TRUST
ROB A. GUTTSCHOW, CFA, SENIOR PORTFOLIO MANAGER, ALTERNATIVES INVESTMENT TEAM OF
FIRST TRUST
SUB-ADVISOR PORTFOLIO MANAGERS
The Sub-Advisor portfolio managers, as set forth below, provide
non-discretionary investment advice to the Investment Committee:
TIMOTHY M. MCCANN, SENIOR PORTFOLIO MANAGER, EQUITYCOMPASS INVESTMENT
MANAGEMENT, LLC
BERNARD J. KAVANAGH, III, PORTFOLIO MANAGER, EQUITYCOMPASS INVESTMENT
MANAGEMENT, LLC
The Investment Committee members are primarily and jointly responsible for the
day-to-day management of the Funds, while the Sub-Advisor portfolio managers
provide non-discretionary investment advice to the Investment Committee. Each
portfolio manager has served as part of the portfolio management team of the
Funds since inception.
Page 7
FIRST TRUST EXCHANGE-TRADED FUND VIII
UNDERSTANDING YOUR FUND EXPENSES
FEBRUARY 29, 2020 (UNAUDITED)
As a shareholder of EquityCompass Risk Manager ETF or EquityCompass Tactical
Risk Manager 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 fees, if any, and other Fund
expenses. This Example is intended to help you understand your ongoing costs of
investing in the Funds and to compare these costs with the ongoing costs of
investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended February 29, 2020.
ACTUAL EXPENSES
The first line in the following table provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During the Six-Month
Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
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 Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as brokerage
commissions. Therefore, the second line in the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
-----------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX MONTH SIX MONTH
SEPTEMBER 1, 2019 FEBRUARY 29, 2020 PERIOD (a) PERIOD (a) (b)
-----------------------------------------------------------------------------------------------------------------------
EQUITYCOMPASS RISK MANAGER ETF (ERM)
Actual $1,000.00 $ 998.10 0.65% $3.23
Hypothetical (5% return before expenses) $1,000.00 $1,021.63 0.65% $3.27
EQUITYCOMPASS TACTICAL RISK MANAGER ETF (TERM)
Actual $1,000.00 $ 997.60 0.65% $3.23
Hypothetical (5% return before expenses) $1,000.00 $1,021.63 0.65% $3.27
|
(a) Annualized expense ratio and expenses paid during the six-month period do
not include fees and expenses of any underlying funds in which each Fund
may invest.
(b) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (September
1, 2019 through February 29, 2020), multiplied by 182/366 (to reflect the
six-month period).
Page 8
EQUITYCOMPASS RISK MANAGER ETF (ERM)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS -- 99.4%
AEROSPACE & DEFENSE -- 3.2%
365 Boeing (The) Co. $ 100,415
683 General Dynamics Corp. 109,068
297 Lockheed Martin Corp. 109,852
543 Raytheon Co. 102,388
806 United Technologies Corp. 105,256
-------------
526,979
-------------
AIR FREIGHT & LOGISTICS -- 1.3%
798 FedEx Corp. 112,654
1,065 United Parcel Service, Inc.,
Class B 96,372
-------------
209,026
-------------
AUTOMOBILES -- 1.8%
13,428 Ford Motor Co. 93,459
3,510 General Motors Co. 107,055
3,420 Harley-Davidson, Inc. 104,207
-------------
304,721
-------------
BANKS -- 4.3%
3,555 Bank of America Corp. 101,317
1,560 Citigroup, Inc. 98,997
905 JPMorgan Chase & Co. 105,079
7,539 People's United Financial, Inc. 105,471
2,147 U.S. Bancorp 99,707
2,342 Wells Fargo & Co. 95,671
2,425 Zions Bancorp N.A. 96,879
-------------
703,121
-------------
BEVERAGES -- 1.5%
2,267 Coca-Cola (The) Co. 121,262
914 PepsiCo, Inc. 120,675
-------------
241,937
-------------
BIOTECHNOLOGY -- 2.9%
1,388 AbbVie, Inc. 118,965
516 Amgen, Inc. 103,061
422 Biogen, Inc. (a) 130,140
1,899 Gilead Sciences, Inc. 131,715
-------------
483,881
-------------
CAPITAL MARKETS -- 3.2%
2,406 Bank of New York Mellon (The)
Corp. 95,999
243 BlackRock, Inc. 112,511
521 Goldman Sachs Group (The), Inc. 104,601
6,937 Invesco Ltd. 99,893
2,417 Morgan Stanley 108,838
-------------
521,842
-------------
CHEMICALS -- 2.5%
1,676 Albemarle Corp. 137,181
2,338 Dow, Inc. 94,478
2,011 DuPont de Nemours, Inc. 86,272
5,891 Mosaic (The) Co. 100,324
-------------
418,255
-------------
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT
-- 1.9%
2,610 Cisco Systems, Inc. $ 104,217
899 F5 Networks, Inc. (a) 107,835
5,094 Juniper Networks, Inc. 108,095
-------------
320,147
-------------
CONSTRUCTION & ENGINEERING
-- 0.7%
3,049 Quanta Services, Inc. 116,258
-------------
CONSUMER FINANCE -- 1.3%
993 American Express Co. 109,161
1,228 Capital One Financial Corp. 108,383
-------------
217,544
-------------
CONTAINERS & PACKAGING -- 0.6%
3,258 Sealed Air Corp. 98,750
-------------
DIVERSIFIED FINANCIAL SERVICES
-- 0.7%
544 Berkshire Hathaway, Inc.,
Class B (a) 112,249
-------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 2.1%
3,136 AT&T, Inc. 110,450
9,698 CenturyLink, Inc. 117,055
2,054 Verizon Communications, Inc. 111,245
-------------
338,750
-------------
ELECTRIC UTILITIES -- 4.4%
1,368 Duke Energy Corp. 125,445
2,704 Exelon Corp. 116,569
508 NextEra Energy, Inc. 128,402
3,302 NRG Energy, Inc. 109,659
1,389 Pinnacle West Capital Corp. 124,302
1,963 Southern (The) Co. 118,487
-------------
722,864
-------------
ELECTRICAL EQUIPMENT -- 0.6%
1,597 Emerson Electric Co. 102,384
-------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 1.9%
2,329 FLIR Systems, Inc. 98,913
855 IPG Photonics Corp. (a) 109,132
477 Zebra Technologies Corp.,
Class A (a) 100,633
-------------
308,678
-------------
ENERGY EQUIPMENT & SERVICES
-- 0.5%
3,079 Schlumberger Ltd. 83,410
-------------
ENTERTAINMENT -- 2.1%
1,723 Live Nation Entertainment,
Inc. (a) 104,707
369 Netflix, Inc. (a) 136,172
840 Walt Disney (The) Co. 98,826
-------------
339,705
-------------
|
See Notes to Financial Statements Page 9
EQUITYCOMPASS RISK MANAGER ETF (ERM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
EQUITY REAL ESTATE INVESTMENT
TRUSTS -- 3.4%
2,404 Apartment Investment &
Management Co., Class A $ 115,007
3,984 Iron Mountain, Inc. 121,154
6,230 Kimco Realty Corp. 108,091
855 Simon Property Group, Inc. 105,233
1,375 SL Green Realty Corp. 107,855
-------------
557,340
-------------
FOOD & STAPLES RETAILING -- 2.0%
424 Costco Wholesale Corp. 119,204
2,083 Walgreens Boots Alliance, Inc. 95,318
1,059 Walmart, Inc. 114,033
-------------
328,555
-------------
FOOD PRODUCTS -- 1.3%
4,021 Kraft Heinz (The) Co. 99,600
2,291 Mondelez International, Inc.,
Class A 120,965
-------------
220,565
-------------
HEALTH CARE EQUIPMENT
& SUPPLIES -- 2.6%
1,433 Abbott Laboratories 110,384
682 ABIOMED, Inc. (a) 102,477
787 Danaher Corp. 113,785
1,073 Medtronic PLC 108,019
-------------
434,665
-------------
HEALTH CARE PROVIDERS & SERVICES
-- 2.7%
1,675 CVS Health Corp. 99,126
1,639 DaVita, Inc. (a) 127,219
1,821 Henry Schein, Inc. (a) 110,972
425 UnitedHealth Group, Inc. 108,358
-------------
445,675
-------------
HOTELS, RESTAURANTS & LEISURE
-- 1.4%
610 McDonald's Corp. 118,444
1,406 Starbucks Corp. 110,272
-------------
228,716
-------------
HOUSEHOLD PRODUCTS -- 1.4%
1,820 Colgate-Palmolive Co. 122,977
1,004 Procter & Gamble (The) Co. 113,683
-------------
236,660
-------------
INDUSTRIAL CONGLOMERATES -- 2.0%
694 3M Co. 103,572
10,286 General Electric Co. 111,912
699 Honeywell International, Inc. 113,357
-------------
328,841
-------------
INSURANCE -- 3.2%
1,096 Allstate (The) Corp. 115,354
2,417 American International Group,
Inc. 101,901
929 Assurant, Inc. 112,028
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
INSURANCE (CONTINUED)
2,403 MetLife, Inc. $ 102,656
4,294 Unum Group 100,093
-------------
532,032
-------------
INTERACTIVE MEDIA & SERVICES
-- 1.4%
88 Alphabet, Inc., Class A (a) 117,854
575 Facebook, Inc., Class A (a) 110,670
-------------
228,524
-------------
INTERNET & DIRECT MARKETING RETAIL
-- 1.3%
64 Amazon.com, Inc. (a) 120,560
60 Booking Holdings, Inc. (a) 101,740
-------------
222,300
-------------
IT SERVICES -- 8.8%
603 Accenture PLC, Class A 108,896
1,357 Akamai Technologies, Inc. (a) 117,394
1,122 Alliance Data Systems Corp. 96,357
984 Broadridge Financial Solutions,
Inc. 102,690
3,435 DXC Technology Co. 82,818
780 Gartner, Inc. (a) 100,924
918 International Business Machines
Corp. 119,478
839 Jack Henry & Associates, Inc. 127,310
1,224 Leidos Holdings, Inc. 125,643
407 Mastercard, Inc., Class A 118,132
1,118 PayPal Holdings, Inc. (a) 120,733
648 Visa, Inc., Class A 117,780
4,699 Western Union (The) Co. 105,211
-------------
1,443,366
-------------
LIFE SCIENCES TOOLS & SERVICES
-- 0.7%
375 Thermo Fisher Scientific, Inc. 109,050
-------------
MACHINERY -- 1.2%
842 Caterpillar, Inc. 104,610
2,475 Flowserve Corp. 99,470
-------------
204,080
-------------
MEDIA -- 3.4%
247 Charter Communications, Inc.,
Class A (a) 121,813
2,740 Comcast Corp., Class A 110,778
3,448 DISH Network Corp., Class A (a) 115,577
5,367 Interpublic Group of Cos. (The),
Inc. 114,639
8,468 News Corp., Class A 102,251
-------------
565,058
-------------
MULTILINE RETAIL -- 1.2%
7,013 Macy's, Inc. 92,782
995 Target Corp. 102,485
-------------
195,267
-------------
|
Page 10 See Notes to Financial Statements
EQUITYCOMPASS RISK MANAGER ETF (ERM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
OIL, GAS & CONSUMABLE FUELS
-- 4.0%
7,122 Cabot Oil & Gas Corp. $ 99,209
1,040 Chevron Corp. 97,074
2,257 Cimarex Energy Co. 74,594
1,867 ConocoPhillips 90,400
1,763 Exxon Mobil Corp. 90,689
5,817 Kinder Morgan, Inc. 111,512
2,760 Occidental Petroleum Corp. 90,362
-------------
653,840
-------------
PERSONAL PRODUCTS -- 0.6%
11,374 Coty, Inc., Class A 104,982
-------------
PHARMACEUTICALS -- 5.5%
645 Allergan PLC 122,982
1,922 Bristol-Myers Squibb Co. 113,513
928 Eli Lilly & Co. 117,049
853 Johnson & Johnson 114,712
1,372 Merck & Co., Inc. 105,040
5,810 Mylan N.V. (a) 99,874
2,474 Perrigo Co., PLC 125,407
3,172 Pfizer, Inc. 106,008
-------------
904,585
-------------
ROAD & RAIL -- 0.7%
691 Union Pacific Corp. 110,429
-------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 3.5%
2,085 Intel Corp. 115,759
512 NVIDIA Corp. 138,276
1,104 Qorvo, Inc. (a) 111,040
1,382 QUALCOMM, Inc. 108,211
947 Texas Instruments, Inc. 108,091
-------------
581,377
-------------
SOFTWARE -- 2.2%
368 Adobe, Inc. (a) 127,004
777 Microsoft Corp. 125,882
2,266 Oracle Corp. 112,076
-------------
364,962
-------------
SPECIALTY RETAIL -- 2.3%
567 Home Depot (The), Inc. 123,515
6,833 L Brands, Inc. 148,003
1,031 Lowe's Cos., Inc. 109,874
-------------
381,392
-------------
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 1.9%
411 Apple, Inc. 112,351
1,987 NetApp, Inc. 92,833
3,412 Xerox Holdings Corp. 109,866
-------------
315,050
-------------
TEXTILES, APPAREL & LUXURY GOODS
-- 1.9%
3,298 Capri Holdings Ltd. (a) 85,154
8,528 Hanesbrands, Inc. 112,911
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS
(CONTINUED)
1,208 NIKE, Inc., Class B $ 107,971
-------------
306,036
-------------
TOBACCO -- 1.3%
2,478 Altria Group, Inc. 100,037
1,421 Philip Morris International, Inc. 116,337
-------------
216,374
-------------
TOTAL COMMON STOCKS -- 99.4% 16,390,222
(Cost $17,467,161) -------------
MONEY MARKET FUNDS -- 0.4%
66,884 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class - 1.44% (b) 66,884
(Cost $66,884) -------------
TOTAL INVESTMENTS -- 99.8% 16,457,106
(Cost $17,534,045) (c)
NET OTHER ASSETS AND
LIABILITIES -- 0.2% 37,432
-------------
NET ASSETS -- 100.0% $ 16,494,538
=============
|
(a) Non-income producing security.
(b) Rate shown reflects yield as of February 29, 2020.
(c) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of February 29, 2020, the
aggregate gross unrealized appreciation for all investments in which there
was an excess of value over tax cost was $773,246 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $1,850,185. The net unrealized depreciation was
$1,076,939.
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of February 29,
2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
----------------------------------------
Common Stocks* $16,390,222 $ -- $ --
Money Market
Funds 66,884 -- --
----------------------------------------
Total Investments $16,457,106 $ -- $ --
========================================
|
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 11
EQUITYCOMPASS TACTICAL RISK MANAGER ETF (TERM)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS -- 99.4%
AEROSPACE & DEFENSE -- 3.2%
545 Boeing (The) Co. $ 149,935
1,019 General Dynamics Corp. 162,724
443 Lockheed Martin Corp. 163,852
810 Raytheon Co. 152,734
1,203 United Technologies Corp. 157,100
-------------
786,345
-------------
AIR FREIGHT & LOGISTICS -- 1.3%
1,190 FedEx Corp. 167,992
1,588 United Parcel Service, Inc.,
Class B 143,698
-------------
311,690
-------------
AUTOMOBILES -- 1.8%
20,018 Ford Motor Co. 139,325
5,234 General Motors Co. 159,637
5,106 Harley-Davidson, Inc. 155,580
-------------
454,542
-------------
BANKS -- 4.3%
5,301 Bank of America Corp. 151,079
2,328 Citigroup, Inc. 147,735
1,349 JPMorgan Chase & Co. 156,632
11,254 People's United Financial, Inc. 157,444
3,205 U.S. Bancorp 148,840
3,494 Wells Fargo & Co. 142,730
3,617 Zions Bancorp N.A. 144,499
-------------
1,048,959
-------------
BEVERAGES -- 1.5%
3,384 Coca-Cola (The) Co. 181,010
1,366 PepsiCo, Inc. 180,353
-------------
361,363
-------------
BIOTECHNOLOGY -- 2.9%
2,073 AbbVie, Inc. 177,677
770 Amgen, Inc. 153,792
630 Biogen, Inc. (a) 194,286
2,839 Gilead Sciences, Inc. 196,913
-------------
722,668
-------------
CAPITAL MARKETS -- 3.2%
3,586 Bank of New York Mellon (The)
Corp. 143,081
362 BlackRock, Inc. 167,610
776 Goldman Sachs Group (The), Inc. 155,798
10,336 Invesco Ltd. 148,838
3,602 Morgan Stanley 162,198
-------------
777,525
-------------
CHEMICALS -- 2.5%
2,506 Albemarle Corp. 205,116
3,486 Dow, Inc. 140,869
2,998 DuPont de Nemours, Inc. 128,614
8,788 Mosaic (The) Co. 149,660
-------------
624,259
-------------
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT
-- 1.9%
3,893 Cisco Systems, Inc. $ 155,447
1,342 F5 Networks, Inc. (a) 160,973
7,595 Juniper Networks, Inc. 161,166
-------------
477,586
-------------
CONSTRUCTION & ENGINEERING
-- 0.7%
4,533 Quanta Services, Inc. 172,843
-------------
CONSUMER FINANCE -- 1.3%
1,481 American Express Co. 162,806
1,830 Capital One Financial Corp. 161,516
-------------
324,322
-------------
CONTAINERS & PACKAGING -- 0.6%
4,858 Sealed Air Corp. 147,246
-------------
DIVERSIFIED FINANCIAL SERVICES
-- 0.7%
812 Berkshire Hathaway, Inc.,
Class B (a) 167,548
-------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 2.1%
4,683 AT&T, Inc. 164,935
14,433 CenturyLink, Inc. 174,206
3,066 Verizon Communications, Inc. 166,055
-------------
505,196
-------------
ELECTRIC UTILITIES -- 4.4%
2,041 Duke Energy Corp. 187,160
4,033 Exelon Corp. 173,863
760 NextEra Energy, Inc. 192,097
4,937 NRG Energy, Inc. 163,958
2,073 Pinnacle West Capital Corp. 185,513
2,928 Southern (The) Co. 176,734
-------------
1,079,325
-------------
ELECTRICAL EQUIPMENT -- 0.6%
2,382 Emerson Electric Co. 152,710
-------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 1.9%
3,473 FLIR Systems, Inc. 147,498
1,275 IPG Photonics Corp. (a) 162,741
711 Zebra Technologies Corp.,
Class A (a) 150,000
-------------
460,239
-------------
ENERGY EQUIPMENT & SERVICES
-- 0.5%
4,588 Schlumberger Ltd. 124,289
-------------
ENTERTAINMENT -- 2.1%
2,570 Live Nation Entertainment,
Inc. (a) 156,179
552 Netflix, Inc. (a) 203,704
1,255 Walt Disney (The) Co. 147,651
-------------
507,534
-------------
|
Page 12 See Notes to Financial Statements
EQUITYCOMPASS TACTICAL RISK MANAGER ETF (TERM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
EQUITY REAL ESTATE INVESTMENT
TRUSTS -- 3.4%
3,596 Apartment Investment &
Management Co., Class A $ 172,033
5,951 Iron Mountain, Inc. 180,970
9,299 Kimco Realty Corp. 161,338
1,277 Simon Property Group, Inc. 157,173
2,053 SL Green Realty Corp. 161,037
-------------
832,551
-------------
FOOD & STAPLES RETAILING -- 2.0%
632 Costco Wholesale Corp. 177,681
3,108 Walgreens Boots Alliance, Inc. 142,222
1,580 Walmart, Inc. 170,134
-------------
490,037
-------------
FOOD PRODUCTS -- 1.3%
6,003 Kraft Heinz (The) Co. 148,694
3,417 Mondelez International, Inc.,
Class A 180,418
-------------
329,112
-------------
HEALTH CARE EQUIPMENT
& SUPPLIES -- 2.6%
2,138 Abbott Laboratories 164,690
1,016 ABIOMED, Inc. (a) 152,664
1,175 Danaher Corp. 169,881
1,601 Medtronic PLC 161,173
-------------
648,408
-------------
HEALTH CARE PROVIDERS & SERVICES
-- 2.7%
2,500 CVS Health Corp. 147,950
2,445 DaVita, Inc. (a) 189,781
2,714 Henry Schein, Inc. (a) 165,391
634 UnitedHealth Group, Inc. 161,645
-------------
664,767
-------------
HOTELS, RESTAURANTS & LEISURE
-- 1.4%
910 McDonald's Corp. 176,695
2,099 Starbucks Corp. 164,624
-------------
341,319
-------------
HOUSEHOLD PRODUCTS -- 1.4%
2,716 Colgate-Palmolive Co. 183,520
1,498 Procter & Gamble (The) Co. 169,619
-------------
353,139
-------------
INDUSTRIAL CONGLOMERATES -- 2.0%
1,035 3M Co. 154,463
15,318 General Electric Co. 166,660
1,041 Honeywell International, Inc. 168,819
-------------
489,942
-------------
INSURANCE -- 3.2%
1,634 Allstate (The) Corp. 171,978
3,598 American International Group,
Inc. 151,692
1,384 Assurant, Inc. 166,897
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
INSURANCE (CONTINUED)
3,582 MetLife, Inc. $ 153,023
6,393 Unum Group 149,021
-------------
792,611
-------------
INTERACTIVE MEDIA & SERVICES
-- 1.4%
131 Alphabet, Inc., Class A (a) 175,442
859 Facebook, Inc., Class A (a) 165,332
-------------
340,774
-------------
INTERNET & DIRECT MARKETING RETAIL
-- 1.3%
96 Amazon.com, Inc. (a) 180,840
89 Booking Holdings, Inc. (a) 150,914
-------------
331,754
-------------
IT SERVICES -- 8.8%
899 Accenture PLC, Class A 162,350
2,027 Akamai Technologies, Inc. (a) 175,356
1,674 Alliance Data Systems Corp. 143,763
1,471 Broadridge Financial Solutions,
Inc. 153,514
5,124 DXC Technology Co. 123,540
1,164 Gartner, Inc. (a) 150,610
1,370 International Business Machines
Corp. 178,306
1,252 Jack Henry & Associates, Inc. 189,978
1,827 Leidos Holdings, Inc. 187,542
608 Mastercard, Inc., Class A 176,472
1,670 PayPal Holdings, Inc. (a) 180,343
970 Visa, Inc., Class A 176,307
7,018 Western Union (The) Co. 157,133
-------------
2,155,214
-------------
LIFE SCIENCES TOOLS & SERVICES
-- 0.7%
560 Thermo Fisher Scientific, Inc. 162,848
-------------
MACHINERY -- 1.2%
1,256 Caterpillar, Inc. 156,045
3,689 Flowserve Corp. 148,261
-------------
304,306
-------------
MEDIA -- 3.4%
367 Charter Communications, Inc.,
Class A (a) 180,993
4,091 Comcast Corp., Class A 165,399
5,143 DISH Network Corp., Class A (a) 172,393
8,004 Interpublic Group of Cos. (The),
Inc. 170,966
12,640 News Corp., Class A 152,628
-------------
842,379
-------------
MULTILINE RETAIL -- 1.2%
10,456 Macy's, Inc. 138,333
1,485 Target Corp. 152,955
-------------
291,288
-------------
|
See Notes to Financial Statements Page 13
EQUITYCOMPASS TACTICAL RISK MANAGER ETF (TERM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
OIL, GAS & CONSUMABLE FUELS
-- 4.0%
10,607 Cabot Oil & Gas Corp. $ 147,756
1,551 Chevron Corp. 144,770
3,369 Cimarex Energy Co. 111,345
2,784 ConocoPhillips 134,801
2,631 Exxon Mobil Corp. 135,339
8,680 Kinder Morgan, Inc. 166,396
4,109 Occidental Petroleum Corp. 134,529
-------------
974,936
-------------
PERSONAL PRODUCTS -- 0.6%
16,943 Coty, Inc., Class A 156,384
-------------
PHARMACEUTICALS -- 5.5%
963 Allergan PLC 183,615
2,869 Bristol-Myers Squibb Co. 169,443
1,386 Eli Lilly & Co. 174,816
1,273 Johnson & Johnson 171,193
2,050 Merck & Co., Inc. 156,948
8,667 Mylan N.V. (a) 148,986
3,692 Perrigo Co., PLC 187,148
4,736 Pfizer, Inc. 158,277
-------------
1,350,426
-------------
ROAD & RAIL -- 0.7%
1,030 Union Pacific Corp. 164,604
-------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 3.5%
3,112 Intel Corp. 172,778
765 NVIDIA Corp. 206,604
1,647 Qorvo, Inc. (a) 165,655
2,060 QUALCOMM, Inc. 161,298
1,413 Texas Instruments, Inc. 161,280
-------------
867,615
-------------
SOFTWARE -- 2.2%
551 Adobe, Inc. (a) 190,161
1,161 Microsoft Corp. 188,094
3,386 Oracle Corp. 167,471
-------------
545,726
-------------
SPECIALTY RETAIL -- 2.3%
845 Home Depot (The), Inc. 184,075
10,181 L Brands, Inc. 220,520
1,538 Lowe's Cos., Inc. 163,905
-------------
568,500
-------------
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 1.9%
613 Apple, Inc. 167,570
2,964 NetApp, Inc. 138,478
5,093 Xerox Holdings Corp. 163,994
-------------
470,042
-------------
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS
-- 1.9%
4,910 Capri Holdings Ltd. (a) $ 126,776
12,723 Hanesbrands, Inc. 168,453
1,803 NIKE, Inc., Class B 161,152
-------------
456,381
-------------
TOBACCO -- 1.3%
3,697 Altria Group, Inc. 149,248
2,121 Philip Morris International, Inc. 173,646
-------------
322,894
-------------
TOTAL COMMON STOCKS -- 99.4% 24,454,146
(Cost $26,142,521) -------------
MONEY MARKET FUNDS -- 0.4%
91,183 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class - 1.44% (b) 91,183
(Cost $91,183) -------------
TOTAL INVESTMENTS -- 99.8% 24,545,329
(Cost $26,233,704) (c)
NET OTHER ASSETS AND
LIABILITIES -- 0.2% 53,801
-------------
NET ASSETS -- 100.0% $ 24,599,130
=============
|
(a) Non-income producing security.
(b) Rate shown reflects yield as of February 29, 2020.
(c) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of February 29, 2020, the
aggregate gross unrealized appreciation for all investments in which there
was an excess of value over tax cost was $1,054,549 and the aggregate
gross unrealized depreciation for all investments in which there was an
excess of tax cost over value was $2,742,924. The net unrealized
depreciation was $1,688,375.
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of February 29,
2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
----------------------------------------
Common Stocks* $24,454,146 $ -- $ --
Money Market
Funds 91,183 -- --
----------------------------------------
Total Investments $24,545,329 $ -- $ --
========================================
|
* See Portfolio of Investments for industry breakout.
Page 14 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF ASSETS AND LIABILITIES
FEBRUARY 29, 2020 (UNAUDITED)
EQUITYCOMPASS
EQUITYCOMPASS TACTICAL
RISK MANAGER ETF RISK MANAGER ETF
(ERM) (TERM)
---------------- ----------------
ASSETS:
Investments, at value.................................................. $ 16,457,106 $ 24,545,329
Dividends receivable................................................... 47,330 68,037
---------------- ----------------
Total Assets........................................................ 16,504,436 24,613,366
---------------- ----------------
LIABILITIES:
Investment advisory fees payable....................................... 9,898 14,236
---------------- ----------------
Total Liabilities................................................... 9,898 14,236
---------------- ----------------
NET ASSETS............................................................. $ 16,494,538 $ 24,599,130
================ ================
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $ 20,887,152 $ 39,044,644
Par value.............................................................. 8,500 14,500
Accumulated distributable earnings (loss).............................. (4,401,114) (14,460,014)
---------------- ----------------
NET ASSETS............................................................. $ 16,494,538 $ 24,599,130
================ ================
NET ASSET VALUE, per share............................................. $ 19.41 $ 16.96
================ ================
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share).............................. 850,002 1,450,002
================ ================
Investments, at cost................................................... $ 17,534,045 $ 26,233,704
================ ================
|
See Notes to Financial Statements Page 15
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 29, 2020 (UNAUDITED)
EQUITYCOMPASS
EQUITYCOMPASS TACTICAL
RISK MANAGER ETF RISK MANAGER ETF
(ERM) (TERM)
---------------- ----------------
INVESTMENT INCOME:
Dividends.............................................................. $ 263,158 $ 387,282
---------------- ----------------
Total investment income............................................. 263,158 387,282
---------------- ----------------
EXPENSES:
Investment advisory fees............................................... 65,103 95,539
---------------- ----------------
Total expenses...................................................... 65,103 95,539
---------------- ----------------
NET INVESTMENT INCOME (LOSS)........................................... 198,055 291,743
---------------- ----------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments......................................................... 16,650 131,624
In-kind redemptions................................................. 442,657 468,282
---------------- ----------------
Net realized gain (loss)............................................... 459,307 599,906
---------------- ----------------
Net change in unrealized appreciation (depreciation) on:
Investments......................................................... (330,407) (402,057)
---------------- ----------------
Net change in unrealized appreciation (depreciation)................... (330,407) (402,057)
---------------- ----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ 128,900 197,849
---------------- ----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ 326,955 $ 489,592
================ ================
|
Page 16 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF CHANGES IN NET ASSETS
EQUITYCOMPASS EQUITYCOMPASS
RISK MANAGER ETF TACTICAL RISK MANAGER ETF
(ERM) (TERM)
-------------------------------- --------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR
2/29/2020 ENDED 2/29/2020 ENDED
(UNAUDITED) 8/31/2019 (UNAUDITED) 8/31/2019
--------------- --------------- --------------- ---------------
OPERATIONS:
Net investment income (loss).............................. $ 198,055 $ 511,567 $ 291,743 $ 784,765
Net realized gain (loss).................................. 459,307 (1,899,156) 599,906 (10,612,945)
Net change in unrealized appreciation (depreciation)...... (330,407) (2,924,408) (402,057) (6,042,566)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from operations........................................ 326,955 (4,311,997) 489,592 (15,870,746)
--------------- --------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations..................................... (255,300) (605,746) (374,021) (832,241)
--------------- --------------- --------------- ---------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................. -- 9,146,356 -- 17,687,113
Cost of shares redeemed................................... (4,246,498) (11,547,316) (5,627,439) (32,708,789)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from shareholder transactions.......................... (4,246,498) (2,400,960) (5,627,439) (15,021,676)
--------------- --------------- --------------- ---------------
Total increase (decrease) in net assets................... (4,174,843) (7,318,703) (5,511,868) (31,724,663)
NET ASSETS:
Beginning of period....................................... 20,669,381 27,988,084 30,110,998 61,835,661
--------------- --------------- --------------- ---------------
End of period............................................. $ 16,494,538 $ 20,669,381 $ 24,599,130 $ 30,110,998
=============== =============== =============== ===============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................... 1,050,002 1,200,002 1,750,002 2,650,002
Shares sold............................................... -- 400,000 -- 850,000
Shares redeemed........................................... (200,000) (550,000) (300,000) (1,750,000)
--------------- --------------- --------------- ---------------
Shares outstanding, end of period......................... 850,002 1,050,002 1,450,002 1,750,002
=============== =============== =============== ===============
|
See Notes to Financial Statements Page 17
FIRST TRUST EXCHANGE-TRADED FUND VIII
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
EQUITYCOMPASS RISK MANAGER ETF (ERM)
SIX MONTHS
ENDED YEAR ENDED AUGUST 31 PERIOD
2/29/2020 ----------------------------- ENDED
(UNAUDITED) 2019 2018 8/31/2017 (a)
------------- ------------- ------------- -------------
Net asset value, beginning of period............................ $ 19.69 $ 23.32 $ 20.50 $ 20.05
----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).................................... 0.22 0.39 0.30 0.10
Net realized and unrealized gain (loss)......................... (0.24) (3.56) 2.80 0.39
----------- ----------- ----------- -----------
Total from investment operations................................ (0.02) (3.17) 3.10 0.49
----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income........................................... (0.26) (0.46) (0.28) (0.04)
Net realized gain............................................... -- (0.00) (b) -- --
----------- ----------- ----------- -----------
Total distributions............................................. (0.26) (0.46) (0.28) (0.04)
----------- ----------- ----------- -----------
Net asset value, end of period.................................. $ 19.41 $ 19.69 $ 23.32 $ 20.50
=========== =========== =========== ===========
TOTAL RETURN (c)................................................ (0.19)% (13.68)% 15.23% 2.44%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)............................ $ 16,495 $ 20,669 $ 27,988 $ 10,250
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets (d)............... 0.65% (e) 0.65% 0.65% 0.65% (e)
Ratio of net expenses to average net assets (d)................. 0.65% (e) 0.59% 0.64% 0.65% (e)
Ratio of net investment income (loss) to average net assets..... 1.98% (e) 1.89% 1.52% 1.81% (e)
Portfolio turnover rate (f)..................................... 28% 207% 121% 8%
|
EQUITYCOMPASS TACTICAL RISK MANAGER ETF (TERM)
SIX MONTHS
ENDED YEAR ENDED AUGUST 31 PERIOD
2/29/2020 ----------------------------- ENDED
(UNAUDITED) 2019 2018 8/31/2017 (a)
------------- ------------- ------------- -------------
Net asset value, beginning of period............................ $ 17.21 $ 23.33 $ 20.50 $ 20.05
----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).................................... 0.19 0.34 0.29 0.09
Net realized and unrealized gain (loss)......................... (0.21) (6.13) 2.81 0.40
----------- ----------- ----------- -----------
Total from investment operations................................ (0.02) (5.79) 3.10 0.49
----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income........................................... (0.23) (0.33) (0.27) (0.04)
----------- ----------- ----------- -----------
Net asset value, end of period.................................. $ 16.96 $ 17.21 $ 23.33 $ 20.50
=========== =========== =========== ===========
TOTAL RETURN (c)................................................ (0.24)% (24.98)% 15.24% 2.44%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)............................ $ 24,599 $ 30,111 $ 61,836 $ 22,551
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets (d)............... 0.65% (e) 0.65% 0.65% 0.65% (e)
Ratio of net expenses to average net assets (d)................. 0.65% (e) 0.59% 0.64% 0.65% (e)
Ratio of net investment income (loss) to average net assets..... 1.98% (e) 1.65% 1.52% 1.85% (e)
Portfolio turnover rate (f)..................................... 28% 317% 120% 10%
|
(a) Inception date is April 10, 2017, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
(b) Amount is less than $0.01.
(c) 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. The total returns would have been lower if certain
fees had not been waived by the Advisor.
(d) The Fund indirectly bears its proportionate share of fees and expenses
incurred by the underlying funds in which the Fund invests. This ratio
does not include these indirect fees and expenses.
(e) Annualized.
(f) 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 18 See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
1. ORGANIZATION
First Trust Exchange-Traded Fund VIII (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on February 22,
2016, 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 sixteen funds that are offering shares. This
report covers the two funds listed below. The shares of each fund are listed and
traded on the NYSE Arca, Inc. ("NYSE Arca").
EquityCompass Risk Manager ETF - (NYSE Arca ticker "ERM")
EquityCompass Tactical Risk Manager ETF - (NYSE Arca ticker "TERM")
Each fund represents a separate series of shares of beneficial interest in the
Trust (each a "Fund" and collectively, the "Funds"). Unlike conventional mutual
funds, each Fund issues and redeems shares on a continuous basis, at net asset
value ("NAV"), only in large specified blocks consisting of 50,000 shares called
a "Creation Unit." Each Fund's Creation Units are generally issued and redeemed
in-kind for securities in which the Fund invests, and in certain circumstances,
for cash, and only to and from broker-dealers and large institutional investors
that have entered into participation agreements. Except when aggregated in
Creation Units, each Fund's shares are not redeemable securities.
Each Fund is an actively managed exchange-traded fund. ERM's and TERM's primary
investment objective is to seek to provide long term capital appreciation with
capital preservation as a secondary objective. Each Fund seeks to achieve its
investment objectives by investing, under normal market conditions, in equity
securities of companies domiciled in the U.S. or listed on a U.S. exchange.
During periods when the U.S. equity market is determined to be unfavorable by
the Fund's sub-advisor, EquityCompass Investment Management, LLC (the
"Sub-Advisor"), each Fund may invest all or a portion of its assets in cash,
cash equivalents, money market funds and/or short-term fixed income
exchange-traded funds ("ETFs"), or each Fund may invest all or a portion of its
assets in a single short-term fixed income ETF, the First Trust Enhanced Short
Maturity ETF (FTSM). Certain of the ETFs in which each Fund invests may be
advised by First Trust Advisors L.P. ("First Trust" or the "Advisor"). During an
unfavorable market period, TERM may also invest in inverse ETFs which seek to
provide investment results that match a negative return of the performance of an
underlying index like the S&P 500(R).
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds are each considered an investment company and follow accounting and
reporting guidance under Financial Accounting Standards Board Accounting
Standards Codification Topic 946, "Financial Services-Investment Companies." The
following is a summary of significant accounting policies consistently followed
by the Funds in the preparation of the financial statements. The preparation of
the financial statements in accordance with accounting principles generally
accepted in the United States of America ("U.S. GAAP") requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
Each Fund's NAV is determined daily as of the close of regular trading on the
New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day
the NYSE is open for trading. If the NYSE closes early on a valuation day, the
NAV is determined as of that time. Each 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.
Each 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 Funds'
investment advisor, First Trust, in accordance with valuation procedures adopted
by the Trust's Board of Trustees, and in accordance with provisions of the 1940
Act. Investments valued by the Advisor's Pricing Committee, if any, are
footnoted as such in the footnotes to the Portfolio of Investments. Each Fund's
investments are valued as follows:
Common stocks and other equity securities listed on any national or
foreign exchange (excluding The Nasdaq Stock Market LLC ("Nasdaq") and the
London Stock Exchange Alternative Investment Market ("AIM")) are valued at
the last sale price on the exchange on which they are principally traded
or, for Nasdaq and AIM securities, the official closing price. Securities
traded on more than one securities exchange are valued at the last sale
price or official closing price, as applicable, at the close of the
securities exchange representing the principal market for such securities.
Page 19
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
Securities traded in an over-the-counter market are fair valued at the
mean of their most recent bid and asked price, if available, and otherwise
at their closing bid price.
Shares of open-end funds are valued at fair value which is based on NAV
per share.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Trust's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities
which may not be publicly sold without registration under the Securities Act of
1933, as amended) for which a third-party pricing service is unable to provide a
market price; securities whose trading has been formally suspended; a security
whose market or fair value price is not available from a pre-established pricing
source; a security with respect to which an event has occurred that is likely to
materially affect the value of the security after the market has closed but
before the calculation of a Fund's NAV or make it difficult or impossible to
obtain a reliable market quotation; and a security whose price, as provided by
the third-party pricing service, does not reflect the security's fair value. As
a general principle, the current fair value of a security would appear to be the
amount which the owner might reasonably expect to receive for the security upon
its current sale. When fair value prices are used, generally they will differ
from market quotations or official closing prices on the applicable exchanges. A
variety of factors may be considered in determining the fair value of such
securities, including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or third-party pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect
the value of the security.
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 February 29, 2020, 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.
C. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income of each Fund, if any, are declared and paid
quarterly by each Fund. Distributions of net realized gains earned by each Fund,
if any, are distributed at least annually.
Page 20
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
Distributions from net investment income and realized capital gains are
determined in accordance with federal income tax regulations, which may differ
from U.S. GAAP. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These permanent differences are primarily due to the varying
treatment of income and gain/loss on portfolio securities held by the 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 August 31, 2019 was as follows:
Distributions Distributions Distributions
paid from paid from paid from
Ordinary Capital Return of
Income Gains Capital
------------- ------------- -------------
EquityCompass Risk Manager ETF $ 599,411 $ 6,335 $ --
EquityCompass Tactical Risk Manager ETF 832,241 -- --
|
As of August 31, 2019, the components of distributable earnings on a tax basis
for each Fund were as follows:
Accumulated Net
Undistributed Capital and Unrealized
Ordinary Other Appreciation
Income Gain (Loss) (Depreciation)
------------- ------------- -------------
EquityCompass Risk Manager ETF $ 106,391 $ (3,821,259) $ (757,901)
EquityCompass Tactical Risk Manager ETF 152,805 (13,442,011) (1,286,379)
|
D. INCOME TAXES
Each Fund intends to continue to qualify as a regulated investment company by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no
provision has been made for federal and state income taxes. However, due to the
timing and amount of distributions, each Fund may be subject to an excise tax of
4% of the amount by which approximately 98% of each Fund's taxable income
exceeds the distributions from such taxable income for the calendar year.
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. Taxable years ending 2017, 2018
and 2019 remain open to federal and state audit. As of February 29, 2020,
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.
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 August 31, 2019, for
federal income tax purposes, each applicable Fund had a capital loss
carryforward available that is shown in the table below, to the extent provided
by regulations, to offset future capital gains. To the extent that these loss
carryforwards are used to offset future capital gains, it is probable that the
capital gains so offset will not be distributed to each applicable Fund's
shareholders.
Non-Expiring Capital Loss
Carryforwards
-------------------------
EquityCompass Risk Manager ETF $ 3,821,259
EquityCompass Tactical Risk Manager ETF 13,442,011
|
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 August 31, 2019, the Funds had no
net late year ordinary or capital losses.
E. EXPENSES
Expenses, other than the investment advisory fee and other excluded expenses,
are paid by the Advisor (see Note 3).
Page 21
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
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 supervising the selection and 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 Funds and First Trust have retained the Sub-Advisor to provide
recommendations to the Advisor regarding the selection and allocation of the
securities in each Fund's investment portfolio. Pursuant to the Investment
Management Agreement between the Trust and the Advisor, First Trust manages the
investment of each Fund's assets and is responsible for the expenses of each
Fund including the cost of transfer agency, sub-advisory, custody, fund
administration, legal, audit, other services and license fees, but excluding fee
payments under the Investment Management Agreement, interest, taxes, pro rata
share of fees and expenses attributable to investments in other investment
companies ("acquired fund fees and expenses"), brokerage commissions and other
expenses connected with the execution of portfolio transactions, distribution
and service fees payable pursuant to a Rule 12b-1 plan, if any, and
extraordinary expenses. The Funds have each agreed to pay First Trust an annual
unitary management fee equal to 0.65% of its average daily net assets. In
addition, each Fund incurs acquired fund fees and expenses. The total of unitary
management fee and acquired fund fees and expenses represents each Fund's total
annual operating expenses.
Pursuant to a contractual agreement between the Trust, on behalf of the Funds,
and First Trust, the management fees paid to First Trust will be reduced by the
proportional amount of the acquired fund fees and expenses of the shares of
investment companies held by the Funds so that the Funds would not bear the
indirect costs of holding them, provided that the investment companies are
advised by First Trust. This contractual agreement shall continue until the
earlier of (i) its termination at the direction of the Trust's Board of Trustees
or (ii) the termination of the Funds' management agreement with First Trust.
First Trust does not have the right to recover the waived fees on the shares of
investment companies advised by First Trust.
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
each Fund. As custodian, BNYM is responsible for custody of each Fund's assets.
As fund accountant and administrator, BNYM is responsible for maintaining the
books and records of each Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for each Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
a defined-outcome fund or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen 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
Chairmen 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 six months ended February 29, 2020, 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
------------ ------------
EquityCompass Risk Manager ETF $ 5,463,802 $ 5,536,873
EquityCompass Tactical Risk Manager ETF 7,901,611 8,011,090
|
For the six months ended February 29, 2020, the cost of in-kind purchases and
proceeds from in-kind sales for each Fund were as follows:
Purchases Sales
------------ ------------
EquityCompass Risk Manager ETF $ -- $ 4,221,613
EquityCompass Tactical Risk Manager ETF -- 5,591,252
|
Page 22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
5. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
Shares are created and redeemed by each Fund only in Creation Unit size
aggregations of 50,000 shares in transactions with broker-dealers or large
institutional investors that have entered into a participation agreement (an
"Authorized Participant"). In order to purchase Creation Units of each Fund, an
Authorized Participant must deposit (i) a designated portfolio of securities
determined by First Trust (the "Deposit Securities") and generally make or
receive a cash payment referred to as the "Cash Component," which is an amount
equal to the difference between the NAV of the Fund Shares (per Creation Unit
Aggregation) and the market value of the Deposit Securities, and/or (ii) cash in
lieu of all or a portion of the Deposit Securities. If the Cash Component is a
positive number (i.e., the NAV per Creation Unit Aggregation exceeds the Deposit
Amount), the Authorized Participant will deliver the Cash Component. If the Cash
Component is a negative number (i.e., the NAV per Creation Unit Aggregation is
less than the Deposit Amount), the Authorized Participant will receive the Cash
Component. Authorized Participants purchasing Creation Units must pay to BNYM,
as transfer agent, a creation transaction fee (the "Creation Transaction Fee")
regardless of the number of Creation Units purchased in the transaction. The
Creation Transaction Fee may vary and is based on the composition of the
securities included in each Fund's portfolio and the countries in which the
transactions are settled. The Creation Transaction Fee may increase or decrease
with changes in each Fund's portfolio. The price for each Creation Unit will
equal the daily NAV per share 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 or stamp taxes. When a Fund permits an Authorized
Participant to substitute cash or a different security in lieu of depositing one
or more of the requisite Deposit Securities, the Authorized Participant may also
be assessed an amount to cover the cost of purchasing the Deposit Securities
and/or disposing of the substituted securities, including 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 such Deposit
Securities and/or substitute securities.
Authorized Participants redeeming Creation Units must pay to BNYM, as transfer
agent, a redemption transaction fee (the "Redemption Transaction Fee"),
regardless of the number of Creation Units redeemed in the transaction. The
Redemption Transaction Fee may vary and is based on the composition of the
securities included in each Fund's portfolio and the countries in which the
transactions are settled. The Redemption Transaction Fee may increase or
decrease with changes in each Fund's portfolio. Each Fund reserves the right to
effect redemptions in cash. An Authorized Participant may request cash
redemption in lieu of securities; however, a Fund may, in its discretion, reject
any such request.
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 December 31, 2020.
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:
Beginning in December 2019, the outbreak of the respiratory disease designated
as COVID-19 has caused significant volatility and declines in global financial
markets, which have caused losses for investors. The impact of this COVID-19
pandemic may be short-term or may last for an extended period of time and, in
either case, could result in a substantial economic downturn or recession.
Management is continuing to monitor this event.
Page 23
ADDITIONAL INFORMATION
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (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 large
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
not concentrated.
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.
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.
Page 24
ADDITIONAL INFORMATION (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
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 CONSTITUENT RISK. Certain funds may be a constituent of one or more
indices. 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
significantly 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.
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. In 2017, the United Kingdom's
Financial Conduct Authority announced that LIBOR will cease to be available for
use after 2021. The unavailability or replacement of LIBOR may affect the value,
liquidity or return on certain fund investments and may result in costs incurred
in connection with closing out positions and entering into new trades. Any
potential effects of the transition away from LIBOR on the fund or on certain
instruments in which the fund invests can be difficult to ascertain, and they
may vary depending on a variety of factors. Any such effects of the transition
away from LIBOR, as well as other unforeseen effects, could result in losses to
the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are
subject to market fluctuations caused by factors such as general economic
conditions, political events, regulatory or market developments, changes in
interest rates and perceived trends in securities prices. Shares of a fund could
decline in value or underperform other investments as a result of the risk of
loss associated with these market fluctuations. In addition, local, regional or
global events such as war, acts of terrorism, spread of infectious diseases or
other public health issues, recessions, or other events could have a significant
negative impact on a fund and its investments. Such events may affect certain
geographic regions, countries, sectors and industries more significantly than
Page 25
ADDITIONAL INFORMATION (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
others. The outbreak of the respiratory disease designated as COVID-19 in
December 2019 has caused significant volatility and declines in global financial
markets, which have caused losses for investors. The impact of this COVID-19
pandemic may be short term or may last for an extended period of time, and in
either case could result in a substantial economic downturn or recession.
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; lack
of liquidity; currency exchange rates; excessive taxation; government seizure of
assets; 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.
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
Page 26
This page intentionally left blank.
This page intentionally left blank.
FIRST TRUST
First Trust Exchange-Traded Fund VIII
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
INVESTMENT SUB-ADVISOR
EquityCompass Investment Management, LLC
1 South Street, 16th Floor
Baltimore, Maryland 21202
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
[BLANK BACK COVER]
FIRST TRUST
First Trust Exchange-Traded Fund VIII
First Trust Low Duration Strategic Focus ETF (LDSF)
Semi-Annual Report
For the Six Months Ended
February 29, 2020
TABLE OF CONTENTS
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
SEMI-ANNUAL REPORT
FEBRUARY 29, 2020
Shareholder Letter........................................................... 1
Fund Performance Overview.................................................... 2
Portfolio Management......................................................... 4
Understanding Your Fund Expenses............................................. 5
Portfolio of Investments..................................................... 6
Statement of Assets and Liabilities.......................................... 7
Statement of Operations...................................................... 8
Statements of Changes in Net Assets.......................................... 9
Financial Highlights......................................................... 10
Notes to Financial Statements................................................ 11
Additional Information....................................................... 16
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
|
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and its representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the series of First Trust Exchange-Traded Fund VIII (the "Trust") described in
this report (First Trust Low Duration Strategic Focus ETF; hereinafter referred
to as the "Fund") to be materially different from any future results,
performance or achievements expressed or implied by the forward-looking
statements. When evaluating the information included in this report, you are
cautioned not to place undue reliance on these forward-looking statements, which
reflect the judgment of the Advisor and its representatives only as of the date
hereof. We undertake no obligation to publicly revise or update these
forward-looking statements to reflect events and circumstances that arise after
the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that the Fund will achieve its investment objectives. The
Fund is subject to market risk, which is the possibility that the market values
of securities owned by the Fund will decline and that the value of the Fund's
shares may therefore be less than what you paid for them. Accordingly, you can
lose money investing in the Fund. See "Risk Considerations" in the Additional
Information section of this report for a discussion of other risks of investing
in the Fund.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.ftportfolios.com or speak with your financial advisor. Investment returns,
net asset value and share price will fluctuate and Fund shares, when sold, may
be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on the Fund's webpage at www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment in
the Fund. It includes details about the Fund and presents data and analysis that
provide insight into the Fund's performance and investment approach.
The statistical information that follows may help you understand the Fund's
performance compared to that of relevant market benchmarks.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor are just that: informed opinions. They should not be considered to be
promises or advice. The opinions, like the statistics, cover the period through
the date on the cover of this report. The material risks of investing in the
Fund are spelled out in the prospectus, the statement of additional information,
and other Fund regulatory filings.
SHAREHOLDER LETTER
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
FEBRUARY 29, 2020
Dear Shareholders:
First Trust is pleased to provide you with the semi-annual report for the First
Trust Low Duration Strategic Focus ETF (the "Fund"), which contains detailed
information about the Fund for the six months ended February 29, 2020.
To say that much has transpired over the past six months would be an
understatement. Prior to the onset of the coronavirus (COVID-19) in Wuhan, China
this past December, my message to investors would have sounded quite bullish,
focusing on such accomplishments as the progress in the trade negotiations
between the U.S. and China, where a "Phase One" deal was signed into law on
January 15, 2020. The main takeaway from the deal is that China agreed to
purchase an additional $200 billion of goods and services from the U.S. over the
next several years in exchange for the U.S. cutting some of its tariffs on
Chinese goods. The deal marked the first breakthrough since the Trump
Administration launched its new tariff initiative in March 2018. On top of that
news, the S&P 500(R) Index was setting new all-time highs all the way up through
the close of trading on February 19, 2020, the day it peaked.
Unfortunately, the good news has been overshadowed by the escalation and spread
of the COVID-19 pandemic. As of April 16, 2020, this disease had spread to 213
countries, areas or territories, had infected 1,991,562 people (confirmed cases)
and was responsible for 130,885 confirmed deaths, according to the World Health
Organization. These numbers are expected to trend higher in the days and weeks
ahead. A growing number of U.S. state governors and foreign leaders have issued
shelter in place orders to their citizens to help slow the spread of this new
virus. The primary objective in doing so is to slow down the number of cases so
that hospitals and health care workers are not overwhelmed by too many patients.
The cost is high because it requires shutting down large chunks of the economy,
which in turn negatively impacts the financial well-being of workers and
companies. In the U.S., Congress passed a financial stimulus package valued at
$2.0 trillion to help backstop workers and companies in the near-term. The
faster we can end the shutdown, consistent with general health and welfare, the
better, according to Brian Wesbury, Chief Economist at First Trust Advisors L.P.
Here is what we think we know. Brian Wesbury believes the U.S. could experience
a modest decline in real gross domestic product of 1.5% (annualized) in the
first quarter of 2020, followed by a massive decline of 20% (annualized) in the
second quarter. The good news is that he sees the economy growing at a 3.0% and
3.5% annual pace in the third and fourth quarters of 2020, respectively. In
other words, we are expecting a healthy rebound in the second half of this year.
As I noted earlier, the stock market was still at a record high in the third
week of February. From February 19 through March 23, however, the S&P 500(R)
Index posted a total return of -33.79%, putting it in bear market territory
(price decline of 20% or more from the most recent peak). Sorry to say it, but
the nearly 11-year bull market is no more. While we do not have a projection for
where stocks will be at year-end, we do know this: excluding the current bear
market, the S&P 500(R) Index has never failed to recoup all the losses sustained
in any sell-off, pullback, correction or bear market. So, while I am
understandably not bullish on the first half of 2020, I will be a bull once
again after we put the worst of COVID-19 behind us. I continue to urge investors
to stay the course. This too shall pass.
Thank you for giving First Trust the opportunity to play a role in your
financial future. We value our relationship with you and will report on the Fund
again in six months.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
|
Page 1
FUND PERFORMANCE OVERVIEW (UNAUDITED)
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
The First Trust Low Duration Strategic Focus ETF (the "Fund") seeks to generate
current income, with a secondary objective of preservation of capital. Under
normal market conditions, the Fund seeks to achieve its investment objectives by
investing at least 80% of its net assets (including investment borrowings) in a
portfolio of U.S.-listed exchange-traded funds ("ETFs") that principally invest
in income-generating securities that provide the Fund with an effective
portfolio duration of three years or less. The Fund is classified as
"non-diversified" under the Investment Company Act of 1940, as amended. The
shares of the Fund are listed and traded on The Nasdaq Stock Market LLC under
the ticker symbol "LDSF."
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
Inception Inception
6 Months Ended 1 Year Ended (1/3/19) (1/3/19)
2/29/20 2/29/20 to 2/29/20 to 2/29/20
FUND PERFORMANCE
NAV 1.87% 4.29% 5.59% 6.48%
Market Price 1.82% 4.19% 5.59% 6.48%
INDEX PERFORMANCE
Blended Benchmark(1) 2.13% 6.28% 6.79% 7.89%
Bloomberg Barclays 1-5 Year Government/Credit Index 2.32% 6.36% 5.81% 6.75%
------------------------------------------------------------------------------------------------------------------------------------
|
Total returns for the period since inception are calculated from the inception
date of the Fund. "Average Annual Total Returns" represent the average annual
change in value of an investment over the period indicated. "Cumulative Total
Returns" represent the total change in value of an investment over the period
indicated.
The Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint between the highest bid and the lowest offer on the stock
exchange on which shares of the Fund are listed for trading as of the time that
the Fund's NAV is calculated. Since shares of the Fund did not trade in the
secondary market until after the Fund's inception, for the period from inception
to the first day of secondary market trading in shares of the Fund, the NAV of
the Fund is used as a proxy for the secondary market trading price to calculate
market returns. NAV and market returns assume that all distributions have been
reinvested in the Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike the Fund, the indices do not actually hold a portfolio of
securities and therefore do not incur the expenses incurred by the Fund. These
expenses negatively impact the performance of the Fund. Also, market returns do
not include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The total returns presented reflect the reinvestment of dividends on
securities in the indices. The returns presented do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund shares. The investment return and principal value of shares of the
Fund will vary with changes in market conditions. Shares of the Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. The Fund's past performance is no guarantee of future performance.
(1) The Benchmark consists of the following two indexes: 80% of the Bloomberg
Barclays 1-5 Year Government/Credit Index which measures the performance
of U.S. dollar-denominated U.S. Treasury bonds, government related bonds
and investment grade U.S. corporate bonds that have a maturity between one
and five years; and 20% of the ICE BofA US High Yield Constrained Index
which tracks the performance of U.S. dollar denominated below investment
grade corporate deb publicly issued in the U.S. domestic market but caps
issuer exposure at 2%.
Page 2
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JANUARY 3, 2019 - FEBRUARY 29, 2020
First Trust Bloomberg Barclays
Low Duration Blended 1-5 Year Government/
Strategic Focus ETF Benchmark Credit Index
1/3/19 $10,000 $10,000 $10,000
2/28/19 10,210 10,151 10,037
8/31/19 10,452 10,564 10,433
2/29/20 10,648 10,789 10,675
|
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 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
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 4, 2019 (commencement
of trading) through February 29, 2020. Shareholders may pay more than NAV when
they buy Fund shares and receive less than NAV when they sell those shares
because shares are bought and sold at current market price. Data presented
represents past performance and cannot be used to predict future results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
1/4/19 - 8/31/19 155 0 0 0
9/1/19 - 2/29/20 116 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
1/4/19 - 8/31/19 11 0 0 0
9/1/19 - 2/29/20 8 0 0 0
|
Page 3
PORTFOLIO MANAGEMENT
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
SEMI-ANNUAL REPORT
FEBRUARY 29, 2020 (UNAUDITED)
ADVISOR
First Trust Advisors L.P. ("First Trust" or the "Advisor") serves as the
investment advisor to the First Trust Low Duration Strategic Focus ETF (the
"Fund"). First Trust is responsible for the ongoing monitoring of the Fund's
investment portfolio, managing the Fund's business affairs and providing certain
administration services necessary for the management of the Fund.
PORTFOLIO MANAGEMENT TEAM
DANIEL J. LINDQUIST, MANAGING DIRECTOR OF FIRST TRUST
DAVID G. MCGAREL, CHIEF INVESTMENT OFFICER, CHIEF OPERATING OFFICER AND MANAGING
DIRECTOR OF FIRST TRUST
CHRIS A. PETERSON, SENIOR VICE PRESIDENT OF FIRST TRUST
WILLIAM HOUSEY, SENIOR VICE PRESIDENT OF FIRST TRUST
STEVE COLLINS, VICE PRESIDENT OF FIRST TRUST
Page 4
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
UNDERSTANDING YOUR FUND EXPENSES
FEBRUARY 29, 2020 (UNAUDITED)
As a shareholder of First Trust Low Duration Strategic Focus ETF (the "Fund"),
you incur two types of costs: (1) transaction costs; and (2) ongoing costs,
including management fees, distribution and/or service fees, if any, and other
Fund expenses. This Example is intended to help you understand your ongoing
costs of investing in the Fund and to compare these costs with the ongoing costs
of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended February 29, 2020.
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 period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as brokerage
commissions. Therefore, the second line in the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
-----------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
SEPTEMBER 1, 2019 FEBRUARY 29, 2020 PERIOD (a) PERIOD (a) (b)
-----------------------------------------------------------------------------------------------------------------------
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
Actual $1,000.00 $1,018.70 0.20% $1.00
Hypothetical (5% return before expenses) $1,000.00 $1,023.87 0.20% $1.01
|
(a) Annualized expense ratio and expenses paid during the six-month period do
not include fees and expenses of the underlying funds in which the Fund
invests.
(b) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (September
1, 2019 through February 29, 2020), multiplied by 182/366 (to reflect the
six-month period).
Page 5
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
EXCHANGE-TRADED FUNDS -- 99.9%
CAPITAL MARKETS -- 99.9%
83,097 First Trust Emerging Markets
Local Currency Bond ETF (a) $ 3,065,448
541,143 First Trust Enhanced Short
Maturity ETF (a) 32,538,928
1,004,929 First Trust Low Duration
Opportunities ETF (a) 52,668,329
407,577 First Trust Senior Loan Fund (a) 19,266,165
133,336 First Trust Tactical High Yield
ETF (a) 6,384,128
313,942 First Trust TCW Opportunistic
Fixed Income ETF (a) 16,792,757
-------------
TOTAL EXCHANGE-TRADED FUNDS
-- 99.9% 130,715,755
(Cost $129,987,940) -------------
MONEY MARKET FUNDS -- 0.1%
91,745 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class - 1.44% (b) 91,745
(Cost $91,745) -------------
TOTAL INVESTMENTS -- 100.0% 130,807,500
(Cost $130,079,685) (c)
NET OTHER ASSETS AND
LIABILITIES -- 0.0% 32,279
-------------
NET ASSETS -- 100.0% $ 130,839,779
=============
|
(a) Investment in an affiliated fund.
(b) Rate shown reflects yield as of February 29, 2020.
(c) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of February 29, 2020, the
aggregate gross unrealized appreciation for all investments in which there
was an excess of value over tax cost was $1,030,210 and the aggregate
gross unrealized depreciation for all investments in which there was an
excess of tax cost over value was $302,395. The net unrealized
appreciation was $727,815.
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of February 29,
2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
------------------------------------------
Exchange-Traded
Funds* $130,715,755 $ -- $ --
Money Market
Funds 91,745 -- --
------------------------------------------
Total Investments $130,807,500 $ -- $ --
==========================================
|
* See Portfolio of Investments for industry breakout.
Page 6 See Notes to Financial Statements
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 29, 2020 (UNAUDITED)
ASSETS:
Investments, at value - Affiliated..................................... $ 130,715,755
Investments, at value - Unaffiliated................................... 91,745
----------------
Total investments, at value............................................ 130,807,500
Receivables:
Capital shares sold................................................. 2,057,324
Dividends........................................................... 50,453
----------------
Total Assets........................................................ 132,915,277
----------------
LIABILITIES:
Payables:
Investment securities purchased..................................... 2,056,127
Investment advisory fees............................................ 19,371
----------------
Total Liabilities................................................... 2,075,498
----------------
NET ASSETS............................................................. $ 130,839,779
================
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $ 130,055,784
Par value.............................................................. 63,500
Accumulated distributable earnings (loss).............................. 720,495
----------------
NET ASSETS............................................................. $ 130,839,779
================
NET ASSET VALUE, per share............................................. $ 20.60
================
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share).............................. 6,350,002
================
Investments, at cost - Affiliated...................................... $ 129,987,940
================
Investments, at cost - Unaffiliated.................................... $ 91,745
================
Total investments, at cost............................................. $ 130,079,685
================
|
See Notes to Financial Statements Page 7
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 29, 2020 (UNAUDITED)
INVESTMENT INCOME:
Dividends - Affiliated................................................. $ 1,171,254
Dividends - Unaffiliated............................................... 54,145
----------------
Total investment income............................................. 1,225,399
----------------
EXPENSES:
Investment advisory fees............................................... 85,566
----------------
Total expenses...................................................... 85,566
----------------
NET INVESTMENT INCOME (LOSS)........................................... 1,139,833
----------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investment - Affiliated............................................. (22,789)
Investments - Unaffiliated.......................................... 2,528
In-kind redemptions - Affiliated.................................... 15,864
In-kind redemptions - Unaffiliated.................................. 18,134
Distribution of capital gains from investment companies............. 111,416
----------------
Net realized gain (loss)............................................... 125,153
----------------
Net change in unrealized appreciation (depreciation) on:
Investment - Affiliated............................................. 518,892
Investments - Unaffiliated.......................................... (38,246)
----------------
Net change in unrealized appreciation (depreciation)................... 480,646
----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ 605,799
----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ 1,745,632
================
|
Page 8 See Notes to Financial Statements
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED PERIOD
2/29/2020 ENDED
(UNAUDITED) 8/31/2019 (a)
---------------- ----------------
OPERATIONS:
Net investment income (loss)......................................................... $ 1,139,833 $ 425,301
Net realized gain (loss)............................................................. 125,153 (21,140)
Net change in unrealized appreciation (depreciation)................................. 480,646 247,169
---------------- ----------------
Net increase (decrease) in net assets resulting from operations...................... 1,745,632 651,330
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations................................................................ (1,231,606) (432,051)
---------------- ----------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold............................................................ 88,302,392 51,029,601
Cost of shares redeemed.............................................................. (8,204,404) (1,021,115)
---------------- ----------------
Net increase (decrease) in net assets resulting from shareholder transactions........ 80,097,988 50,008,486
---------------- ----------------
Total increase (decrease) in net assets.............................................. 80,612,014 50,227,765
NET ASSETS:
Beginning of period.................................................................. 50,227,765 --
---------------- ----------------
End of period........................................................................ $ 130,839,779 $ 50,227,765
================ ================
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period.............................................. 2,450,002 --
Shares sold.......................................................................... 4,300,000 2,500,002
Shares redeemed...................................................................... (400,000) (50,000)
---------------- ----------------
Shares outstanding, end of period.................................................... 6,350,002 2,450,002
================ ================
|
(a) Inception date is January 3, 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 9
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
SIX MONTHS
ENDED PERIOD
2/29/2020 ENDED
(UNAUDITED) 8/31/2019 (a)
--------------- ---------------
Net asset value, beginning of period........................... $ 20.50 $ 20.03
----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... 0.27 0.43
Net realized and unrealized gain (loss)........................ 0.11 0.47
----------- -----------
Total from investment operations............................... 0.38 0.90
----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.......................................... (0.28) (0.43)
----------- -----------
Net asset value, end of period................................. $ 20.60 $ 20.50
=========== ===========
TOTAL RETURN (b)............................................... 1.87% 4.52%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 130,840 $ 50,228
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets (c).............. 0.20% (d) 0.20% (d)
Ratio of net investment income (loss) to average net assets ... 2.66% (d) 3.16% (d)
Portfolio turnover rate (e).................................... 8% 14%
|
(a) Inception date is January 3, 2019, 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 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.
(c) The Fund indirectly bears its proportionate share of fees and expenses
incurred by the underlying funds in which the Fund invests. This ratio
does not include these indirect fees and expenses.
(d) Annualized.
(e) 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 10 See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
FEBRUARY 29, 2020 (UNAUDITED)
1. ORGANIZATION
First Trust Exchange-Traded Fund VIII (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on February 22,
2016, 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 sixteen funds that are offering shares. This
report covers the First Trust Low Duration Strategic Focus ETF (the "Fund"),
which trades under the ticker "LDSF" on The Nasdaq Stock Market LLC ("Nasdaq").
Unlike conventional mutual funds, the Fund issues and redeems shares on a
continuous basis, at net asset value ("NAV"), only in large specified blocks
consisting of 50,000 shares called a "Creation Unit." Creation Units are
generally issued and redeemed in-kind for securities in which the Fund invests
and, in certain circumstances, for cash and only to and from broker-dealers and
large institutional investors that have entered into participation agreements.
Except when aggregated in Creation Units, the Fund's shares are not redeemable
securities.
The Fund is an actively managed exchange-traded fund. The Fund's primary
investment objective is to generate current income. The Fund's secondary
investment objective is the preservation of capital. The Fund seeks to achieve
its investment objectives by investing, under normal market conditions, at least
80% of its net assets (including investment borrowings) in a portfolio of
U.S.-listed exchange-traded funds ("ETFs") that principally invest in
income-generating securities that provide the Fund with an effective portfolio
duration of three years or less. A significant portion of the ETFs in which the
Fund invests may be advised by First Trust. The Fund may invest in ETFs that
invest principally in corporate bonds, floating rate loans and fixed-to-floating
rate loans, senior loans, mortgage-backed securities, hybrid income securities
(including convertible, contingent convertible and preferred securities),
government debt and other fixed income securities. The securities to which the
Fund may have exposure may be issued by both U.S. and non-U.S. issuers,
including both corporate and governmental issuers located in countries
considered to be emerging markets. The Fund may also invest up to 40% of its net
assets in ETFs that have exposure to U.S. corporate high yield securities (also
known as "junk bonds") and senior loans. The Fund may invest up to 20% of its
net assets in bonds issued by non-U.S. government and corporate issuers,
including up to 10% of its net assets in ETFs holding debt of issuers located in
countries considered to be emerging markets. The Fund may also invest up to 10%
of its net assets in ETFs holding preferred securities and up to 10% of its net
assets in ETFs holding convertible securities.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund is considered an investment company and follows accounting and
reporting guidance under Financial Accounting Standards Board Accounting
Standards Codification Topic 946, "Financial Services-Investment Companies." The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of the financial statements. The preparation of
the financial statements in accordance with accounting principles generally
accepted in the United States of America ("U.S. GAAP") requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
The Fund's NAV is determined daily as of the close of regular trading on the New
York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the
NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV
is determined as of that time. The Fund's NAV is calculated by dividing the
value of all assets of the Fund (including accrued interest and dividends), less
all liabilities (including accrued expenses and dividends declared but unpaid),
by the total number of shares outstanding.
The Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are primarily obtained from
third-party pricing services. Fair value prices represent any prices not
considered market value prices and are either obtained from a third-party
pricing service or are determined by the Advisor's Pricing Committee 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. All securities and other assets of the Fund
initially expressed in foreign currencies will be converted to U.S. dollars
using exchange rates in effect at the time of valuation. The Fund's investments
are valued as follows:
Common stocks and other equity securities listed on any national or
foreign exchange (excluding Nasdaq and the London Stock Exchange
Alternative Investment Market ("AIM")) are valued at the last sale price
on the exchange on which they are principally traded or, for Nasdaq and
AIM securities, the official closing price. Securities traded on more than
one securities exchange are valued at the last sale price or official
closing price, as applicable, at the close of the securities exchange
representing the principal market for such securities.
Shares of open-end funds are valued at fair value which is based on NAV
per share.
Page 11
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
FEBRUARY 29, 2020 (UNAUDITED)
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Trust's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities
which may not be publicly sold without registration under the Securities Act of
1933, as amended) for which a third-party pricing service is unable to provide a
market price; securities whose trading has been formally suspended; a security
whose market or fair value price is not available from a pre-established pricing
source; a security with respect to which an event has occurred that is likely to
materially affect the value of the security after the market has closed but
before the calculation of the Fund's NAV or make it difficult or impossible to
obtain a reliable market quotation; and a security whose price, as provided by
the third-party pricing service, does not reflect the security's fair value. As
a general principle, the current fair value of a security would appear to be the
amount which the owner might reasonably expect to receive for the security upon
its current sale. When fair value prices are used, generally they will differ
from market quotations or official closing prices on the applicable exchanges. A
variety of factors may be considered in determining the fair value of such
securities, including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or third-party pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect
the value of the security.
The Fund is subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investment.
The inputs or methodologies used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value the Fund's investments as of February 29, 2020, is
included with the Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date.
C. AFFILIATED TRANSACTIONS
The Fund invests in securities of affiliated funds. The Fund's investment
performance and risks are directly related to the investment performance and
risks of the affiliated funds. Dividend income, realized gains and losses, and
change in appreciation (depreciation) from affiliated funds are presented on the
Statement of Operations.
Page 12
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
FEBRUARY 29, 2020 (UNAUDITED)
Amounts related to these investments at February 29, 2020 and for the fiscal
period then ended are as follows:
CHANGE IN
UNREALIZED REALIZED
SHARES AT VALUE AT APPRECIATION GAIN VALUE AT DIVIDEND
SECURITY NAME 2/29/2020 8/31/2019 PURCHASES SALES (DEPRECIATION) (LOSS) 2/29/2020 INCOME
----------------------------------------------------------------------------------------------------------------------------------
First Trust Emerging
Markets Local
Currency Bond ETF 83,097 $ 1,215,799 $ 2,237,229 $ (281,608) $ (109,111) $ 3,139 $ 3,065,448 $ 60,037
First Trust Enhanced
Short Maturity ETF 541,143 11,259,941 21,267,246 -- 11,741 -- 32,538,928 222,096
First Trust Low
Duration
Opportunities ETF 1,004,929 20,129,332 35,298,966 (3,198,803) 448,830 (9,996) 52,668,329 415,670
First Trust Senior
Loan Fund 407,577 7,477,145 13,260,449 (1,383,435) (81,982) (6,012) 19,266,165 248,969
First Trust Tactical
High Yield ETF 133,336 2,502,346 4,418,692 (477,401) (65,453) 5,944 6,384,128 107,507
First Trust TCW
Opportunistic
Fixed Income ETF 313,942 2,562,596 13,915,294 -- 314,867 -- 16,792,757 116,975
----------------------------------------------------------------------------------------------
$ 45,147,159 $ 90,397,876 $ (5,341,247) $ 518,892 $ (6,925) $130,715,755 $ 1,171,254
==============================================================================================
|
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income, if any, are declared and paid monthly by
the Fund, or as the Board of Trustees may determine from time to time.
Distributions of net realized capital gains earned by the Fund, if any, are
distributed at least annually.
Distributions from net investment income and realized capital gains are
determined in accordance with federal income tax regulations, which may differ
from U.S. GAAP. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These permanent differences are primarily due to the varying
treatment of income and gain/loss on significantly modified portfolio securities
held by the Fund and have no impact on net assets or NAV per share. Temporary
differences, which arise from recognizing certain items of income, expense and
gain/loss in different periods for financial statement and tax purposes, will
reverse at some time in the future.
The tax character of distributions paid during the fiscal period ended August
31, 2019 was as follows:
Distributions paid from:
Ordinary income................................. $ 432,051
Capital gains................................... --
Return of capital............................... --
|
As of August 31, 2019, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income................... $ --
Accumulated capital and other gain (loss)....... (11,785)
Net unrealized appreciation (depreciation)...... 218,254
|
E. INCOME TAXES
The Fund intends to qualify as a regulated investment company by complying with
the requirements under Subchapter M of the Internal Revenue Code of 1986, as
amended, which includes distributing substantially all of its net investment
income and net realized gains to shareholders. Accordingly, no provision has
been made for federal and state income taxes. However, due to the timing and
amount of distributions, the Fund may be subject to an excise tax of 4% of the
amount by which approximately 98% of the Fund's taxable income exceeds the
distributions from such taxable income for the calendar year.
The Fund is subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. The taxable year ending 2019
remains open to federal and state audit. As of February 29, 2020, management has
evaluated the application of these standards to the Fund and has determined that
no provision for income tax is required in the Fund's financial statements for
uncertain tax positions.
Page 13
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
FEBRUARY 29, 2020 (UNAUDITED)
The Fund intends to utilize provisions of the federal income tax laws, which
allow it to carry a realized capital loss forward indefinitely following the
year of the loss and offset such loss against any future realized capital gains.
The Fund is subject to certain limitations under U.S. tax rules on the use of
capital loss carryforwards and net unrealized built-in losses. These limitations
apply when there has been a 50% change in ownership. At August 31, 2019, the
Fund had non-expiring capital loss carryforwards available for federal income
tax purposes of $11,785. To the extent that these loss carryforwards are used to
offset future capital gains, it is probable that the capital gains so offset
will not be distributed to the Fund's shareholders.
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 period ended August 31, 2019, the Fund had
no net late year ordinary or capital losses.
F. EXPENSES
Expenses, other than the investment advisory fee and other excluded expenses,
are paid by the Advisor (see Note 3).
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Fund, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the selection and ongoing monitoring of the securities
in the Fund's portfolio, managing the Fund's business affairs and providing
certain administrative services necessary for the management of the Fund.
Pursuant to the Investment Management Agreement between the Trust and the
Advisor, First Trust manages the investment of the Fund's assets and is
responsible for the expenses of the Fund including the cost of transfer agency,
custody, fund administration, legal, audit and other services and license fees
(if any), but excluding fee payments under the Investment Management Agreement,
interest, taxes, pro rata share of fees and expenses attributable to investments
in other investment companies ("acquired fund fees and expenses"), brokerage
commissions and other expenses connected with the execution of portfolio
transactions, expenses associated with short sale transactions, distribution and
service fees payable pursuant to a Rule 12b-1 plan, if any, and extraordinary
expenses, which are paid by the Fund. The Fund has agreed to pay First Trust an
annual unitary management fee equal to 0.20% of its average daily net assets. In
addition, the Fund incurs acquired fund fees and expenses. The total of the
unitary management fee and acquired fund fees and expenses represents the Fund's
total annual operating expenses.
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
the Fund. As custodian, BNYM is responsible for custody of the Fund's assets. As
fund accountant and administrator, BNYM is responsible for maintaining the books
and records of the Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for the Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
a defined-outcome fund or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen 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
Chairmen will rotate every three years. The officers and "Interested" Trustee
receive no compensation from the Trust for acting in such capacities.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended February 29, 2020, the cost of purchases and proceeds
from sales of investments, excluding short-term investments and in-kind
transactions, were $6,749,868 and $6,758,917, respectively.
For the six months ended February 29, 2020, the cost of in-kind purchases and
proceeds from in-kind sales were $88,226,372 and $8,196,627, respectively.
Page 14
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
FEBRUARY 29, 2020 (UNAUDITED)
5. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
Shares are created and redeemed by the Fund only in Creation Unit size
aggregations of 50,000 shares in transactions with broker-dealers or large
institutional investors that have entered into a participation agreement (an
"Authorized Participant"). In order to purchase Creation Units of the Fund, an
Authorized Participant must deposit (i) a designated portfolio of equity
securities determined by First Trust (the "Deposit Securities") and generally
make or receive a cash payment referred to as the "Cash Component," which is an
amount equal to the difference between the NAV of the Fund Shares (per Creation
Unit Aggregation) and the market value of the Deposit Securities, and/or (ii)
cash in lieu of all or a portion of the Deposit Securities. If the Cash
Component is a positive number (i.e., the NAV per Creation Unit Aggregation
exceeds the Deposit Amount), the Authorized Participant will deliver the Cash
Component. If the Cash Component is a negative number (i.e., the NAV per
Creation Unit Aggregation is less than the Deposit Amount), the Authorized
Participant will receive the Cash Component. Authorized Participants purchasing
Creation Units must pay to BNYM, as transfer agent, a creation transaction fee
(the "Creation Transaction Fee") regardless of the number of Creation Units
purchased in the transaction. The Creation Transaction Fee is based on the
composition of the securities included in the Fund's portfolio and the countries
in which the transactions are settled. The price for each Creation Unit will
equal the daily NAV per share 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 or stamp taxes. When the Fund permits an
Authorized Participant to substitute cash or a different security in lieu of
depositing one or more of the requisite Deposit Securities, the Authorized
Participant may also be assessed an amount to cover the cost of purchasing the
Deposit Securities and/or disposing of the substituted securities, including
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 such Deposit Securities and/or substitute securities.
Authorized Participants redeeming Creation Units must pay to BNYM, as transfer
agent, a redemption transaction fee (the "Redemption Transaction Fee"),
regardless of the number of Creation Units redeemed in the transaction. The
Redemption Transaction Fee may vary and is based on the composition of the
securities included in the Fund's portfolio and the countries in which the
transactions are settled. The Fund reserves the right to effect redemptions in
cash. An Authorized Participant may request cash redemption in lieu of
securities; however, the Fund may, in its discretion, reject any such request.
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 Fund is
authorized to pay an amount up to 0.25% of its average daily net assets each
year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the
Fund, for amounts expended to finance activities primarily intended to result in
the sale of Creation Units or the provision of investor services. FTP may also
use this amount to compensate securities dealers or other persons that are
Authorized Participants for providing distribution assistance, including
broker-dealer and shareholder support and educational and promotional services.
No 12b-1 fees are currently paid by the Fund, and pursuant to a contractual
arrangement, no 12b-1 fees will be paid any time before December 31, 2020.
7. INDEMNIFICATION
The Trust, on behalf of the Fund, has a variety of indemnification obligations
under contracts with its service providers. The Trust's maximum exposure under
these arrangements is unknown. However, the Trust has not had prior claims or
losses pursuant to these contracts and expects the risk of loss to be remote.
8. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Fund through
the date the financial statements were issued, and has determined that there was
the following subsequent event:
Beginning in December 2019, the outbreak of the respiratory disease designated
as COVID-19 has caused significant volatility and declines in global financial
markets, which have caused losses for investors. The impact of this COVID-19
pandemic may be short term or may last for an extended period of time and, in
either case, could result in a substantial economic downturn or recession.
Management is continuing to monitor this event.
Page 15
ADDITIONAL INFORMATION
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
FEBRUARY 29, 2020 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine
how to vote proxies and information on how the Fund voted proxies relating to
its portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Fund's website at www.ftportfolios.com; and (3) on the Securities and
Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
The Fund files portfolio holdings information for each month in a fiscal quarter
within 60 days after the end of the relevant fiscal quarter on Form N-PORT.
Portfolio holdings information for the third month of each fiscal quarter will
be publicly available on the SEC's website at www.sec.gov. The Fund's complete
schedule of portfolio holdings for the second and fourth quarters of each fiscal
year is included in the semi-annual and annual reports to shareholders,
respectively, and is filed with the SEC on Form N-CSR. The semi-annual and
annual report for the Fund is available to investors within 60 days after the
period to which it relates. The Fund's Forms N-PORT and Forms N-CSR are
available on the SEC's website listed above.
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 large
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
not concentrated.
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.
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.
Page 16
ADDITIONAL INFORMATION (CONTINUED)
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
FEBRUARY 29, 2020 (UNAUDITED)
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 CONSTITUENT RISK. Certain funds may be a constituent of one or more
indices. 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
significantly 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.
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. In 2017, the United Kingdom's
Financial Conduct Authority announced that LIBOR will cease to be available for
use after 2021. The unavailability or replacement of LIBOR may affect the value,
liquidity or return on certain fund investments and may result in costs incurred
in connection with closing out positions and entering into new trades. Any
potential effects of the transition away from LIBOR on the fund or on certain
instruments in which the fund invests can be difficult to ascertain, and they
may vary depending on a variety of factors. Any such effects of the transition
away from LIBOR, as well as other unforeseen effects, could result in losses to
the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are
subject to market fluctuations caused by factors such as general economic
conditions, political events, regulatory or market developments, changes in
interest rates and perceived trends in securities prices. Shares of a fund could
decline in value or underperform other investments as a result of the risk of
loss associated with these market fluctuations. In addition, local, regional or
global events such as war, acts of terrorism, spread of infectious diseases or
other public health issues, recessions, or other events could have a significant
negative impact on a fund and its investments. Such events may affect certain
geographic regions, countries, sectors and industries more significantly than
others. The outbreak of the respiratory disease designated as COVID-19 in
December 2019 has caused significant volatility and declines in global financial
markets, which have caused losses for investors. The impact of this COVID-19
pandemic may be short term or may last for an extended period of time, and in
either case could result in a substantial economic downturn or recession.
Page 17
ADDITIONAL INFORMATION (CONTINUED)
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
FEBRUARY 29, 2020 (UNAUDITED)
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; lack
of liquidity; currency exchange rates; excessive taxation; government seizure of
assets; 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.
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
Page 18
This page intentionally left blank.
This page intentionally left blank.
FIRST TRUST
First Trust Exchange-Traded Fund VIII
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
[BLANK BACK COVER]
FIRST TRUST
First Trust Exchange-Traded Fund VIII
FT Cboe Vest U.S. Equity Buffer ETF - August (FAUG)
FT Cboe Vest U.S. Equity Deep Buffer ETF - August (DAUG)
FT Cboe Vest U.S. Equity Buffer ETF - November (FNOV)
FT Cboe Vest U.S. Equity Deep Buffer ETF - November (DNOV)
FT Cboe Vest U.S. Equity Buffer ETF - February (FFEB)
FT Cboe Vest U.S. Equity Deep Buffer ETF - February (DFEB)
Semi-Annual Report
For the Period Ended
February 29, 2020
TABLE OF CONTENTS
FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL REPORT
FEBRUARY 29, 2020
Shareholder Letter........................................................... 1
Fund Performance Overview
FT Cboe Vest U.S. Equity Buffer ETF - August (FAUG)....................... 2
FT Cboe Vest U.S. Equity Deep Buffer ETF - August (DAUG).................. 4
FT Cboe Vest U.S. Equity Buffer ETF - November (FNOV)..................... 6
FT Cboe Vest U.S. Equity Deep Buffer ETF - November (DNOV)................ 8
FT Cboe Vest U.S. Equity Buffer ETF - February (FFEB)..................... 10
FT Cboe Vest U.S. Equity Deep Buffer ETF - February (DFEB)................ 12
Notes to Fund Performance Overview........................................... 14
Portfolio Management......................................................... 15
Understanding Your Fund Expenses............................................. 16
Portfolio of Investments
FT Cboe Vest U.S. Equity Buffer ETF - August (FAUG)....................... 18
FT Cboe Vest U.S. Equity Deep Buffer ETF - August (DAUG).................. 20
FT Cboe Vest U.S. Equity Buffer ETF - November (FNOV)..................... 22
FT Cboe Vest U.S. Equity Deep Buffer ETF - November (DNOV)................ 24
FT Cboe Vest U.S. Equity Buffer ETF - February (FFEB)..................... 26
FT Cboe Vest U.S. Equity Deep Buffer ETF - February (DFEB)................ 28
Statements of Assets and Liabilities......................................... 30
Statements of Operations..................................................... 32
Statements of Changes in Net Assets.......................................... 34
Financial Highlights......................................................... 36
Notes to Financial Statements................................................ 39
Additional Information....................................................... 46
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
|
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and/or Cboe Vest Financial LLC ("Cboe Vest" or the
"Sub-Advisor") and their respective representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
any series of First Trust Exchange-Traded Fund VIII (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 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 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 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 a relevant market benchmark.
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, statement of
additional information, and other Fund regulatory filings.
SHAREHOLDER LETTER
FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
FEBRUARY 29, 2020
Dear Shareholders:
First Trust is pleased to provide you with the semi-annual report for certain
series of the First Trust Exchange-Traded Fund VIII (the "Funds"), which
contains detailed information about the Funds for the period ended February 29,
2020.
To say that much has transpired over the past six months would be an
understatement. Prior to the onset of the coronavirus (COVID-19) in Wuhan, China
this past December, my message to investors would have sounded quite bullish,
focusing on such accomplishments as the progress in the trade negotiations
between the U.S. and China, where a "Phase One" deal was signed into law on
January 15, 2020. The main takeaway from the deal is that China agreed to
purchase an additional $200 billion of goods and services from the U.S. over the
next several years in exchange for the U.S. cutting some of its tariffs on
Chinese goods. The deal marked the first breakthrough since the Trump
Administration launched its new tariff initiative in March 2018. On top of that
news, the S&P 500(R) Index was setting new all-time highs all the way up through
the close of trading on February 19, 2020, the day it peaked.
Unfortunately, the good news has been overshadowed by the escalation and spread
of the COVID-19 pandemic. As of April 16, 2020, this disease had spread to 213
countries, areas or territories, had infected 1,991,562 people (confirmed cases)
and was responsible for 130,885 confirmed deaths, according to the World Health
Organization. These numbers are expected to trend higher in the days and weeks
ahead. A growing number of U.S. state governors and foreign leaders have issued
shelter in place orders to their citizens to help slow the spread of this new
virus. The primary objective in doing so is to slow down the number of cases so
that hospitals and health care workers are not overwhelmed by too many patients.
The cost is high because it requires shutting down large chunks of the economy,
which in turn negatively impacts the financial well-being of workers and
companies. In the U.S., Congress passed a financial stimulus package valued at
$2.0 trillion to help backstop workers and companies in the near-term. The
faster we can end the shutdown, consistent with general health and welfare, the
better, according to Brian Wesbury, Chief Economist at First Trust Advisors L.P.
Here is what we think we know. Brian Wesbury believes the U.S. could experience
a modest decline in real gross domestic product of 1.5% (annualized) in the
first quarter of 2020, followed by a massive decline of 20% (annualized) in the
second quarter. The good news is that he sees the economy growing at a 3.0% and
3.5% annual pace in the third and fourth quarters of 2020, respectively. In
other words, we are expecting a healthy rebound in the second half of this year.
As I noted earlier, the stock market was still at a record high in the third
week of February. From February 19 through March 23, however, the S&P 500(R)
Index posted a total return of -33.79%, putting it in bear market territory
(price decline of 20% or more from the most recent peak). Sorry to say it, but
the nearly 11-year bull market is no more. While we do not have a projection for
where stocks will be at year-end, we do know this: excluding the current bear
market, the S&P 500(R) Index has never failed to recoup all the losses sustained
in any sell-off, pullback, correction or bear market. So, while I am
understandably not bullish on the first half of 2020, I will be a bull once
again after we put the worst of COVID-19 behind us. I continue to urge investors
to stay the course. This too shall pass.
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
FUND PERFORMANCE OVERVIEW (UNAUDITED)
FT CBOE VEST U.S. EQUITY BUFFER ETF - AUGUST (FAUG)
The FT Cboe Vest U.S. Equity Buffer ETF - August (the "Fund") seeks to provide
investors with returns (before fees, expenses and taxes) that match the price
return of the SPDR(R) S&P 500(R) ETF Trust (the "Underlying ETF"), up to a
predetermined upside cap of 8.60% (before fees, expenses and taxes) and 7.93%
(after fees and expenses, excluding brokerage commissions, trading fees, taxes
and extraordinary expenses not included in the Fund's management fee), while
providing a buffer against the first 10% (before fees, expenses and taxes) of
Underlying ETF losses, over the period from November 7, 2019 to August 21, 2020
(the "Outcome Period"). Under normal market conditions, the Fund will invest
substantially all of its assets in FLexible EXchange(R) Options ("FLEX Options")
that reference the performance of the Underlying ETF. The Fund will not
terminate at the end of the Outcome Period; instead, a subsequent Outcome Period
will begin. At the start of each new Outcome Period, the Fund resets by
investing in a new set of FLEX Options that will provide a new cap for the new
Outcome Period. This means that the cap will change for each Outcome Period
based upon prevailing market conditions at the beginning of each Outcome Period.
An investor that purchases Fund shares other than on the first day of an Outcome
Period and/or sells Fund shares prior to the end of an Outcome Period may
experience results that are very different from the target outcomes sought by
the Fund for that Outcome Period. The Fund is classified as non-diversified
under the Investment Company Act of 1940, as amended. The shares of the Fund are
listed and traded on the Cboe BZX Exchange, Inc., under the ticker symbol
"FAUG."
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURNS
Inception
(11/6/19)
to 2/29/20
FUND PERFORMANCE
NAV -2.36%
Market Price -2.43%
INDEX PERFORMANCE
S&P 500(R) Index -3.98%
------------------------------------------------------------------------------------------------------------------------------------
|
(See Notes to Fund Performance Overview on page 14.)
Page 2
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
FT CBOE VEST U.S. EQUITY BUFFER ETF - AUGUST (FAUG) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
NOVEMBER 6, 2019 - FEBRUARY 29, 2020
FT Cboe Vest U.S. Equity S&P 500(R)
Buffer ETF - August Index
11/6/19 $10,000 $10,000
2/29/20 9,764 9,602
|
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
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period November 7, 2019
(commencement of trading) through February 29, 2020. Shareholders may pay more
than NAV when they buy Fund shares and receive less than NAV when they sell
those shares because shares are bought and sold at current market price. Data
presented represents past performance and cannot be used to predict future
results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
11/7/19 - 2/29/20 14 1 1 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
11/7/19 - 2/29/20 61 0 0 0
|
Page 3
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - AUGUST (DAUG)
The FT Cboe Vest U.S. Equity Deep Buffer ETF - August (the "Fund") seeks to
provide investors with returns (before fees, expenses and taxes) that match the
price return of the SPDR(R) S&P 500(R) ETF Trust (the "Underlying ETF"), up to a
predetermined upside cap of 6.58% (before fees, expenses and taxes) and 5.91%
(after fees and expenses, excluding brokerage commissions, trading fees, taxes
and extraordinary expenses not included in the Fund's management fee), while
providing a buffer against Underlying ETF losses between -5% and -30% (before
fees, expenses and taxes), over the period from November 7, 2019 to August 21,
2020 (the "Outcome Period"). Under normal market conditions, the Fund will
invest substantially all of its assets in FLexible EXchange(R) Options ("FLEX
Options") that reference the performance of the Underlying ETF. The Fund will
not terminate at the end of the Outcome Period; instead, a subsequent Outcome
Period will begin. At the start of each new Outcome Period, the Fund resets by
investing in a new set of FLEX Options that will provide a new cap for the new
Outcome Period. This means that the cap will change for each Outcome Period
based upon prevailing market conditions at the beginning of each Outcome Period.
An investor that purchases Fund shares other than on the first day of an Outcome
Period and/or sells Fund shares prior to the end of an Outcome Period may
experience results that are very different from the target outcomes sought by
the Fund for that Outcome Period. The Fund is classified as non-diversified
under the Investment Company Act of 1940, as amended. The shares of the Fund are
listed and traded on the Cboe BZX Exchange, Inc., under the ticker symbol
"DAUG."
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURNS
Inception
(11/6/19)
to 2/29/20
FUND PERFORMANCE
NAV -1.96%
Market Price -1.16%
INDEX PERFORMANCE
S&P 500(R) Index -3.98%
------------------------------------------------------------------------------------------------------------------------------------
|
(See Notes to Fund Performance Overview on page 14.)
Page 4
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - AUGUST (DAUG) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
NOVEMBER 6, 2019 - FEBRUARY 29, 2020
FT Cboe Vest U.S. Equity S&P 500(R)
Deep Buffer ETF - August Index
11/6/19 $10,000 $10,000
2/29/20 9,804 9,602
|
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
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period November 7, 2019
(commencement of trading) through February 29, 2020. Shareholders may pay more
than NAV when they buy Fund shares and receive less than NAV when they sell
those shares because shares are bought and sold at current market price. Data
presented represents past performance and cannot be used to predict future
results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
11/7/19 - 2/29/20 21 1 1 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
11/7/19 - 2/29/20 54 0 0 0
|
Page 5
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
FT CBOE VEST U.S. EQUITY BUFFER ETF - NOVEMBER (FNOV)
The FT Cboe Vest U.S. Equity Buffer ETF - November (the "Fund") seeks to provide
investors with returns (before fees, expenses and taxes) that match the price
return of the SPDR(R) S&P 500(R) ETF Trust (the "Underlying ETF"), up to a
predetermined upside cap of 12.36% (before fees, expenses and taxes) and 11.50%
(after fees and expenses, excluding brokerage commissions, trading fees, taxes
and extraordinary expenses not included in the Fund's management fee), while
providing a buffer against the first 10% (before fees, expenses and taxes) of
Underlying ETF losses, over the period from November 18, 2019 to November 20,
2020 (the "Outcome Period"). Under normal market conditions, the Fund will
invest substantially all of its assets in FLexible EXchange(R) Options ("FLEX
Options") that reference the performance of the Underlying ETF. The Fund will
not terminate at the end of the Outcome Period; instead, a subsequent Outcome
Period will begin. At the start of each new Outcome Period, the Fund resets by
investing in a new set of FLEX Options that will provide a new cap for the new
Outcome Period. This means that the cap will change for each Outcome Period
based upon prevailing market conditions at the beginning of each Outcome Period.
An investor that purchases Fund shares other than on the first day of an Outcome
Period and/or sells Fund shares prior to the end of an Outcome Period may
experience results that are very different from the target outcomes sought by
the Fund for that Outcome Period. The Fund is classified as non-diversified
under the Investment Company Act of 1940, as amended. The shares of the Fund are
listed and traded on the Cboe BZX Exchange, Inc., under the ticker symbol
"FNOV."
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURNS
Inception
(11/15/19)
to 2/29/20
FUND PERFORMANCE
NAV -2.95%
Market Price -3.24%
INDEX PERFORMANCE
S&P 500(R) Index -5.33%
------------------------------------------------------------------------------------------------------------------------------------
|
(See Notes to Fund Performance Overview on page 14.)
Page 6
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
FT CBOE VEST U.S. EQUITY BUFFER ETF - NOVEMBER (FNOV) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
NOVEMBER 15, 2019 - FEBRUARY 29, 2020
FT Cboe Vest U.S. Equity S&P 500(R)
Buffer ETF - November Index
11/15/19 $10,000 $10,000
2/29/20 9,705 9,467
|
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
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period November 18, 2019
(commencement of trading) through February 29, 2020. Shareholders may pay more
than NAV when they buy Fund shares and receive less than NAV when they sell
those shares because shares are bought and sold at current market price. Data
presented represents past performance and cannot be used to predict future
results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
11/18/19 - 2/29/20 41 1 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
11/18/19 - 2/29/20 28 0 0 0
|
Page 7
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - NOVEMBER (DNOV)
The FT Cboe Vest U.S. Equity Deep Buffer ETF - November (the "Fund") seeks to
provide investors with returns (before fees, expenses and taxes) that match the
price return of the SPDR(R) S&P 500(R) ETF Trust (the "Underlying ETF"), up to a
predetermined upside cap of 8.12% (before fees, expenses and taxes) and 7.26%
(after fees and expenses, excluding brokerage commissions, trading fees, taxes
and extraordinary expenses not included in the Fund's management fee), while
providing a buffer against Underlying ETF losses between -5% and -30% (before
fees, expenses and taxes), over the period from November 18, 2019 to November
20, 2020 (the "Outcome Period"). Under normal market conditions, the Fund will
invest substantially all of its assets in FLexible EXchange(R) Options ("FLEX
Options") that reference the performance of the Underlying ETF. The Fund will
not terminate at the end of the Outcome Period; instead, a subsequent Outcome
Period will begin. At the start of each new Outcome Period, the Fund resets by
investing in a new set of FLEX Options that will provide a new cap for the new
Outcome Period. This means that the cap will change for each Outcome Period
based upon prevailing market conditions at the beginning of each Outcome Period.
An investor that purchases Fund shares other than on the first day of an Outcome
Period and/or sells Fund shares prior to the end of an Outcome Period may
experience results that are very different from the target outcomes sought by
the Fund for that Outcome Period. The Fund is classified as non-diversified
under the Investment Company Act of 1940, as amended. The shares of the Fund are
listed and traded on the Cboe BZX Exchange, Inc., under the ticker symbol
"DNOV."
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURNS
Inception
(11/15/19)
to 2/29/20
FUND PERFORMANCE
NAV -2.95%
Market Price -1.73%
INDEX PERFORMANCE
S&P 500(R) Index -5.33%
------------------------------------------------------------------------------------------------------------------------------------
|
(See Notes to Fund Performance Overview on page 14.)
Page 8
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - NOVEMBER (DNOV) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
NOVEMBER 15, 2019 - FEBRUARY 29, 2020
FT Cboe Vest U.S. Equity S&P 500(R)
Deep Buffer ETF - November Index
11/15/19 $10,000 $10,000
2/29/20 9,705 9,467
|
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
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period November 18, 2019
(commencement of trading) through February 29, 2020. Shareholders may pay more
than NAV when they buy Fund shares and receive less than NAV when they sell
those shares because shares are bought and sold at current market price. Data
presented represents past performance and cannot be used to predict future
results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
11/18/19 - 2/29/20 12 0 1 1
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
11/18/19 - 2/29/20 56 0 0 0
|
Page 9
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
FT CBOE VEST U.S. EQUITY BUFFER ETF - FEBRUARY (FFEB)
The FT Cboe Vest U.S. Equity Buffer ETF - February (the "Fund") seeks to provide
investors with returns (before fees, expenses and taxes) that match the price
return of the SPDR(R) S&P 500(R) ETF Trust (the "Underlying ETF"), up to a
predetermined upside cap of 10.75% (before fees, expenses and taxes) and 9.90%
(after fees and expenses, excluding brokerage commissions, trading fees, taxes
and extraordinary expenses not included in the Fund's management fee), while
providing a buffer against the first 10% (before fees, expenses and taxes) of
Underlying ETF losses, over the period from February 24, 2020 to February 19,
2021 (the "Outcome Period"). Under normal market conditions, the Fund will
invest substantially all of its assets in FLexible EXchange(R) Options ("FLEX
Options") that reference the performance of the Underlying ETF. The Fund will
not terminate at the end of the Outcome Period; instead, a subsequent Outcome
Period will begin. At the start of each new Outcome Period, the Fund resets by
investing in a new set of FLEX Options that will provide a new cap for the new
Outcome Period. This means that the cap will change for each Outcome Period
based upon prevailing market conditions at the beginning of each Outcome Period.
An investor that purchases Fund shares other than on the first day of an Outcome
Period and/or sells Fund shares prior to the end of an Outcome Period may
experience results that are very different from the target outcomes sought by
the Fund for that Outcome Period. The Fund is classified as non-diversified
under the Investment Company Act of 1940, as amended. The shares of the Fund are
listed and traded on the Cboe BZX Exchange, Inc., under the ticker symbol
"FFEB."
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURNS
Inception
(2/21/20)
to 2/29/20
FUND PERFORMANCE
NAV -7.86%
Market Price -7.82%
INDEX PERFORMANCE
S&P 500(R) Index -11.49%
------------------------------------------------------------------------------------------------------------------------------------
|
(See Notes to Fund Performance Overview on page 14.)
Page 10
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
FT CBOE VEST U.S. EQUITY BUFFER ETF - FEBRUARY (FFEB) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
FEBRUARY 21, 2020 - FEBRUARY 29, 2020
FT Cboe Vest U.S. Equity S&P 500(R)
Buffer ETF - February Index
2/21/20 $10,000 $10,000
2/29/20 9,214 8,851
|
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
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period February 24, 2020
(commencement of trading) through February 29, 2020. Shareholders may pay more
than NAV when they buy Fund shares and receive less than NAV when they sell
those shares because shares are bought and sold at current market price. Data
presented represents past performance and cannot be used to predict future
results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
2/24/20 - 2/29/20 5 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
2/24/20 - 2/29/20 0 0 0 0
|
Page 11
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - FEBRUARY (DFEB)
The FT Cboe Vest U.S. Equity Deep Buffer ETF - February (the "Fund") seeks to
provide investors with returns (before fees, expenses and taxes) that match the
price return of the SPDR(R) S&P 500(R) ETF Trust (the "Underlying ETF"), up to a
predetermined upside cap of 7.50% (before fees, expenses and taxes) and 6.65%
(after fees and expenses, excluding brokerage commissions, trading fees, taxes
and extraordinary expenses not included in the Fund's management fee), while
providing a buffer against Underlying ETF losses between -5% and -30% (before
fees, expenses and taxes), over the period from February 24, 2020 to February
19, 2021 (the "Outcome Period"). Under normal market conditions, the Fund will
invest substantially all of its assets in FLexible EXchange(R) Options ("FLEX
Options") that reference the performance of the Underlying ETF. The Fund will
not terminate at the end of the Outcome Period; instead, a subsequent Outcome
Period will begin. At the start of each new Outcome Period, the Fund resets by
investing in a new set of FLEX Options that will provide a new cap for the new
Outcome Period. This means that the cap will change for each Outcome Period
based upon prevailing market conditions at the beginning of each Outcome Period.
An investor that purchases Fund shares other than on the first day of an Outcome
Period and/or sells Fund shares prior to the end of an Outcome Period may
experience results that are very different from the target outcomes sought by
the Fund for that Outcome Period. The Fund is classified as non-diversified
under the Investment Company Act of 1940, as amended. The shares of the Fund are
listed and traded on the Cboe BZX Exchange, Inc., under the ticker symbol
"DFEB."
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURNS
Inception
(2/21/20)
to 2/29/20
FUND PERFORMANCE
NAV -5.38%
Market Price -4.69%
INDEX PERFORMANCE
S&P 500(R) Index -11.49%
------------------------------------------------------------------------------------------------------------------------------------
|
(See Notes to Fund Performance Overview on page 14.)
Page 12
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - FEBRUARY (DFEB) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
FEBRUARY 21, 2020 - FEBRUARY 29, 2020
FT Cboe Vest U.S. Equity S&P 500(R)
Deep Buffer ETF - February Index
2/21/20 $10,000 $10,000
2/29/20 9,462 8,851
|
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
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period February 24, 2020
(commencement of trading) through February 29, 2020. Shareholders may pay more
than NAV when they buy Fund shares and receive less than NAV when they sell
those shares because shares are bought and sold at current market price. Data
presented represents past performance and cannot be used to predict future
results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
2/24/20 - 2/29/20 4 1 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
2/24/20 - 2/29/20 0 0 0 0
|
Page 13
NOTES TO FUND PERFORMANCE OVERVIEW (UNAUDITED)
Total returns for the periods since inception are calculated from the inception
date of each Fund. "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 between the highest bid and the lowest offer on the stock
exchange on which shares of the Fund are 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 14
PORTFOLIO MANAGEMENT
FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL REPORT
FEBRUARY 29, 2020 (UNAUDITED)
ADVISOR
First Trust Advisors L.P. ("First Trust" or the "Advisor") is the investment
advisor to FT Cboe Vest U.S. Equity Buffer ETF - August ("FAUG"), FT Cboe Vest
U.S. Equity Deep Buffer ETF - August ("DAUG"), FT Cboe Vest U.S. Equity Buffer
ETF - November ("FNOV"), FT Cboe Vest U.S. Equity Deep Buffer ETF - November
("DNOV"), FT Cboe Vest U.S. Equity Buffer ETF - February ("FFEB"), FT Cboe Vest
U.S. Equity Deep Buffer ETF - February ("DFEB"), (each a "Fund" and,
collectively, the "Funds"). 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
Cboe VestSM Financial LLC ("Cboe Vest" or the "Sub-Advisor") serves as the
investment sub-advisor to the Funds. In this capacity, Cboe Vest is responsible
for the selection and ongoing monitoring of the securities in each Fund's
investment portfolio. Cboe Vest, with principal offices at 1765 Greensboro
Station Pl., 9th Floor, McLean, Virginia 22102, was founded in 2012. Cboe Vest
had approximately $646 million under management or committed to management as of
February 29, 2020.
PORTFOLIO MANAGEMENT TEAM
KARAN SOOD, MANAGING DIRECTOR OF CBOE VEST
HOWARD RUBIN, MANAGING DIRECTOR OF CBOE VEST
Page 15
FIRST TRUST EXCHANGE-TRADED FUND VIII
UNDERSTANDING YOUR FUND EXPENSES
FEBRUARY 29, 2020 (UNAUDITED)
As a shareholder of FT Cboe Vest U.S. Equity Buffer ETF - August, FT Cboe Vest
U.S. Equity Deep Buffer ETF - August, FT Cboe Vest U.S. Equity Buffer ETF -
November, FT Cboe Vest U.S. Equity Deep Buffer ETF - November, FT Cboe Vest U.S.
Equity Buffer ETF - February or FT Cboe Vest U.S. Equity Deep Buffer ETF -
February (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 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 (or shorter) period
ended February 29, 2020.
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 period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on each Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
each Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Funds and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as brokerage
commissions. Therefore, the second line in the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
--------------------------------------------------------------------------------------------------------------------------------
ANNUALIZED EXPENSES PAID
EXPENSE RATIO DURING THE PERIOD
BEGINNING ENDING BASED ON THE NOVEMBER 6, 2019 (a)
ACCOUNT VALUE ACCOUNT VALUE NUMBER OF DAYS TO
NOVEMBER 6, 2019 (a) FEBRUARY 29, 2020 IN THE PERIOD FEBRUARY 29, 2020 (b)
--------------------------------------------------------------------------------------------------------------------------------
FT CBOE VEST U.S. EQUITY BUFFER ETF - AUGUST (FAUG)
Actual $1,000.00 $ 976.40 0.85% $2.66
Hypothetical (5% return before expenses) $1,000.00 $1,020.64 0.85% $4.27
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - AUGUST (DAUG)
Actual $1,000.00 $ 980.40 0.85% $2.67
Hypothetical (5% return before expenses) $1,000.00 $1,020.64 0.85% $4.27
|
Page 16
FIRST TRUST EXCHANGE-TRADED FUND VIII
UNDERSTANDING YOUR FUND EXPENSES (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
--------------------------------------------------------------------------------------------------------------------------------
ANNUALIZED EXPENSES PAID
EXPENSE RATIO DURING THE PERIOD
BEGINNING ENDING BASED ON THE NOVEMBER 15, 2019 (a)
ACCOUNT VALUE ACCOUNT VALUE NUMBER OF DAYS TO
NOVEMBER 15, 2019 (a) FEBRUARY 29, 2020 IN THE PERIOD FEBRUARY 29, 2020 (c)
--------------------------------------------------------------------------------------------------------------------------------
FT CBOE VEST U.S. EQUITY BUFFER ETF - NOVEMBER (FNOV)
Actual $1,000.00 $ 970.50 0.85% $2.45
Hypothetical (5% return before expenses) $1,000.00 $1,020.64 0.85% $4.27
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - NOVEMBER (DNOV)
Actual $1,000.00 $ 970.50 0.85% $2.45
Hypothetical (5% return before expenses) $1,000.00 $1,020.64 0.85% $4.27
|
--------------------------------------------------------------------------------------------------------------------------------
ANNUALIZED EXPENSES PAID
EXPENSE RATIO DURING THE PERIOD
BEGINNING ENDING BASED ON THE FEBRUARY 21, 2020 (a)
ACCOUNT VALUE ACCOUNT VALUE NUMBER OF DAYS TO
FEBRUARY 21, 2020 (a) FEBRUARY 29, 2020 IN THE PERIOD FEBRUARY 29, 2020 (d)
--------------------------------------------------------------------------------------------------------------------------------
FT CBOE VEST U.S. EQUITY BUFFER ETF - FEBRUARY (FFEB)
Actual $1,000.00 $ 921.40 0.85% $0.20
Hypothetical (5% return before expenses) $1,000.00 $1,020.64 0.85% $4.27
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - FEBRUARY (DFEB)
Actual $1,000.00 $ 946.20 0.85% $0.20
Hypothetical (5% return before expenses) $1,000.00 $1,020.64 0.85% $4.27
|
(a) Inception date.
(b) Actual expenses are equal to the annualized expense ratio as indicated in
the table multiplied by the average account value over the period
(November 6, 2019 through February 29, 2020), multiplied by 116/366.
Hypothetical expenses are assumed for the most recent six-month period.
(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 15, 2019 through February 29, 2020), multiplied by 107/366.
Hypothetical expenses are assumed for the most recent six-month period.
(d) Actual expenses are equal to the annualized expense ratio as indicated in
the table multiplied by the average account value over the period
(February 21, 2020 through February 29, 2020), multiplied by 9/366.
Hypothetical expenses are assumed for the most recent six-month period.
Page 17
FT CBOE VEST U.S. EQUITY BUFFER ETF - AUGUST (FAUG)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
-------------- ------------------------------------------------------- ------------- ----------- ------------ -------------
PURCHASED OPTIONS -- 104.4%
CALL OPTIONS PURCHASED -- 96.8%
147 SPDR(R) S&P 500(R) ETF Trust (a)....................... $ 4,355,022 $ 3.07 08/21/20 $ 4,265,940
(Cost $4,432,492) -------------
PUT OPTIONS PURCHASED -- 7.6%
147 SPDR(R) S&P 500(R) ETF Trust........................... 4,355,022 307.10 08/21/20 336,290
(Cost $186,447) -------------
TOTAL PURCHASED OPTIONS.......................................................................... 4,602,230
(Cost $4,618,939) -------------
|
SHARES DESCRIPTION VALUE
-------------- ------------------------------------------------------------------------------------------------- -------------
MONEY MARKET FUNDS -- 1.0%
43,749 Dreyfus Government Cash Management Fund, Institutional Shares - 1.50% (b)........................ 43,749
(Cost $43,749) -------------
TOTAL INVESTMENTS -- 105.4%...................................................................... 4,645,979
(Cost $4,662,688) (c) -------------
|
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
-------------- ------------------------------------------------------- ------------- ----------- ------------ -------------
WRITTEN OPTIONS -- (5.3%)
CALL OPTIONS WRITTEN -- (1.3%)
(147) SPDR(R) S&P 500(R) ETF Trust (a)....................... $ (4,355,022) $ 333.51 08/21/20 (58,553)
(Premiums received $110,197) -------------
PUT OPTIONS WRITTEN -- (4.0%)
(147) SPDR(R) S&P 500(R) ETF Trust........................... (4,355,022) 276.39 08/21/20 (174,984)
(Premiums received $126,465) -------------
TOTAL WRITTEN OPTIONS............................................................................ (233,537)
(Premiums received $236,662) -------------
NET OTHER ASSETS AND LIABILITIES -- (0.1)%....................................................... (3,124)
-------------
NET ASSETS -- 100.0%............................................................................. $ 4,409,318
=============
|
(a) This security is fair valued by the Advisor's Pricing Committee in
accordance with procedures adopted by the Trust's Board of Trustees, and
in accordance with provisions of the Investment Company Act of 1940, as
amended. At February 29, 2020, securities noted as such are valued at
$4,207,387 or 95.5% of net assets.
(b) Rate shown reflects yield as of February 29, 2020.
(c) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of February 29, 2020, the
aggregate gross unrealized appreciation for all investments in which there
was an excess of value over tax cost was $201,487 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $215,071. The net unrealized depreciation was
$13,584. The amounts presented are inclusive of derivative contracts.
Page 18 See Notes to Financial Statements
FT CBOE VEST U.S. EQUITY BUFFER ETF - AUGUST (FAUG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of February 29,
2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
ASSETS TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
2/29/2020 PRICES INPUTS INPUTS
------------- ------------- ------------- -------------
Call Options Purchased........................... $ 4,265,940 $ -- $ 4,265,940 $ --
Put Options Purchased............................ 336,290 -- 336,290 --
Money Market Funds............................... 43,749 43,749 -- --
------------- ------------- ------------- -------------
Total Investments................................ $ 4,645,979 $ 43,749 $ 4,602,230 $ --
============= ============= ============= =============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
2/29/2020 PRICES INPUTS INPUTS
------------- ------------- ------------- -------------
Call Options Written............................. $ (58,553) $ -- $ (58,553) $ --
Put Options Written.............................. (174,984) -- (174,984) --
------------- ------------- ------------- -------------
Total............................................ $ (233,537) $ -- $ (233,537) $ --
============= ============= ============= =============
|
See Notes to Financial Statements Page 19
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - AUGUST (DAUG)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
-------------- ------------------------------------------------------- ------------- ----------- ------------ -------------
PURCHASED OPTIONS -- 101.8%
CALL OPTIONS PURCHASED -- 96.4%
49 SPDR(R) S&P 500(R) ETF Trust (a)....................... $ 1,451,674 $ 3.08 08/21/20 $ 1,421,931
(Cost $1,469,919) -------------
PUT OPTIONS PURCHASED -- 5.4%
49 SPDR(R) S&P 500(R) ETF Trust........................... 1,451,674 291.75 08/21/20 80,149
(Cost $59,209) -------------
TOTAL PURCHASED OPTIONS.......................................................................... 1,502,080
(Cost $1,529,128) -------------
|
SHARES DESCRIPTION VALUE
-------------- ------------------------------------------------------------------------------------------------- -------------
MONEY MARKET FUNDS -- 1.0%
14,538 Dreyfus Government Cash Management Fund, Institutional Shares - 1.50% (b)........................ 14,538
(Cost $14,538) -------------
TOTAL INVESTMENTS -- 102.8%....................................................................... 1,516,618
(Cost $1,543,666) (c) -------------
|
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
-------------- ------------------------------------------------------- ------------- ----------- ------------ -------------
WRITTEN OPTIONS -- (2.7%)
CALL OPTIONS WRITTEN -- (1.9%)
(49) SPDR(R) S&P 500(R) ETF Trust (a)....................... $ (1,451,674) $ 327.30 08/21/20 (28,030)
(Premiums received $32,274) -------------
PUT OPTIONS WRITTEN -- (0.8%)
(49) SPDR(R) S&P 500(R) ETF Trust........................... (1,451,674) 214.97 08/21/20 (11,179)
(Premiums received $8,068) -------------
TOTAL WRITTEN OPTIONS............................................................................ (39,209)
(Premiums received $40,342) -------------
NET OTHER ASSETS AND LIABILITIES -- (0.1)%....................................................... (1,883)
-------------
NET ASSETS -- 100.0%............................................................................. $ 1,475,526
=============
|
(a) This security is fair valued by the Advisor's Pricing Committee in
accordance with procedures adopted by the Trust's Board of Trustees, and
in accordance with provisions of the Investment Company Act of 1940, as
amended. At February 29, 2020, securities noted as such are valued at
$1,393,901 or 94.5% of net assets.
(b) Rate shown reflects yield as of February 29, 2020.
(c) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of February 29, 2020, the
aggregate gross unrealized appreciation for all investments in which there
was an excess of value over tax cost was $25,184 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $51,099. The net unrealized depreciation was
$25,915. The amounts presented are inclusive of derivative contracts.
Page 20 See Notes to Financial Statements
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - AUGUST (DAUG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of February 29,
2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
ASSETS TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
2/29/2020 PRICES INPUTS INPUTS
------------- ------------- ------------- -------------
Call Options Purchased........................... $ 1,421,931 $ -- $ 1,421,931 $ --
Put Options Purchased............................ 80,149 -- 80,149 --
Money Market Funds............................... 14,538 14,538 -- --
------------- ------------- ------------- -------------
Total Investments................................ $ 1,516,618 $ 14,538 $ 1,502,080 $ --
============= ============= ============= =============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
2/29/2020 PRICES INPUTS INPUTS
------------- ------------- ------------- -------------
Call Options Written............................. $ (28,030) $ -- $ (28,030) $ --
Put Options Written.............................. (11,179) -- (11,179) --
------------- ------------- ------------- -------------
Total............................................ $ (39,209) $ -- $ (39,209) $ --
============= ============= ============= =============
|
See Notes to Financial Statements Page 21
FT CBOE VEST U.S. EQUITY BUFFER ETF - NOVEMBER (FNOV)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
-------------- ------------------------------------------------------- ------------- ----------- ------------ -------------
PURCHASED OPTIONS -- 105.3%
CALL OPTIONS PURCHASED -- 95.3%
1,764 SPDR(R) S&P 500(R) ETF Trust........................... $ 52,260,264 $ 3.12 11/20/20 $ 50,900,220
(Cost $53,663,275) -------------
PUT OPTIONS PURCHASED -- 10.0%
1,764 SPDR(R) S&P 500(R) ETF Trust........................... 52,260,264 311.79 11/20/20 5,314,932
(Cost $3,590,273) -------------
TOTAL PURCHASED OPTIONS.......................................................................... 56,215,152
(Cost $57,253,548) -------------
|
SHARES DESCRIPTION VALUE
-------------- ------------------------------------------------------------------------------------------------- -------------
MONEY MARKET FUNDS -- 0.9%
501,233 Dreyfus Government Cash Management Fund, Institutional Shares - 1.50% (a)........................ 501,233
(Cost $501,233) -------------
TOTAL INVESTMENTS -- 106.2%...................................................................... 56,716,385
(Cost $57,754,781) (b) -------------
|
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
-------------- ------------------------------------------------------- ------------- ----------- ------------ -------------
WRITTEN OPTIONS -- (6.2%)
CALL OPTIONS WRITTEN -- (0.5%)
(1,764) SPDR(R) S&P 500(R) ETF Trust........................... $ (52,260,264) $ 350.33 11/20/20 (292,824)
(Premiums received $663,109) -------------
PUT OPTIONS WRITTEN -- (5.7%)
(1,764) SPDR(R) S&P 500(R) ETF Trust........................... (52,260,264) 280.61 11/20/20 (3,049,956)
(Premiums received $1,951,585) -------------
TOTAL WRITTEN OPTIONS............................................................................ (3,342,780)
(Premiums received $2,614,694) -------------
NET OTHER ASSETS AND LIABILITIES -- 0.0%......................................................... 19,023
-------------
NET ASSETS -- 100.0%............................................................................. $ 53,392,628
=============
|
(a) Rate shown reflects yield as of February 29, 2020.
(b) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of February 29, 2020, the
aggregate gross unrealized appreciation for all investments in which there
was an excess of value over tax cost was $2,094,944 and the aggregate
gross unrealized depreciation for all investments in which there was an
excess of tax cost over value was $3,861,426. The net unrealized
depreciation was $1,766,482. The amounts presented are inclusive of
derivative contracts.
Page 22 See Notes to Financial Statements
FT CBOE VEST U.S. EQUITY BUFFER ETF - NOVEMBER (FNOV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of February 29,
2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
ASSETS TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
2/29/2020 PRICES INPUTS INPUTS
------------- ------------- ------------- -------------
Call Options Purchased........................... $ 50,900,220 $ -- $ 50,900,220 $ --
Put Options Purchased............................ 5,314,932 -- 5,314,932 --
Money Market Funds............................... 501,233 501,233 -- --
------------- ------------- ------------- -------------
Total Investments................................ $ 56,716,385 $ 501,233 $ 56,215,152 $ --
============= ============= ============= =============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
2/29/2020 PRICES INPUTS INPUTS
------------- ------------- ------------- -------------
Call Options Written............................. $ (292,824) $ -- $ (292,824) $ --
Put Options Written.............................. (3,049,956) -- (3,049,956) --
------------- ------------- ------------- -------------
Total............................................ $ (3,342,780) $ -- $ (3,342,780) $ --
============= ============= ============= =============
|
See Notes to Financial Statements Page 23
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - NOVEMBER (DNOV)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
-------------- ------------------------------------------------------- ------------- ----------- ------------ -------------
PURCHASED OPTIONS -- 102.1%
CALL OPTIONS PURCHASED -- 95.4%
441 SPDR(R) S&P 500(R) ETF Trust (a)....................... $ 13,065,066 $ 3.13 11/20/20 $ 12,726,819
(Cost $13,607,745) -------------
PUT OPTIONS PURCHASED -- 6.7%
441 SPDR(R) S&P 500(R) ETF Trust........................... 13,065,066 296.20 11/20/20 896,849
(Cost $569,287) -------------
TOTAL PURCHASED OPTIONS.......................................................................... 13,623,668
(Cost $14,177,032) -------------
|
SHARES DESCRIPTION VALUE
-------------- ------------------------------------------------------------------------------------------------- -------------
MONEY MARKET FUNDS -- 1.0%
127,395 Dreyfus Government Cash Management Fund, Institutional Shares - 1.50% (b)........................ 127,395
(Cost $127,395) -------------
TOTAL INVESTMENTS -- 103.1%...................................................................... 13,751,063
(Cost $14,304,427) (c) -------------
|
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
-------------- ------------------------------------------------------- ------------- ----------- ------------ -------------
WRITTEN OPTIONS -- (3.0%)
CALL OPTIONS WRITTEN -- (1.8%)
(441) SPDR(R) S&P 500(R) ETF Trust (a)....................... $ (13,065,066) $ 337.11 11/20/20 (234,953)
(Premiums received $392,820) -------------
PUT OPTIONS WRITTEN -- (1.2%)
(441) SPDR(R) S&P 500(R) ETF Trust........................... (13,065,066) 218.25 11/20/20 (161,703)
(Premiums received $86,723) -------------
TOTAL WRITTEN OPTIONS............................................................................ (396,656)
(Premiums received $479,543) -------------
NET OTHER ASSETS AND LIABILITIES -- (0.1)%....................................................... (9,325)
-------------
NET ASSETS -- 100.0%............................................................................. $ 13,345,082
=============
|
(a) This security is fair valued by the Advisor's Pricing Committee in
accordance with procedures adopted by the Trust's Board of Trustees, and
in accordance with provisions of the Investment Company Act of 1940, as
amended. At February 29, 2020, securities noted as such are valued at
$12,491,866 or 93.6% of net assets.
(b) Rate shown reflects yield as of February 29, 2020.
(c) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of February 29, 2020, the
aggregate gross unrealized appreciation for all investments in which there
was an excess of value over tax cost was $485,429 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $955,906. The net unrealized depreciation was
$470,477. The amounts presented are inclusive of derivative contracts.
Page 24 See Notes to Financial Statements
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - NOVEMBER (DNOV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of February 29,
2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
ASSETS TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
2/29/2020 PRICES INPUTS INPUTS
------------- ------------- ------------- -------------
Call Options Purchased........................... $ 12,726,819 $ -- $ 12,726,819 $ --
Put Options Purchased............................ 896,849 -- 896,849 --
Money Market Funds............................... 127,395 127,395 -- --
------------- ------------- ------------- -------------
Total Investments................................ $ 13,751,063 $ 127,395 $ 13,623,668 $ --
============= ============= ============= =============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
2/29/2020 PRICES INPUTS INPUTS
------------- ------------- ------------- -------------
Call Options Written............................. $ (234,953) $ -- $ (234,953) $ --
Put Options Written.............................. (161,703) -- (161,703) --
------------- ------------- ------------- -------------
Total............................................ $ (396,656) $ -- $ (396,656) $ --
============= ============= ============= =============
|
See Notes to Financial Statements Page 25
FT CBOE VEST U.S. EQUITY BUFFER ETF - FEBRUARY (FFEB)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
-------------- ------------------------------------------------------- ------------- ----------- ------------ -------------
PURCHASED OPTIONS -- 108.0%
CALL OPTIONS PURCHASED -- 93.2%
2,944 SPDR(R) S&P 500(R) ETF Trust........................... $ 87,218,944 $ 3.33 02/19/21 $ 84,327,936
(Cost $88,620,656) -------------
PUT OPTIONS PURCHASED -- 14.8%
2,944 SPDR(R) S&P 500(R) ETF Trust........................... 87,218,944 333.48 02/19/21 13,353,984
(Cost $10,044,008) -------------
TOTAL PURCHASED OPTIONS.......................................................................... 97,681,920
(Cost $98,664,664) -------------
|
SHARES DESCRIPTION VALUE
-------------- ------------------------------------------------------------------------------------------------- -------------
MONEY MARKET FUNDS -- 1.0%
921,922 Dreyfus Government Cash Management Fund, Institutional Shares - 1.50% (a)........................ 921,922
(Cost $921,922) -------------
TOTAL INVESTMENTS -- 109.0%...................................................................... 98,603,842
(Cost $99,586,586) (b) -------------
|
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
-------------- ------------------------------------------------------- ------------- ----------- ------------ -------------
WRITTEN OPTIONS -- (9.2%)
CALL OPTIONS WRITTEN -- (0.3%)
(2,944) SPDR(R) S&P 500(R) ETF Trust........................... $ (87,218,944) $ 369.33 02/19/21 (294,400)
(Premiums received $391,635) -------------
PUT OPTIONS WRITTEN -- (8.9%)
(2,944) SPDR(R) S&P 500(R) ETF Trust........................... (87,218,944) 300.13 02/19/21 (8,057,728)
(Premiums received $5,810,689) -------------
TOTAL WRITTEN OPTIONS............................................................................ (8,352,128)
(Premiums received $6,202,324) -------------
NET OTHER ASSETS AND LIABILITIES -- 0.2%......................................................... 203,631
-------------
NET ASSETS -- 100.0%............................................................................. $ 90,455,345
=============
|
(a) Rate shown reflects yield as of February 29, 2020.
(b) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of February 29, 2020, the
aggregate gross unrealized appreciation for all investments in which there
was an excess of value over tax cost was $3,407,211 and the aggregate
gross unrealized depreciation for all investments in which there was an
excess of tax cost over value was $6,539,759. The net unrealized
depreciation was $3,132,548. The amounts presented are inclusive of
derivative contracts.
Page 26 See Notes to Financial Statements
FT CBOE VEST U.S. EQUITY BUFFER ETF - FEBRUARY (FFEB)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of February 29,
2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
ASSETS TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
2/29/2020 PRICES INPUTS INPUTS
------------- ------------- ------------- -------------
Call Options Purchased........................... $ 84,327,936 $ -- $ 84,327,936 $ --
Put Options Purchased............................ 13,353,984 -- 13,353,984 --
Money Market Funds............................... 921,922 921,922 -- --
------------- ------------- ------------- -------------
Total Investments................................ $ 98,603,842 $ 921,922 $ 97,681,920 $ --
============= ============= ============= =============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
2/29/2020 PRICES INPUTS INPUTS
------------- ------------- ------------- -------------
Call Options Written............................. $ (294,400) $ -- $ (294,400) $ --
Put Options Written.............................. (8,057,728) -- (8,057,728) --
------------- ------------- ------------- -------------
Total............................................ $ (8,352,128) $ -- $ (8,352,128) $ --
============= ============= ============= =============
|
See Notes to Financial Statements Page 27
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - FEBRUARY (DFEB)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
-------------- ------------------------------------------------------- ------------- ----------- ------------ -------------
PURCHASED OPTIONS -- 102.0%
CALL OPTIONS PURCHASED -- 90.8%
3,910 SPDR(R) S&P 500(R) ETF Trust........................... $ 115,837,660 $ 3.32 02/19/21 $ 112,001,950
(Cost $116,071,048) -------------
PUT OPTIONS PURCHASED -- 11.2%
3,910 SPDR(R) S&P 500(R) ETF Trust........................... 115,837,660 316.81 02/19/21 13,747,560
(Cost $11,233,966) -------------
TOTAL PURCHASED OPTIONS.......................................................................... 125,749,510
(Cost $127,305,014) -------------
|
SHARES DESCRIPTION VALUE
-------------- ------------------------------------------------------------------------------------------------- -------------
MONEY MARKET FUNDS -- 0.7%
914,641 Dreyfus Government Cash Management Fund, Institutional Shares - 1.50% (a)........................ 914,641
(Cost $914,641) -------------
TOTAL INVESTMENTS -- 102.7%...................................................................... 126,664,151
(Cost $128,219,655) (b) -------------
|
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
-------------- ------------------------------------------------------- ------------- ----------- ------------ -------------
WRITTEN OPTIONS -- (3.1%)
CALL OPTIONS WRITTEN -- (0.6%)
(3,910) SPDR(R) S&P 500(R) ETF Trust........................... $(115,837,660) $ 358.49 02/19/21 (688,160)
(Premiums received $990,466) -------------
PUT OPTIONS WRITTEN -- (2.5%)
(3,910) SPDR(R) S&P 500(R) ETF Trust........................... (115,837,660) 233.44 02/19/21 (3,151,460)
(Premiums received $2,319,147) -------------
TOTAL WRITTEN OPTIONS............................................................................ (3,839,620)
(Premiums received $3,309,613) -------------
NET OTHER ASSETS AND LIABILITIES -- 0.4%......................................................... 540,326
-------------
NET ASSETS -- 100.0%............................................................................. $ 123,364,857
=============
|
(a) Rate shown reflects yield as of February 29, 2020.
(b) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of February 29, 2020, the
aggregate gross unrealized appreciation for all investments in which there
was an excess of value over tax cost was $2,815,900 and the aggregate
gross unrealized depreciation for all investments in which there was an
excess of tax cost over value was $4,901,411. The net unrealized
depreciation was $2,085,511. The amounts presented are inclusive of
derivative contracts.
Page 28 See Notes to Financial Statements
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - FEBRUARY (DFEB)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of February 29,
2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
ASSETS TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
2/29/2020 PRICES INPUTS INPUTS
------------- ------------- ------------- -------------
Call Options Purchased........................... $ 112,001,950 $ -- $ 112,001,950 $ --
Put Options Purchased............................ 13,747,560 -- 13,747,560 --
Money Market Funds............................... 914,641 914,641 -- --
------------- ------------- ------------- -------------
Total Investments................................ $ 126,664,151 $ 914,641 $ 125,749,510 $ --
============= ============= ============= =============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
2/29/2020 PRICES INPUTS INPUTS
------------- ------------- ------------- -------------
Call Options Written............................. $ (688,160) $ -- $ (688,160) $ --
Put Options Written.............................. (3,151,460) -- (3,151,460) --
------------- ------------- ------------- -------------
Total............................................ $ (3,839,620) $ -- $ (3,839,620) $ --
============= ============= ============= =============
|
See Notes to Financial Statements Page 29
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF ASSETS AND LIABILITIES
FEBRUARY 29, 2020 (UNAUDITED)
FT CBOE VEST FT CBOE VEST
U.S. EQUITY U.S. EQUITY
BUFFER ETF - DEEP BUFFER ETF -
AUGUST AUGUST
(FAUG) (DAUG)
------------------- -------------------
ASSETS:
Investments, at value..................................................... $ 43,749 $ 14,538
Options contracts purchased, at value..................................... 4,602,230 1,502,080
Receivables:
Investment securities sold............................................. -- --
Dividends.............................................................. 248 93
Capital shares sold.................................................... -- --
--------------- ---------------
Total Assets........................................................... 4,646,227 1,516,711
--------------- ---------------
LIABILITIES:
Options contracts written, at value....................................... 233,537 39,209
Payables:
Investment securities purchased........................................ -- --
Investment advisory fees............................................... 3,372 1,976
--------------- ---------------
Total Liabilities...................................................... 236,909 41,185
--------------- ---------------
NET ASSETS................................................................ $ 4,409,318 $ 1,475,526
=============== ===============
NET ASSETS CONSIST OF:
Paid-in capital........................................................... $ 4,456,103 $ 1,494,339
Par value................................................................. 1,500 500
Accumulated distributable earnings (loss)................................. (48,285) (19,313)
--------------- ---------------
NET ASSETS................................................................ $ 4,409,318 $ 1,475,526
=============== ===============
NET ASSET VALUE, per share................................................ $ 29.40 $ 29.51
=============== ===============
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share)................................. 150,002 50,002
=============== ===============
Investments, at cost...................................................... $ 43,749 $ 14,538
=============== ===============
Premiums paid on options contracts purchased.............................. $ 4,618,939 $ 1,529,128
=============== ===============
Premiums received on options contracts written............................ $ 236,662 $ 40,342
=============== ===============
|
Page 30 See Notes to Financial Statements
FT CBOE VEST FT CBOE VEST FT CBOE VEST FT CBOE VEST
U.S. EQUITY U.S. EQUITY U.S. EQUITY U.S. EQUITY
BUFFER ETF - DEEP BUFFER ETF - BUFFER ETF - DEEP BUFFER ETF -
NOVEMBER NOVEMBER FEBRUARY FEBRUARY
(FNOV) (DNOV) (FFEB) (DFEB)
------------------- ------------------- ------------------- -------------------
$ 501,233 $ 127,395 $ 921,922 $ 914,641
56,215,152 13,623,668 97,681,920 125,749,510
278,017 -- 1,563,954 1,440,096
429 153 112 107
4,450,377 -- 16,964,158 46,453,338
--------------- --------------- --------------- ---------------
61,445,208 13,751,216 117,132,066 174,557,692
--------------- --------------- --------------- ---------------
3,342,780 396,656 8,352,128 3,839,620
4,685,138 -- 18,317,396 47,346,368
24,662 9,478 7,197 6,847
--------------- --------------- --------------- ---------------
8,052,580 406,134 26,676,721 51,192,835
--------------- --------------- --------------- ---------------
$ 53,392,628 $ 13,345,082 $ 90,455,345 $ 123,364,857
=============== =============== =============== ===============
$ 55,198,995 $ 13,836,305 $ 93,562,983 $ 125,414,609
18,000 4,500 32,000 42,500
(1,824,367) (495,723) (3,139,638) (2,092,252)
--------------- --------------- --------------- ---------------
$ 53,392,628 $ 13,345,082 $ 90,455,345 $ 123,364,857
=============== =============== =============== ===============
$ 29.66 $ 29.66 $ 28.27 $ 29.03
=============== =============== =============== ===============
1,800,002 450,002 3,200,002 4,250,002
=============== =============== =============== ===============
$ 501,233 $ 127,395 $ 921,922 $ 914,641
=============== =============== =============== ===============
$ 57,253,548 $ 14,177,032 $ 98,664,664 $ 127,305,014
=============== =============== =============== ===============
$ 2,614,694 $ 479,543 $ 6,202,324 $ 3,309,613
=============== =============== =============== ===============
|
See Notes to Financial Statements Page 31
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED FEBRUARY 29, 2020 (UNAUDITED)
FT CBOE VEST FT CBOE VEST
U.S. EQUITY U.S. EQUITY
BUFFER ETF - DEEP BUFFER ETF -
AUGUST AUGUST
(FAUG) (a) (DAUG) (a)
------------------- -------------------
INVESTMENT INCOME:
Dividends................................................................. $ 548 $ 206
--------------- ---------------
Total investment income................................................ 548 206
--------------- ---------------
EXPENSES:
Investment advisory fees.................................................. 15,681 8,085
--------------- ---------------
Total expenses......................................................... 15,681 8,085
--------------- ---------------
NET INVESTMENT INCOME (LOSS).............................................. (15,133) (7,879)
--------------- ---------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Purchased options contracts............................................ 27,726 19,302
Written options contracts.............................................. (47,294) (4,821)
--------------- ---------------
Net realized gain (loss).................................................. (19,568) 14,481
--------------- ---------------
Net change in unrealized appreciation (depreciation) on:
Purchased options contracts............................................ (16,709) (27,048)
Written options contracts.............................................. 3,125 1,133
--------------- ---------------
Net change in unrealized appreciation (depreciation)...................... (13,584) (25,915)
--------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................... (33,152) (11,434)
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS........................................................ $ (48,285) $ (19,313)
=============== ===============
|
(a) Inception date is November 6, 2019, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
(b) Inception date is November 15, 2019, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
(c) Inception date is February 21, 2020, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
Page 32 See Notes to Financial Statements
FT CBOE VEST FT CBOE VEST FT CBOE VEST FT CBOE VEST
U.S. EQUITY U.S. EQUITY U.S. EQUITY U.S. EQUITY
BUFFER ETF - DEEP BUFFER ETF - BUFFER ETF - DEEP BUFFER ETF -
NOVEMBER NOVEMBER FEBRUARY FEBRUARY
(FNOV) (b) (DNOV) (b) (FFEB) (c) (DFEB) (c)
------------------- ------------------- ------------------- -------------------
$ 1,083 $ 444 $ 112 $ 107
--------------- --------------- --------------- ---------------
1,083 444 112 107
--------------- --------------- --------------- ---------------
58,968 25,690 7,202 6,848
--------------- --------------- --------------- ---------------
58,968 25,690 7,202 6,848
--------------- --------------- --------------- ---------------
(57,885) (25,246) (7,090) (6,741)
--------------- --------------- --------------- ---------------
-- -- -- --
-- -- -- --
--------------- --------------- --------------- ---------------
-- -- -- --
--------------- --------------- --------------- ---------------
(1,038,396) (553,364) (982,744) (1,555,504)
(728,086) 82,887 (2,149,804) (530,007)
--------------- --------------- --------------- ---------------
(1,766,482) (470,477) (3,132,548) (2,085,511)
--------------- --------------- --------------- ---------------
(1,766,482) (470,477) (3,132,548) (2,085,511)
--------------- --------------- --------------- ---------------
$ (1,824,367) $ (495,723) $ (3,139,638) $ (2,092,252)
=============== =============== =============== ===============
|
See Notes to Financial Statements Page 33
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF CHANGES IN NET ASSETS
FT CBOE VEST FT CBOE VEST
U.S. EQUITY U.S. EQUITY
BUFFER ETF - DEEP BUFFER ETF -
AUGUST AUGUST
(FAUG) (DAUG)
------------------- -------------------
PERIOD ENDED PERIOD ENDED
2/29/20 2/29/20
(UNAUDITED) (a) (UNAUDITED) (a)
------------------- -------------------
OPERATIONS:
Net investment income (loss).............................................. $ (15,133) $ (7,879)
Net realized gain (loss).................................................. (19,568) 14,481
Net change in unrealized appreciation (depreciation)...................... (13,584) (25,915)
--------------- ---------------
Net increase (decrease) in net assets resulting from operations........... (48,285) (19,313)
--------------- ---------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................................. 9,115,590 3,011,135
Cost of shares redeemed................................................... (4,657,987) (1,516,296)
--------------- ---------------
Net increase (decrease) in net assets resulting from shareholder
transactions........................................................... 4,457,603 1,494,839
--------------- ---------------
Total increase (decrease) in net assets................................... 4,409,318 1,475,526
NET ASSETS:
Beginning of period....................................................... -- --
--------------- ---------------
End of period............................................................. $ 4,409,318 $ 1,475,526
=============== ===============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................................... -- --
Shares sold............................................................... 300,002 100,002
Shares redeemed........................................................... (150,000) (50,000)
--------------- ---------------
Shares outstanding, end of period......................................... 150,002 50,002
=============== ===============
|
(a) Inception date is November 6, 2019, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
(b) Inception date is November 15, 2019, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
(c) Inception date is February 21, 2020, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
Page 34 See Notes to Financial Statements
FT CBOE VEST FT CBOE VEST FT CBOE VEST FT CBOE VEST
U.S. EQUITY U.S. EQUITY U.S. EQUITY U.S. EQUITY
BUFFER ETF - DEEP BUFFER ETF - BUFFER ETF - DEEP BUFFER ETF -
NOVEMBER NOVEMBER FEBRUARY FEBRUARY
(FNOV) (DNOV) (FFEB) (DFEB)
------------------- ------------------- ------------------- -------------------
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
2/29/20 2/29/20 2/29/20 2/29/20
(UNAUDITED) (b) (UNAUDITED) (b) (UNAUDITED) (c) (UNAUDITED) (c)
------------------- ------------------- ------------------- -------------------
$ (57,885) $ (25,246) $ (7,090) $ (6,741)
-- -- -- --
(1,766,482) (470,477) (3,132,548) (2,085,511)
--------------- --------------- --------------- ---------------
(1,824,367) (495,723) (3,139,638) (2,092,252)
--------------- --------------- --------------- ---------------
55,216,995 13,840,805 93,594,983 125,457,109
-- -- -- --
--------------- --------------- --------------- ---------------
55,216,995 13,840,805 93,594,983 125,457,109
--------------- --------------- --------------- ---------------
53,392,628 13,345,082 90,455,345 123,364,857
-- -- -- --
--------------- --------------- --------------- ---------------
$ 53,392,628 $ 13,345,082 $ 90,455,345 $ 123,364,857
=============== =============== =============== ===============
-- -- -- --
1,800,002 450,002 3,200,002 4,250,002
-- -- -- --
--------------- --------------- --------------- ---------------
1,800,002 450,002 3,200,002 4,250,002
=============== =============== =============== ===============
|
See Notes to Financial Statements Page 35
FIRST TRUST EXCHANGE-TRADED FUND VIII
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FT CBOE VEST U.S. EQUITY BUFFER ETF - AUGUST (FAUG)
PERIOD
ENDED
2/29/2020 (a)
(UNAUDITED)
---------------
Net asset value, beginning of period........................... $ 30.10
---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... (0.10)
Net realized and unrealized gain (loss)........................ (0.60)
---------
Total from investment operations............................... (0.70)
---------
Net asset value, end of period................................. $ 29.40
=========
TOTAL RETURN (b)............................................... (2.36)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 4,409
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets.................. 0.85% (c)
Ratio of net investment income (loss) to average net assets.... (0.82)% (c)
Portfolio turnover rate (d).................................... 0%
|
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - AUGUST (DAUG)
PERIOD
ENDED
2/29/2020 (a)
(UNAUDITED)
---------------
Net asset value, beginning of period........................... $ 30.10
---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... (0.16)
Net realized and unrealized gain (loss)........................ (0.43)
---------
Total from investment operations............................... (0.59)
---------
Net asset value, end of period................................. $ 29.51
=========
TOTAL RETURN (b)............................................... (1.96)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 1,476
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets.................. 0.85% (c)
Ratio of net investment income (loss) to average net assets.... (0.83)% (c)
Portfolio turnover rate (d).................................... 0%
|
(a) Inception date is November 6, 2019, 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,
derivatives and in-kind transactions.
Page 36 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FT CBOE VEST U.S. EQUITY BUFFER ETF - NOVEMBER (FNOV)
PERIOD
ENDED
2/29/2020 (a)
(UNAUDITED)
---------------
Net asset value, beginning of period........................... $ 30.56
---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... (0.03)
Net realized and unrealized gain (loss)........................ (0.87)
---------
Total from investment operations............................... (0.90)
---------
Net asset value, end of period................................. $ 29.66
=========
TOTAL RETURN (b)............................................... (2.95)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 53,393
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets.................. 0.85% (c)
Ratio of net investment income (loss) to average net assets.... (0.83)% (c)
Portfolio turnover rate (d).................................... 0%
|
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - NOVEMBER (DNOV)
PERIOD
ENDED
2/29/2020 (a)
(UNAUDITED)
---------------
Net asset value, beginning of period........................... $ 30.55
---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... (0.06)
Net realized and unrealized gain (loss)........................ (0.83)
---------
Total from investment operations............................... (0.89)
---------
Net asset value, end of period................................. $ 29.66
=========
TOTAL RETURN (b)............................................... (2.95)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 13,345
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets.................. 0.85% (c)
Ratio of net investment income (loss) to average net assets.... (0.84)% (c)
Portfolio turnover rate (d).................................... 0%
|
(a) Inception date is November 15, 2019, 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,
derivatives and in-kind transactions.
See Notes to Financial Statements Page 37
FIRST TRUST EXCHANGE-TRADED FUND VIII
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FT CBOE VEST U.S. EQUITY BUFFER ETF - FEBRUARY (FFEB)
PERIOD
ENDED
2/29/2020 (a)
(UNAUDITED)
---------------
Net asset value, beginning of period........................... $ 30.68
---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... (0.00) (b)
Net realized and unrealized gain (loss)........................ (2.41)
---------
Total from investment operations............................... (2.41)
---------
Net asset value, end of period................................. $ 28.27
=========
TOTAL RETURN (c)............................................... (7.86)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 90,455
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets.................. 0.85% (d)
Ratio of net investment income (loss) to average net assets.... (0.84)% (d)
Portfolio turnover rate (e).................................... 0%
|
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - FEBRUARY (DFEB)
PERIOD
ENDED
2/29/2020 (a)
(UNAUDITED)
---------------
Net asset value, beginning of period........................... $ 30.68
---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... (0.00) (b)
Net realized and unrealized gain (loss)........................ (1.65)
---------
Total from investment operations............................... (1.65)
---------
Net asset value, end of period................................. $ 29.03
=========
TOTAL RETURN (c)............................................... (5.38)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 123,365
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets.................. 0.85% (d)
Ratio of net investment income (loss) to average net assets.... (0.84)% (d)
Portfolio turnover rate (e).................................... 0%
|
(a) Inception date is February 21, 2020, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
(b) Amount represents less than $0.01 per share.
(c) 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.
(d) Annualized.
(e) 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,
derivatives and in-kind transactions.
Page 38 See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
1. ORGANIZATION
First Trust Exchange-Traded Fund VIII (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on February 22,
2016, 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 sixteen funds that are offering shares. This
report covers the six funds listed below. The shares of each fund are listed and
traded on the Cboe BZX Exchange, Inc. ("Cboe BZX").
FT Cboe Vest U.S. Equity Buffer ETF - August - (Cboe BZX ticker "FAUG")(1)
FT Cboe Vest U.S. Equity Deep Buffer ETF - August - (Cboe BZX ticker
"DAUG")(1)
FT Cboe Vest U.S. Equity Buffer ETF - November - (Cboe BZX ticker "FNOV")(2)
FT Cboe Vest U.S. Equity Deep Buffer ETF - November - (Cboe BZX ticker
"DNOV")(2)
FT Cboe Vest U.S. Equity Buffer ETF - February - (Cboe BZX ticker "FFEB")(3)
FT Cboe Vest U.S. Equity Deep Buffer ETF - February - (Cboe BZX ticker
"DFEB")(3)
(1) Commenced investment operations on November 6, 2019.
(2) Commenced investment operations on November 15, 2019.
(3) Commenced investment operations on February 21, 2020.
Each fund represents a separate series of shares of beneficial interest in the
Trust (each a "Fund" and collectively, the "Funds"). Unlike conventional mutual
funds, each Fund issues and redeems shares on a continuous basis, at net asset
value ("NAV"), only in large specified blocks consisting of 50,000 shares called
a "Creation Unit." Each Fund's Creation Units are generally issued, in-kind for
securities in which a Fund invests, and, in certain circumstances, for cash, and
only to and from broker-dealers and large institutional investors that have
entered into participation agreements. Except when aggregated in Creation Units,
each Fund's shares are not redeemable securities.
Each Fund is an actively managed exchange-traded fund.
The investment objective of FAUG is to seek to provide investors with returns
(before fees, expenses and taxes) that match those of the SPDR(R) S&P 500(R) ETF
Trust (the "Underlying ETF"), up to a predetermined upside cap of 8.60% (before
fees, expenses and taxes) and 7.93% (after fees and expenses, excluding
brokerage commissions, trading fees, taxes and extraordinary expenses not
included in the Fund's management fee ), while providing a buffer against the
first 10% (before fees, expenses and taxes) of Underlying ETF losses, over the
period from November 7, 2019 to August 21, 2020.
The investment objective of DAUG is to seek to provide investors with returns
(before fees, expenses and taxes) that match those of the Underlying ETF, up to
a predetermined upside cap of 6.58% (before fees, expenses and taxes) and 5.91%
(after fees and expenses, excluding brokerage commissions, trading fees, taxes
and extraordinary expenses not included in the Fund's management fee), while
providing a buffer against Underlying ETF losses between -5% and -30% (before
fees, expenses and taxes) over the period from November 7, 2019 to August 21,
2020.
The investment objective of FNOV is to seek to provide investors with returns
(before fees, expenses and taxes) that match those of the Underlying ETF, up to
a predetermined upside cap of 12.36% (before fees, expenses and taxes) and
11.50% (after fees and expenses, excluding brokerage commissions, trading fees,
taxes and extraordinary expenses not included in the Fund's management fee),
while providing a buffer against the first 10% (before fees, expenses and taxes)
of Underlying ETF losses, over the period from November 18, 2019 to November 20,
2020.
The investment objective of DNOV is to seek to provide investors with returns
(before fees, expenses and taxes) that match those of the Underlying ETF, up to
a predetermined upside cap of 8.12% (before fees, expenses and taxes) and 7.26%
(after fees and expenses, excluding brokerage commissions, trading fees, taxes
and extraordinary expenses not included in the Fund's management fee), while
providing a buffer against Underlying ETF losses between -5% and -30% (before
fees, expenses and taxes) over the period from November 18, 2019 to November 20,
2020.
The investment objective of FFEB is to seek to provide investors with returns
(before fees, expenses and taxes) that match the price return of the Underlying
ETF, up to a predetermined upside cap of 10.75% (before fees, expenses and
taxes) and 9.90% (after fees and expenses, excluding brokerage commissions,
trading fees, taxes and extraordinary expenses not included in the Fund's
management fee), while providing a buffer against the first 10% (before fees,
expenses and taxes) of Underlying ETF losses, over the period from February 24,
2020 to February 19, 2021.
Page 39
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
The investment objective of DFEB is to seek to provide investors with returns
(before fees, expenses and taxes) that match the price return of the Underlying
ETF, up to a predetermined upside cap of 7.50% (before fees, expenses and taxes)
and 6.65% (after fees and expenses, excluding brokerage commissions, trading
fees, taxes and extraordinary expenses not included in the Fund's management
fee), while providing a buffer against Underlying ETF losses between -5% and
-30% (before fees, expenses and taxes) over the period from February 24, 2020 to
February 19, 2021.
Under normal market conditions, each Fund will invest substantially all of its
assets in FLexible EXchange(R) Options ("FLEX Options") that reference the
performance of the Underlying ETF.
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds are each considered an investment company and follow accounting and
reporting guidance under Financial Accounting Standards Board Accounting
Standards Codification Topic 946, "Financial Services-Investment Companies." The
following is a summary of significant accounting policies consistently followed
by the Funds in the preparation of the financial statements. The preparation of
the financial statements in accordance with accounting principles generally
accepted in the United States of America ("U.S. GAAP") requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
Each Fund's NAV is determined daily as of the close of regular trading on the
New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day
the NYSE is open for trading. If the NYSE closes early on a valuation day, the
NAV is determined as of that time. Each 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.
Each 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 Funds'
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. Each Fund's investments are valued as
follows:
Exchange-traded options contracts (other than FLEX Option contracts) are
valued at the closing price in the market where such contracts are
principally traded. If no closing price is available, exchange-traded
options contracts are fair valued at the mean of their most recent bid and
asked price, if available, and otherwise at their closing bid price.
Over-the-counter options contracts are fair valued at the mean of their
most recent bid and asked price, if available, and otherwise at their
closing bid price. FLEX Options are normally valued using a model-based
price provided by a third-party pricing vendor. On days when a trade in a
FLEX Option occurs, the trade price will be used to value such FLEX
Options in lieu of the model price.
Shares of open-end funds are valued at fair value which is based on NAV
per share.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Trust's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities
which may not be publicly sold without registration under the Securities Act of
1933, as amended) for which a third-party pricing service is unable to provide a
market price; securities whose trading has been formally suspended; a security
whose market or fair value price is not available from a pre-established pricing
source; a security with respect to which an event has occurred that is likely to
materially affect the value of the security after the market has closed but
before the calculation of a Fund's NAV or make it difficult or impossible to
obtain a reliable market quotation; and a security whose price, as provided by
the third-party pricing service, does not reflect the security's fair value. As
a general principle, the current fair value of a security would appear to be the
amount which the owner might reasonably expect to receive for the security upon
its current sale. When fair value prices are used, generally they will differ
from market quotations or official closing prices on the applicable exchanges. A
variety of factors may be considered in determining the fair value of such
securities, including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or third-party pricing services;
6) relationships among various securities;
Page 40
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
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 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 February 29, 2020, 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.
C. FLEX OPTIONS
FLEX Options are customized equity or index option contracts that trade on an
exchange, but provide investors with the ability to customize key contract terms
like exercise prices, styles and expiration dates. FLEX Options are guaranteed
for settlement by the Options Clearing Corporation.
Each Fund will purchase and sell call and put FLEX Options based on the
performance of the Underlying ETF. The FLEX Options that each Fund will hold
that reference the Underlying ETF will give each Fund the right to receive or
deliver shares of the Underlying ETF on the option expiration date at a strike
price, depending on whether the option is a put or call option and whether each
Fund purchases or sells the option. The FLEX Options held by each Fund are
European style options, which are exercisable at the strike price only on the
FLEX Option expiration date.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income of each Fund, if any, are declared and paid
annually, or as the Board of Trustees may determine from time to time.
Distributions of net realized gains earned by each Fund, if any, are distributed
at least annually.
Distributions from net investment income and realized capital gains are
determined in accordance with federal income tax regulations, which may differ
from U.S. GAAP. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These permanent differences are primarily due to the varying
treatment of income and gain/loss on 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.
E. INCOME TAXES
Each Fund intends 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.
Page 41
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (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. As of February 29, 2020,
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.
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.
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.
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 selection and 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.
Cboe Vest Financial LLC ("Cboe Vest"), an affiliate of First Trust, serves as
the Funds' sub-advisor and manages each Fund's portfolio subject to First
Trust's supervision. Pursuant to the Investment Management Agreement, between
the Trust, on behalf of the Funds, and the Advisor, and the Investment
Sub-Advisory Agreement among the Trust, on behalf of the Funds, the Advisor and
Cboe Vest, First Trust will supervise Cboe Vest and its management of the
investment of each Fund's assets and will pay Cboe Vest 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, sub-advisory, 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 12b-1 plan, if any, and extraordinary expenses. Each Fund has
agreed to pay First Trust an annual unitary management fee equal to 0.85% of its
average daily net assets.
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
each Fund. As custodian, BNYM is responsible for custody of each Fund's assets.
As fund accountant and administrator, BNYM is responsible for maintaining the
books and records of each Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for each Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any
sub-advisor or any of their affiliates ("Independent Trustees") is paid a fixed
annual retainer that is allocated equally among each fund in the First Trust
Fund Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
a defined-outcome fund or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen 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
Chairmen 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 February 29, 2020, the Funds had no purchases or sales of
investments, excluding short-term investments, derivatives, and in-kind
transactions.
For the period ended February 29, 2020, the Funds had no in-kind purchases or
sales.
Page 42
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
5. DERIVATIVE TRANSACTIONS
The following table presents the types of derivatives held by each Fund at
February 29, 2020, the primary underlying risk exposure and the location of
these instruments as presented on the Statements of Assets and Liabilities.
ASSET DERIVATIVES LIABILITY DERIVATIVES
---------------------------------------- ----------------------------------------
DERIVATIVES STATEMENTS OF ASSETS AND STATEMENTS OF ASSETS AND
INSTRUMENT RISK EXPOSURE LIABILITIES LOCATION VALUE LIABILITIES LOCATION VALUE
----------- -------------- ------------------------ ------------- ------------------------ -------------
FAUG
Options contracts Options contracts
Options Equity Risk purchased, at value $ 4,602,230 written, at value $ 233,537
DAUG
Options contracts Options contracts
Options Equity Risk purchased, at value 1,502,080 written, at value 39,209
FNOV
Options contracts Options contracts
Options Equity Risk purchased, at value 56,215,152 written, at value 3,342,780
DNOV
Options contracts Options contracts
Options Equity Risk purchased, at value 13,623,668 written, at value 396,656
FFEB
Options contracts Options contracts
Options Equity Risk purchased, at value 97,681,920 written, at value 8,352,128
DFEB
Options contracts Options contracts
Options Equity Risk purchased, at value 125,749,510 written, at value 3,839,620
|
The following table presents the amount of net realized gain (loss) and change
in net unrealized appreciation (depreciation) recognized for the period ended
February 29, 2020, on each Fund's derivative instruments, as well as the primary
underlying risk exposure associated with the instruments.
EQUITY RISK
--------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS LOCATION FAUG DAUG FNOV DNOV FFEB DFEB
------------------------------------- --------------------------------------------------------------------------------
Net realized gain (loss) on:
Purchased options contracts $ 27,726 $ 19,302 $ -- $ -- $ -- $ --
Written options contracts (47,294) (4,821) -- -- -- --
Net change in unrealized appreciation
(depreciation) on:
Purchased options contracts (16,709) (27,048) (1,038,396) (553,364) (982,744) (1,555,504)
Written options contracts 3,125 1,133 (728,086) 82,887 (2,149,804) (530,007)
|
The funds do not have the right to offset financial assets and financial
liabilities related to options contracts on the Statements of Assets and
Liabilities.
Page 43
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
The following table presents the premiums for purchased options contracts
opened, premiums for purchased options contracts closed, exercised and expired,
premiums for written options contracts opened and premiums for written options
contracts closed, exercised and expired, for the period ended February 29, 2020,
on each Fund's options contracts.
PREMIUMS FOR PREMIUMS FOR
PREMIUMS FOR PURCHASED WRITTEN OPTIONS
PURCHASED OPTIONS CONTRACTS PREMIUMS FOR CONTRACTS CLOSED,
OPTIONS CONTRACTS CLOSED, EXERCISED WRITTEN OPTIONS EXERCISED AND
OPENED AND EXPIRED CONTRACTS OPENED EXPIRED
----------------------------------------------------------------------------
FAUG $ 9,412,955 $ 4,794,016 $ 399,972 $ 163,310
DAUG 3,058,255 1,529,127 80,683 40,341
FNOV 57,253,548 -- 2,614,694 --
DNOV 14,177,032 -- 479,543 --
FFEB 98,664,664 -- 6,202,324 --
DFEB 127,305,014 -- 3,309,613 --
|
6. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
Shares are created and redeemed by each Fund only in Creation Unit size
aggregations of 50,000 shares in transactions with broker-dealers or large
institutional investors that have entered into a participation agreement (an
"Authorized Participant'). In order to purchase Creation Units of each Fund, an
Authorized Participant must deposit (i) a designated portfolio of securities
determined by First Trust (the "Deposit Securities") and generally make or
receive a cash payment referred to as the "Cash Component," which is an amount
equal to the difference between the NAV of the Fund Shares (per Creation Unit
Aggregation) and the market value of the Deposit Securities, and/or (ii) cash in
lieu of all or a portion of the Deposit Securities. If the Cash Component is a
positive number (i.e., the NAV per Creation Unit Aggregation exceeds the Deposit
Amount), the Authorized Participant will deliver the Cash Component. If the Cash
Component is a negative number (i.e., the NAV per Creation Unit Aggregation is
less than the Deposit Amount), the Authorized Participant will receive the Cash
Component. Authorized Participants purchasing Creation Units must pay to BNYM,
as transfer agent, a creation transaction fee (the "Creation Transaction Fee")
regardless of the number of Creation Units purchased in the transaction. The
Creation Transaction Fee may vary and is based on the composition of the
securities included in each Fund's portfolio and the countries in which the
transactions are settled. The Creation Transaction Fee may increase or decrease
with changes in each Fund's portfolio. The price for each Creation Unit will
equal the daily NAV per share 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 or stamp taxes. When a Fund permits an Authorized
Participant to substitute cash or a different security in lieu of depositing one
or more of the requisite Deposit Securities, the Authorized Participant may also
be assessed an amount to cover the cost of purchasing the Deposit Securities
and/or disposing of the substituted securities, including 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 such Deposit
Securities and/or substitute securities.
Authorized Participants redeeming Creation Units must pay to BNYM, as transfer
agent, a redemption transaction fee (the "Redemption Transaction Fee"),
regardless of the number of Creation Units redeemed in the transaction. The
Redemption Transaction Fee may vary and is based on the composition of the
securities included in each Fund's portfolio and the countries in which the
transactions are settled. The Redemption Transaction Fee may increase or
decrease with changes in each Fund's portfolio. Each Fund reserves the right to
effect redemptions in cash. An Authorized Participant may request cash
redemption in lieu of securities; however, a Fund may, in its discretion, reject
any such request.
7. DISTRIBUTION PLAN
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the 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 November 1, 2021 for
FAUG, DAUG, FNOV and DNOV and February 1, 2022 for FFEB and DFEB.
Page 44
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
8. 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.
9. 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:
Beginning in December 2019, the outbreak of the respiratory disease designated
as COVID-19 has caused significant volatility and declines in global financial
markets, which have caused losses for investors. The impact of this COVID-19
pandemic may be short term or may last for an extended period of time and, in
either case, could result in a substantial economic downturn or recession.
Management is continuing to monitor this event.
Page 45
ADDITIONAL INFORMATION
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (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.
BUFFERED LOSS RISK. There can be no guarantee that the Fund will be successful
in its strategy to buffer against Underlying ETF losses if the Underlying ETF
decreases over the Target Outcome Period by 10% or less. A shareholder may lose
their entire investment. The Fund's strategy seeks to deliver returns that match
the Underlying ETF (up to the cap), while limiting downside losses, if shares
are bought on the day on which the Fund enters into the FLEX Options and held
until those FLEX Options expire at the end of each Target Outcome Period. In the
event an investor purchases shares after the date on which the FLEX Options were
entered into or sells shares prior to the expiration of the FLEX Options, the
buffer that the Fund seeks to provide may not be available.
CAPPED UPSIDE RISK. The Fund's strategy seeks to provide returns that match
those of the Underlying ETF for Fund shares purchased on the first day of a
Target Outcome Period and held for the entire Target Outcome Period, subject to
a pre-determined upside cap. If an investor does not hold its Funds hares for an
entire Target Outcome Period, the returns realized by that investor may not
match those the Fund seeks to achieve. If the Underlying ETF experiences gains
during a Target Outcome Period, the Fund will not participate in those gains
beyond the cap. In the event an investor purchases Fund shares after the first
day of a Target Outcome Period and the Fund has risen in value to a level near
to the cap, there may be little or no ability for that investor to experience an
investment gain on their Fund shares.
CONCENTRATION RISK. To the extent that a fund is able to invest a large
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
not concentrated.
CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable
or unwilling to make dividend, interest and/or principal payments when due and
the related risk that the value of a security may decline because of concerns
about the issuer's ability to make such payments.
CYBER SECURITY RISK. The funds are susceptible to potential operational risks
through breaches in cyber security. A breach in cyber security refers to both
intentional and unintentional events that may cause a fund to lose proprietary
information, suffer data corruption or lose operational capacity. Such events
could cause a fund to incur regulatory penalties, reputational damage,
additional compliance costs associated with corrective measures and/or financial
loss. In addition, cyber security breaches of a fund's third-party service
providers, such as its administrator, transfer agent, custodian, or sub-advisor,
as applicable, or issuers in which the fund invests, can also subject a fund to
many of the same risks associated with direct cyber security breaches.
Page 46
ADDITIONAL INFORMATION (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (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.
FLEX OPTIONS CORRELATION RISK. The FLEX Options held by the Fund will be
exercisable at the strike price only on their expiration date. Prior to the
expiration date, the value of the FLEX Options will be determined based upon
market quotations or using other recognized pricing methods. The value of the
FLEX Options prior to the expiration date may vary because of related factors
other than the value of the Underlying ETF. Factors that may influence the value
of the FLEX Options, other than changes in the value of the Underlying ETF, may
include interest rate changes, changing supply and demand, decreased liquidity
of the FLEX Options and changing volatility levels of the Underlying ETF.
FLEX OPTIONS LIQUIDITY RISK. The FLEX Options are listed on an exchange;
however, no one can guarantee that a liquid secondary trading market will exist
for the FLEX Options. In the event that trading in the FLEX Options is limited
or absent, the value of the Fund's FLEX Options may decrease. In a less liquid
market for the FLEX Options, liquidating the FLEX Options may require the
payment of a premium (for written FLEX Options) or acceptance of a discounted
price (for purchased FLEX Options) and may take longer to complete. A less
liquid trading market may adversely impact the value of the FLEX Options and
Fund shares and result in the Fund being unable to achieve its investment
objective. The trading in FLEX Options may be less deep and liquid than the
market for certain other securities. FLEX Options may be less liquid than
certain non-customized options. In a less liquid market for the FLEX Options,
the liquidation of a large number of options may more significantly impact the
price. A less liquid trading market may adversely impact the value of the FLEX
Options and the value of your investment.
FLEX OPTIONS RISK. The OCC may be unable or unwilling to perform its obligations
under the FLEX Options contracts. Additionally, FLEX Options may be less liquid
than other exchange-traded options. The value of the FLEX Options prior to their
expiration date may vary because of factors other than fluctuations in the value
of the Underlying ETF, such as an increase in interest rates, a change in the
actual and perceived volatility of the stock market and the Underlying ETF and
the remaining time to expiration. Additionally, the value of the FLEX Options
does not increase or decrease at the same rate as the Underlying ETF or its
underlying securities. FLEX Option prices may be highly volatile and may
fluctuate substantially during a short period of time. Trading FLEX Options
involves risks different from, or possibly greater than, the risks associated
with investing directly in securities.
FLEX OPTIONS VALUATION RISK. The FLEX Options held by the Fund will be
exercisable at the strike price only on their expiration date. Prior to the
expiration date, the value of the FLEX Options will be determined based upon
market quotations or using other recognized pricing methods. The value of the
FLEX Options prior to the expiration date may vary because of related factors
Page 47
ADDITIONAL INFORMATION (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
other than the value of the Underlying ETF. During periods of reduced market
liquidity or in the absence of readily available market quotations for the
holdings of the Fund, the ability of the Fund to value the FLEX Options becomes
more difficult and the judgment of the Fund's investment adviser (employing the
fair value procedures adopted by the Board of Trustees of the Trust) may play a
greater role in the valuation of the Fund's holdings due to reduced availability
of reliable objective pricing data.
INDEX CONSTITUENT RISK. Certain funds may be a constituent of one or more
indices. 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
significantly 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.
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. In 2017, the United Kingdom's
Financial Conduct Authority announced that LIBOR will cease to be available for
use after 2021. The unavailability or replacement of LIBOR may affect the value,
liquidity or return on certain fund investments and may result in costs incurred
in connection with closing out positions and entering into new trades. Any
potential effects of the transition away from LIBOR on the fund or on certain
instruments in which the fund invests can be difficult to ascertain, and they
may vary depending on a variety of factors. Any such effects of the transition
away from LIBOR, as well as other unforeseen effects, could result in losses to
the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are
subject to market fluctuations caused by factors such as general economic
conditions, political events, regulatory or market developments, changes in
interest rates and perceived trends in securities prices. Shares of a fund could
decline in value or underperform other investments as a result of the risk of
loss associated with these market fluctuations. In addition, local, regional or
global events such as war, acts of terrorism, spread of infectious diseases or
other public health issues, recessions, or other events could have a significant
negative impact on a fund and its investments. Such events may affect certain
geographic regions, countries, sectors and industries more significantly than
others. The outbreak of the respiratory disease designated as COVID-19 in
December 2019 has caused significant volatility and declines in global financial
markets, which have caused losses for investors. The impact of this COVID-19
pandemic may be short term or may last for an extended period of time, and in
either case could result in a substantial economic downturn or recession.
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; lack
of liquidity; currency exchange rates; excessive taxation; government seizure of
assets; 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.
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.
Page 48
ADDITIONAL INFORMATION (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
SPECIAL TAX RISK. The Fund intends to qualify as a "regulated Investment
company" ("RIC"), however, the federal income tax treatment of certain aspects
of the proposed operations of the Fund are not entirely clear. This includes the
tax aspects of the Fund's options strategy, its hedging strategy, the possible
application of the "straddle" rules, and various loss limitation provisions of
the Internal Revenue Code of 1986, as amended. If, in any year, the Fund fails
to qualify as a regulated investment company under the applicable tax laws, the
Fund would be taxed as an ordinary corporation. Certain options on an ETF may
not qualify as "Section 1256 contracts" under Section 1256 of the Code, and
disposition of such options will likely result in short-term or long-term
capital gains or losses depending on the holding period.
The Fund intends to treat any income it may derive from the FLEX Options as
"qualifying income" under the provisions of the Code applicable to RICs. In
addition, based upon language in the legislative history, the Fund intends to
treat the issuer of the FLEX Options as the referenced asset, which, assuming
the referenced asset qualifies as a RIC, would allow the Fund to qualify for
special rules in the RIC diversification requirements. If the income is not
qualifying income or the issuer of the FLEX Options is not appropriately the
referenced asset, the Fund could lose its own status as a RIC.
In the event that a shareholder purchases shares of the Fund shortly before a
distribution by the Fund, the entire distribution may be taxable to the
shareholder even though a portion of the distribution effectively represents a
return of the purchase price.
TARGET OUTCOME PERIOD RISK. The Fund's investment strategy is designed to
deliver returns that match the Underlying ETF if Fund shares are bought on the
day on which the Fund enters into the FLEX Options (i.e., the first day of a
Target Outcome Period) and held until those FLEX Options expire at the end of
the Target Outcome Period. In the event an investor purchases Fund shares after
the first day of a Target Outcome Period or sells shares prior to the expiration
of the Target Outcome Period, the value of that investor's investment in Fund
shares may not be buffered against a decline in the value of the Underlying ETF
and may not participate in a gain in the value of the Underlying ETF up to the
cap for the investor's investment period.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
ADVISORY AGREEMENT
BOARD CONSIDERATIONS REGARDING APPROVAL OF INVESTMENT MANAGEMENT AGREEMENT AND
INVESTMENT SUB-ADVISORY AGREEMENT
The Board of Trustees of First Trust Exchange-Traded Fund VIII (the "Trust"),
including the Independent Trustees, unanimously approved the Investment
Management Agreement (the "Advisory Agreement") with First Trust Advisors L.P.
(the "Advisor") and the Investment Sub-Advisory Agreement (the "Sub-Advisory
Agreement" and together with the Advisory Agreement, the "Agreements") among the
Trust, the Advisor and Cboe Vest Financial LLC (the "Sub-Advisor") on behalf of
the following four series of the Trust (each a "Fund" and collectively, the
"Funds"):
FT Cboe Vest U.S. Equity Buffer ETF - August (FAUG)
FT Cboe Vest U.S. Equity Deep Buffer ETF - August (DAUG)
FT Cboe Vest U.S. Equity Buffer ETF - November (FNOV)
FT Cboe Vest U.S. Equity Deep Buffer ETF - November (DNOV)
The Board approved the Agreements for each Fund for an initial two-year term at
a meeting held on October 30, 2019. The Board determined for each Fund 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 reasonable business
judgment.
To reach this determination for each Fund, 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
each 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 each Fund
(including the relevant personnel responsible for these services and their
experience); the proposed unitary fee rate payable by each Fund as compared to
fees charged to a peer group of funds (the "Expense Group") and a broad peer
universe of funds (the "Expense Universe"), each assembled by Broadridge
Financial Solutions, Inc. ("Broadridge"), an independent source, and as compared
to fees charged to other clients of the Advisor, including other exchange-traded
funds ("ETFs") managed by the Advisor; the proposed sub-advisory fee rate as
compared to fees charged to other clients of the Sub-Advisor; the estimated
expense ratio of each Fund as compared to expense ratios of the funds in the
Page 49
ADDITIONAL INFORMATION (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
Fund's Expense Group and Expense Universe; the nature of expenses to be incurred
in providing services to each Fund and the potential for economies of scale, if
any; financial data on the Advisor and the Sub-Advisor; any fall-out 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 each Fund's perspective.
In evaluating whether to approve the Agreements for each 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 each Fund and reviewed all of the
services to be provided by the Advisor to the Funds, including the oversight of
the Sub-Advisor, as well as the background and experience of the persons
responsible for such services. The Board considered that each 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 each Fund's compliance with the 1940 Act, as
well as each 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, the Board
reviewed the materials provided by the Sub-Advisor and noted the background and
experience of the Sub-Advisor's portfolio management team and the Sub-Advisor's
investment style. At the meeting, the Trustees received a presentation from
representatives of the Sub-Advisor, and were able to ask questions about the
Sub-Advisor and the proposed options-based and target outcome investment
strategies for the Funds. Because the Funds had yet to commence investment
operations, the Board could not consider the historical investment performance
of the Funds. 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 each 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 each Fund under
the Advisory Agreement for the services to be provided. The Board noted that,
under the unitary fee arrangement, each Fund would pay the Advisor a unitary fee
equal to an annual rate of 0.85% of its average daily net assets. The Board
considered that, from the unitary fee for each Fund, the Advisor would pay the
Sub-Advisor a sub-advisory fee equal to 50% of the Fund's unitary fee remaining
after the Fund's expenses are paid. The Board noted that the Advisor would be
responsible for each 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, 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. The
Board received and reviewed information showing the advisory or unitary fee
rates and expense ratios of the peer funds in the Expense Groups, as well as
advisory and unitary fee rates charged by the Advisor and the Sub-Advisor to
other fund (including ETF) and non-fund clients, as applicable. Because each
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 noted that the unitary fee for each Fund was above the median total (net)
expense ratio of the peer funds in its Expense Group. With respect to the
Expense Groups, the Board discussed with representatives of the Advisor how the
Expense Groups were assembled and how each 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
differences between each Fund and other clients that limited their
comparability, noting the Advisor's statement that the Funds are unique within
the First Trust Fund Complex, but are most similar to two other ETFs in the
First Trust Fund Complex utilizing options-based strategies, each of which also
pays a unitary fee equal to an annual rate of 0.85% of its average daily net
assets. The Board also considered the Advisor's statement that it provides
advisory services to two Canadian ETFs with investment objectives and policies
similar to those of the Funds, each of which also pays a unitary fee equal to an
annual rate of 0.85% of its average daily net assets and is sub-advised by the
Sub-Advisor. In light of the information considered and the nature, extent and
quality of the services expected to be provided to each Fund under the
Agreements, the Board determined that, for each Fund, 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 each 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 Funds would benefit the Advisor and the Sub-Advisor, but
that the unitary fee structure provides a level of certainty in expenses for the
Funds. The Board noted that the Advisor has continued to hire personnel and
build infrastructure, including technology, 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 each Fund under the Advisory Agreement and noted that the Advisor was unable
to estimate the profitability of the Advisory Agreement for each Fund to the
Advisor at this time. The Board also considered the Sub-Advisor's estimate of
the asset level for each Fund at which the Sub-Advisor expects the Sub-Advisory
Agreement for the Fund to be profitable to the Sub-Advisor and that the
Sub-Advisor would be paid by the Advisor from each Fund's unitary fee. The Board
Page 50
ADDITIONAL INFORMATION (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
noted its understanding that the sub-advisory fee rate for each Fund was
negotiated at arm's length between the Advisor and the Sub-Advisor. In addition,
the Board considered fall-out benefits described by the Advisor that may be
realized from its relationship with the Funds. The Board noted that FTCP has a
controlling ownership interest in the Sub-Advisor's parent company and
considered potential fall-out benefits to the Advisor from such ownership
interest. The Board also considered that the Advisor had identified as a
fall-out benefit to the Advisor and FTP their exposure to investors and brokers
who, absent their exposure to the Funds, may have had no dealings with the
Advisor or FTP. The Board also considered the potential fall-out benefits to the
Sub-Advisor from FTCP's controlling ownership interest in the Sub-Advisor's
parent company. The Board noted the Sub-Advisor's statements that it does not
foresee any fall-out benefits from its relationship with the Funds and that, as
a policy, it does not enter into soft-dollar arrangements for the procurement of
research services in connection with client securities transactions. The Board
concluded that the character and amount of potential fall-out 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, unanimously determined that the terms
of the Agreements are fair and reasonable and that the approval of the
Agreements is in the best interests of each Fund. No single factor was
determinative in the Board's analysis.
BOARD CONSIDERATIONS REGARDING APPROVAL OF INVESTMENT MANAGEMENT AGREEMENT AND
INVESTMENT SUB-ADVISORY AGREEMENT
The Board of Trustees of First Trust Exchange-Traded Fund VIII (the "Trust"),
including the Independent Trustees, unanimously approved the Investment
Management Agreement (the "Advisory Agreement") with First Trust Advisors L.P.
(the "Advisor") and the Investment Sub-Advisory Agreement (the "Sub-Advisory
Agreement" and together with the Advisory Agreement, the "Agreements") among the
Trust, the Advisor and Cboe Vest Financial LLC (the "Sub-Advisor") on behalf of
the following two series of the Trust (each a "Fund" and collectively, the
"Funds"):
FT Cboe Vest U.S. Equity Buffer ETF - February (FFEB)
FT Cboe Vest U.S. Equity Deep Buffer ETF - February (DFEB)
The Board approved the Agreements for each Fund for an initial two-year term at
a meeting held on December 8-9, 2019. The Board determined for each Fund 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 reasonable
business judgment.
To reach this determination for each Fund, 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
each 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 each Fund
(including the relevant personnel responsible for these services and their
experience); the proposed unitary fee rate payable by each Fund as compared to
fees charged to a peer group of funds (the "Expense Group") and a broad peer
universe of funds (the "Expense Universe"), each assembled by Broadridge
Financial Solutions, Inc. ("Broadridge"), an independent source, and as compared
to fees charged to other clients of the Advisor, including other exchange-traded
funds ("ETFs") managed by the Advisor; the proposed sub-advisory fee rate as
compared to fees charged to other clients of the Sub-Advisor; the estimated
expense ratio of each 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 each Fund and the potential for economies of scale, if
any; financial data on the Advisor and the Sub-Advisor; any fall-out 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 each Fund's perspective.
In evaluating whether to approve the Agreements for each 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 each Fund and reviewed all of the
services to be provided by the Advisor to the Funds, including the oversight of
the Sub-Advisor, as well as the background and experience of the persons
responsible for such services. The Board considered that each 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
Page 51
ADDITIONAL INFORMATION (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
Advisor's, the Sub-Advisor's and each Fund's compliance with the 1940 Act, as
well as each 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, the Board
reviewed the materials provided by the Sub-Advisor and noted the background and
experience of the Sub-Advisor's portfolio management team and the Sub-Advisor's
investment style, as well as the Board's prior meeting with representatives of
the Sub-Advisor in October 2019. Because the Funds had yet to commence
investment operations, the Board could not consider the historical investment
performance of the Funds. 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 each 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 each Fund under
the Advisory Agreement for the services to be provided. The Board noted that,
under the unitary fee arrangement, each Fund would pay the Advisor a unitary fee
equal to an annual rate of 0.85% of its average daily net assets. The Board
considered that, from the unitary fee for each Fund, the Advisor would pay the
Sub-Advisor a sub-advisory fee equal to 50% of the Fund's unitary fee remaining
after the Fund's expenses are paid. The Board noted that the Advisor would be
responsible for each 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, 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. The
Board received and reviewed information showing the advisory or unitary fee
rates and expense ratios of the peer funds in the Expense Groups, as well as
advisory and unitary fee rates charged by the Advisor and the Sub-Advisor to
other fund (including ETF) and non-fund clients, as applicable. Because each
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 noted that the unitary fee for each Fund was above the median total (net)
expense ratio of the peer funds in its Expense Group. With respect to the
Expense Groups, the Board discussed with representatives of the Advisor how the
Expense Groups were assembled and how each 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 that
the Funds are part of the FT Cboe Vest U.S. Equity Target Outcome ETF product
line in the First Trust Fund Complex and noted that the first set of four ETFs
in the product line, identical to the Funds except with respect to the target
outcome periods, was launched in November 2019, each of which also pays a
unitary fee equal to an annual rate of 0.85% of its average daily net assets and
is sub-advised by the Sub-Advisor. In light of the information considered and
the nature, extent and quality of the services expected to be provided to each
Fund under the Agreements, the Board determined that, for each Fund, 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 each 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 Funds would benefit the Advisor and the Sub-Advisor, but
that the unitary fee structure provides a level of certainty in expenses for the
Funds. The Board noted that the Advisor has continued to hire personnel and
build infrastructure, including technology, 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 each Fund under the Advisory Agreement. The Board considered the Advisor's
estimate of the asset level for each Fund at which the Advisor expects the
Advisory Agreement for the Fund to be profitable to the Advisor and the
Advisor's estimate of the profitability of the Advisory Agreement for each Fund
if its 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 each 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 for each Fund to the Sub-Advisor. The Board considered that the
Sub-Advisor would be paid by the Advisor from each Fund's unitary fee and its
understanding that the sub-advisory fee rate for each Fund was the product of an
arm's length negotiation. In addition, the Board considered fall-out benefits
described by the Advisor that may be realized from its relationship with the
Funds. The Board noted that FTCP has a controlling ownership interest in the
Sub-Advisor's parent company and considered potential fall-out benefits to the
Advisor from such ownership interest. The Board also considered that the Advisor
had identified as a fall-out benefit to the Advisor and FTP their exposure to
investors and brokers who, absent their exposure to the Funds, may have had no
dealings with the Advisor or FTP. The Board also considered the potential
fall-out benefits to the Sub-Advisor from FTCP's controlling ownership interest
in the Sub-Advisor's parent company. The Board noted the Sub-Advisor's
statements that it does not foresee any fall-out benefits from its relationship
with the Funds and that, as a policy, it does not enter into soft-dollar
arrangements for the procurement of research services in connection with client
securities transactions. The Board concluded that the character and amount of
potential fall-out 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, unanimously determined that the terms
of the Agreements are fair and reasonable and that the approval of the
Agreements is in the best interests of each Fund. No single factor was
determinative in the Board's analysis.
Page 52
FIRST TRUST
First Trust Exchange-Traded Fund VIII
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
INVESTMENT SUB-ADVISOR
Cboe Vest Financial LLC
1765 Greensboro Station Pl, 9th Floor
McLean, VA 22102
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
[BLANK BACK COVER]
FIRST TRUST
First Trust Exchange-Traded Fund VIII
First Trust Active Factor Large Cap ETF (AFLG)
First Trust Active Factor Mid Cap ETF (AFMC)
First Trust Active Factor Small Cap ETF (AFSM)
Semi-Annual Report
For the Period
December 3, 2019
(Commencement of Operations)
through February 29, 2020
TABLE OF CONTENTS
FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL REPORT
FEBRUARY 29, 2020
Shareholder Letter........................................................... 1
Fund Performance Overview
First Trust Active Factor Large Cap ETF (AFLG)............................ 2
First Trust Active Factor Mid Cap ETF (AFMC).............................. 4
First Trust Active Factor Small Cap ETF (AFSM)............................ 6
Notes to Fund Performance Overview........................................... 8
Portfolio Management......................................................... 9
Understanding Your Fund Expenses............................................. 10
Portfolio of Investments
First Trust Active Factor Large Cap ETF (AFLG)............................ 11
First Trust Active Factor Mid Cap ETF (AFMC).............................. 15
First Trust Active Factor Small Cap ETF (AFSM)............................ 20
Statements of Assets and Liabilities......................................... 25
Statements of Operations..................................................... 26
Statements of Changes in Net Assets.......................................... 27
Financial Highlights......................................................... 28
Notes to Financial Statements................................................ 30
Additional Information....................................................... 35
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
|
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and its representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
any series of First Trust Exchange-Traded Fund VIII (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 its representatives only as of the date hereof. We
undertake no obligation to publicly revise or update these forward-looking
statements to reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that 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 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 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 a relevant market benchmark.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor are just that: informed opinions. They should not be considered to be
promises or advice. The opinions, like the statistics, cover the period through
the date on the cover of this report. The material risks of investing in each
Fund are spelled out in its prospectus, statement of additional information, and
other Fund regulatory filings.
SHAREHOLDER LETTER
FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
FEBRUARY 29, 2020
Dear Shareholders:
First Trust is pleased to provide you with the semi-annual report for certain
series of the First Trust Exchange-Traded Fund VIII (the "Funds"), which
contains detailed information about the Funds since their inception on December
3, 2019, to February 29, 2020.
To say that much has transpired over the past six months would be an
understatement. Prior to the onset of the coronavirus (COVID-19) in Wuhan, China
this past December, my message to investors would have sounded quite bullish,
focusing on such accomplishments as the progress in the trade negotiations
between the U.S. and China, where a "Phase One" deal was signed into law on
January 15, 2020. The main takeaway from the deal is that China agreed to
purchase an additional $200 billion of goods and services from the U.S. over the
next several years in exchange for the U.S. cutting some of its tariffs on
Chinese goods. The deal marked the first breakthrough since the Trump
Administration launched its new tariff initiative in March 2018. On top of that
news, the S&P 500(R) Index was setting new all-time highs all the way up through
the close of trading on February 19, 2020, the day it peaked.
Unfortunately, the good news has been overshadowed by the escalation and spread
of the COVID-19 pandemic. As of April 16, 2020, this disease had spread to 213
countries, areas or territories, had infected 1,991,562 people (confirmed cases)
and was responsible for 130,885 confirmed deaths, according to the World Health
Organization. These numbers are expected to trend higher in the days and weeks
ahead. A growing number of U.S. state governors and foreign leaders have issued
shelter in place orders to their citizens to help slow the spread of this new
virus. The primary objective in doing so is to slow down the number of cases so
that hospitals and health care workers are not overwhelmed by too many patients.
The cost is high because it requires shutting down large chunks of the economy,
which in turn negatively impacts the financial well-being of workers and
companies. In the U.S., Congress passed a financial stimulus package valued at
$2.0 trillion to help backstop workers and companies in the near-term. The
faster we can end the shutdown, consistent with general health and welfare, the
better, according to Brian Wesbury, Chief Economist at First Trust Advisors L.P.
Here is what we think we know. Brian Wesbury believes the U.S. could experience
a modest decline in real gross domestic product of 1.5% (annualized) in the
first quarter of 2020, followed by a massive decline of 20% (annualized) in the
second quarter. The good news is that he sees the economy growing at a 3.0% and
3.5% annual pace in the third and fourth quarters of 2020, respectively. In
other words, we are expecting a healthy rebound in the second half of this year.
As I noted earlier, the stock market was still at a record high in the third
week of February. From February 19 through March 23, however, the S&P 500(R)
Index posted a total return of -33.79%, putting it in bear market territory
(price decline of 20% or more from the most recent peak). Sorry to say it, but
the nearly 11-year bull market is no more. While we do not have a projection for
where stocks will be at year-end, we do know this: excluding the current bear
market, the S&P 500(R) Index has never failed to recoup all the losses sustained
in any sell-off, pullback, correction or bear market. So, while I am
understandably not bullish on the first half of 2020, I will be a bull once
again after we put the worst of COVID-19 behind us. I continue to urge investors
to stay the course. This too shall pass.
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
FUND PERFORMANCE OVERVIEW (UNAUDITED)
FIRST TRUST ACTIVE FACTOR LARGE CAP ETF (AFLG)
The First Trust Active Factor Large Cap ETF (the "Fund") seeks to provide
capital appreciation. Under normal market conditions, the Fund will invest at
least 80% of its net assets (including investment borrowings) in U.S.-listed
equity securities issued by large capitalization companies. The Fund defines
large capitalization companies as those that, at the time of investment, have a
minimum market capitalization equal to or greater than the minimum market
capitalization of a widely recognized index of large capitalization companies
based upon the composition of the index at the time of investment. The Fund is
actively managed primarily relying on a multi-factor quantitative methodology
with active risk management to construct a portfolio of securities exhibiting
exposures to one or more investing factors. The multi-factor quantitative
methodology currently used by the Fund may take into account the following
factors: (i) value; (ii) momentum; (iii) quality; and (iv) low volatility. The
Fund is classified as "non-diversified" under the Investment Company Act of
1940, as amended. The shares of the Fund are listed and traded on the NYSE Arca,
Inc., under the ticker symbol "AFLG."
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURNS
Inception
(12/3/19)
to 2/29/20
FUND PERFORMANCE
NAV -6.56%
Market Price -6.51%
INDEX PERFORMANCE
S&P 500(R) Index -4.05%
------------------------------------------------------------------------------------------------------------------------------------
|
(See Notes to Fund Performance Overview on page 8.)
----------------------------------------------------------
% OF TOTAL
LONG-TERM
SECTOR CLASSIFICATION INVESTMENTS
----------------------------------------------------------
Information Technology 23.27%
Health Care 14.47
Financials 13.43
Industrials 8.81
Consumer Discretionary 8.72
Communication Services 7.63
Consumer Staples 6.18
Real Estate 5.79
Utilities 4.60
Materials 4.05
Energy 3.05
--------
Total 100.00%
========
----------------------------------------------------------
% OF TOTAL
LONG-TERM
TOP TEN HOLDINGS INVESTMENTS
----------------------------------------------------------
Apple, Inc. 5.37%
Microsoft Corp. 2.95
AT&T, Inc. 1.82
Bristol-Myers Squibb Co. 1.65
Johnson & Johnson 1.60
PulteGroup, Inc. 1.12
Merck & Co., Inc. 1.10
JPMorgan Chase & Co. 1.03
Intel Corp. 1.02
Alphabet, Inc., Class A 1.02
--------
Total 18.68%
========
|
Page 2
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
FIRST TRUST ACTIVE FACTOR LARGE CAP ETF (AFLG) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 3, 2019 - FEBRUARY 29, 2020
First Trust Active Factor S&P 500(R)
Large Cap ETF Index
12/3/19 $10,000 $10,000
2/29/20 9,344 9,595
|
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
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period December 4, 2019
(commencement of trading) through February 29, 2020. Shareholders may pay more
than NAV when they buy Fund shares and receive less than NAV when they sell
those shares because shares are bought and sold at current market price. Data
presented represents past performance and cannot be used to predict future
results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
12/4/19 - 2/29/20 59 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
12/4/19 - 2/29/20 0 0 0 0
|
Page 3
FUND PERFORMANCE OVERVIEW (UNAUDITED)
FIRST TRUST ACTIVE FACTOR MID CAP ETF (AFMC)
The First Trust Active Factor Mid Cap ETF (the "Fund") seeks to provide capital
appreciation. Under normal market conditions, the Fund will invest at least 80%
of its net assets (including investment borrowings) in U.S.-listed equity
securities issued by mid capitalization companies. The Fund defines mid
capitalization companies as those that, at the time of investment, have a market
capitalization between the minimum and maximum market capitalization of a widely
recognized index of mid capitalization companies based upon the composition of
the index at the time of investment. The Fund is actively managed primarily
relying on a multi-factor quantitative methodology with active risk management
to construct a portfolio of securities exhibiting exposures to one or more
investing factors. The multi-factor quantitative methodology currently used by
the Fund may take into account the following factors: (i) value; (ii) momentum;
(iii) quality; and (iv) low volatility. The Fund is classified as
"non-diversified" under the Investment Company Act of 1940, as amended. The
shares of the Fund are listed and traded on the NYSE Arca, Inc., under the
ticker symbol "AFMC."
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURNS
Inception
(12/3/19)
to 2/29/20
FUND PERFORMANCE
NAV -8.74%
Market Price -8.69%
INDEX PERFORMANCE
S&P MidCap 400 Index -8.19%
------------------------------------------------------------------------------------------------------------------------------------
|
(See Notes to Fund Performance Overview on page 8.)
----------------------------------------------------------
% OF TOTAL
LONG-TERM
SECTOR CLASSIFICATION INVESTMENTS
----------------------------------------------------------
Information Technology 16.77%
Industrials 15.26
Financials 15.22
Health Care 13.18
Consumer Discretionary 13.13
Real Estate 9.84
Materials 5.52
Utilities 4.94
Communication Services 2.78
Consumer Staples 1.93
Energy 1.43
--------
Total 100.00%
========
----------------------------------------------------------
% OF TOTAL
LONG-TERM
TOP TEN HOLDINGS INVESTMENTS
----------------------------------------------------------
Reliance Steel & Aluminum Co. 1.38%
Hawaiian Electric Industries, Inc. 1.34
SYNNEX Corp. 1.19
CACI International, Inc., Class A 1.11
DaVita, Inc. 1.10
Portland General Electric Co. 1.06
Bio-Rad Laboratories, Inc., Class A 1.03
NorthWestern Corp. 1.01
Jabil, Inc. 1.01
Tyler Technologies, Inc. 0.94
--------
Total 11.17%
========
|
Page 4
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
FIRST TRUST ACTIVE FACTOR MID CAP ETF (AFMC) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 3, 2019 - FEBRUARY 29, 2020
First Trust Active Factor S&P MidCap
Mid Cap ETF 400 Index
12/3/19 $10,000 $10,000
2/29/20 9,126 9,181
|
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
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period December 4, 2019
(commencement of trading) through February 29, 2020. Shareholders may pay more
than NAV when they buy Fund shares and receive less than NAV when they sell
those shares because shares are bought and sold at current market price. Data
presented represents past performance and cannot be used to predict future
results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% =2.00%
12/4/19 - 2/29/20 58 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
12/4/19 - 2/29/20 1 0 0 0
|
Page 5
FUND PERFORMANCE OVERVIEW (UNAUDITED)
FIRST TRUST ACTIVE FACTOR SMALL CAP ETF (AFSM)
The First Trust Active Factor Small Cap ETF (the "Fund") seeks to provide
capital appreciation. Under normal market conditions, the Fund will invest at
least 80% of its net assets (including investment borrowings) in U.S.-listed
equity securities issued by small capitalization companies. The Fund defines
small capitalization companies as those that, at the time of investment, have a
market capitalization between a minimum of $250 million and the maximum market
capitalization of a widely recognized index of small capitalization companies
based upon the composition of the index at the time of investment. The Fund is
actively managed primarily relying on a multi-factor quantitative methodology
with active risk management to construct a portfolio of securities exhibiting
exposures to one or more investing factors. The multi-factor quantitative
methodology currently used by the Fund may take into account the following
factors: (i) value; (ii) momentum; (iii) quality; and (iv) low volatility. The
Fund is classified as "non-diversified" under the Investment Company Act of
1940, as amended. The shares of the Fund are listed and traded on the NYSE Arca,
Inc., under the ticker symbol "AFSM."
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURNS
Inception
(12/3/19)
to 2/29/20
FUND PERFORMANCE
NAV -10.19%
Market Price -10.14%
INDEX PERFORMANCE
Russell 2000(R) Index -7.56%
------------------------------------------------------------------------------------------------------------------------------------
|
(See Notes to Fund Performance Overview on page 8.)
----------------------------------------------------------
% OF TOTAL
LONG-TERM
SECTOR CLASSIFICATION INVESTMENTS
----------------------------------------------------------
Health Care 18.74%
Industrials 15.52
Financials 14.64
Information Technology 13.88
Consumer Discretionary 11.99
Real Estate 10.43
Utilities 3.85
Materials 3.76
Consumer Staples 2.70
Energy 2.28
Communication Services 2.21
--------
Total 100.00%
========
----------------------------------------------------------
% OF TOTAL
LONG-TERM
TOP TEN HOLDINGS INVESTMENTS
----------------------------------------------------------
Select Medical Holdings Corp. 1.13%
Avista Corp. 0.95
NorthWestern Corp. 0.85
Hilltop Holdings, Inc. 0.80
Syneos Health, Inc. 0.77
Generac Holdings, Inc. 0.75
Portland General Electric Co. 0.75
Radian Group, Inc. 0.74
Integer Holdings Corp. 0.74
Benchmark Electronics, Inc. 0.74
--------
Total 8.22%
========
|
Page 6
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
FIRST TRUST ACTIVE FACTOR SMALL CAP ETF (AFSM) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
DECEMBER 3, 2019 - FEBRUARY 29, 2020
First Trust Active Factor Russell 2000(R)
Small Cap ETF Index
12/3/19 $10,000 $10,000
2/29/20 8,981 9,244
|
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
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period December 4, 2019
(commencement of trading) through February 29, 2020. Shareholders may pay more
than NAV when they buy Fund shares and receive less than NAV when they sell
those shares because shares are bought and sold at current market price. Data
presented represents past performance and cannot be used to predict future
results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
12/4/19 - 2/29/20 58 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
12/4/19 - 2/29/20 1 0 0 0
|
Page 7
NOTES TO FUND PERFORMANCE OVERVIEW (UNAUDITED)
Total returns for the period since inception are calculated from the inception
date of each Fund. "Cumulative Total Returns" represent the total change in
value of an investment over the period 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 between the highest bid and the lowest offer on the stock
exchange on which shares of the Fund are 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
PORTFOLIO MANAGEMENT
FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL REPORT
FEBRUARY 29, 2020 (UNAUDITED)
ADVISOR
First Trust Advisors L.P. ("First Trust" or the "Advisor") serves as the
investment advisor to the Funds. First Trust is responsible for the selection
and ongoing monitoring of the securities in the Fund's portfolio and certain
other services necessary for the management of the portfolios.
PORTFOLIO MANAGEMENT TEAM
DANIEL J. LINDQUIST, CHAIRMAN OF THE INVESTMENT COMMITTEE AND MANAGING DIRECTOR
OF FIRST TRUST
JON C. ERICKSON, SENIOR VICE PRESIDENT OF FIRST TRUST
DAVID G. MCGAREL, CHIEF INVESTMENT OFFICER, CHIEF OPERATING OFFICER AND MANAGING
DIRECTOR OF FIRST TRUST
ROGER F. TESTIN, SENIOR VICE PRESIDENT OF FIRST TRUST
STAN UELAND, SENIOR VICE PRESIDENT OF FIRST TRUST
CHRIS A. PETERSON, SENIOR VICE PRESIDENT OF FIRST TRUST
Page 9
FIRST TRUST EXCHANGE-TRADED FUND VIII
UNDERSTANDING YOUR FUND EXPENSES
FEBRUARY 29, 2020 (UNAUDITED)
As a shareholder of First Trust Active Factor Large Cap ETF, First Trust Active
Factor Mid Cap ETF or First Trust Active Factor Small Cap 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
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 February 29, 2020.
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 period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on each Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
each Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Funds and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as brokerage
commissions. Therefore, the second line in the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
--------------------------------------------------------------------------------------------------------------------------------
ANNUALIZED EXPENSES PAID
EXPENSE RATIO DURING THE PERIOD
BEGINNING ENDING BASED ON THE DECEMBER 3, 2019 (a)
ACCOUNT VALUE ACCOUNT VALUE NUMBER OF DAYS TO
DECEMBER 3, 2019 (a) FEBRUARY 29, 2020 IN THE PERIOD FEBRUARY 29, 2020 (b)
--------------------------------------------------------------------------------------------------------------------------------
FIRST TRUST ACTIVE FACTOR LARGE CAP ETF (AFLG)
Actual $1,000.00 $ 934.40 0.55% $1.29
Hypothetical (5% return before expenses) $1,000.00 $1,022.13 0.55% $2.77
FIRST TRUST ACTIVE FACTOR MID CAP ETF (AFMC)
Actual $1,000.00 $ 912.60 0.65% $1.51
Hypothetical (5% return before expenses) $1,000.00 $1,021.63 0.65% $3.27
FIRST TRUST ACTIVE FACTOR SMALL CAP ETF (AFSM)
Actual $1,000.00 $ 898.10 0.75% $1.73
Hypothetical (5% return before expenses) $1,000.00 $1,021.13 0.75% $3.77
|
(a) Inception date.
(b) Actual expenses are equal to the annualized expense ratio as indicated in
the table multiplied by the average account value over the period
(December 3, 2019 through February 29, 2020), multiplied by 89/366.
Hypothetical expenses are assumed for the most recent six-month period.
Page 10
FIRST TRUST ACTIVE FACTOR LARGE CAP ETF (AFLG)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS -- 99.5%
AEROSPACE & DEFENSE -- 1.3%
220 Arconic, Inc. $ 6,457
14 Lockheed Martin Corp. 5,178
28 Teledyne Technologies, Inc. (a) 9,445
62 Textron, Inc. 2,517
-------------
23,597
-------------
AIR FREIGHT & LOGISTICS -- 0.1%
28 C.H. Robinson Worldwide, Inc. 1,929
-------------
AIRLINES -- 0.5%
193 Southwest Airlines Co. 8,915
-------------
AUTO COMPONENTS -- 0.3%
185 BorgWarner, Inc. 5,846
-------------
AUTOMOBILES -- 0.1%
56 Harley-Davidson, Inc. 1,706
-------------
BANKS -- 4.1%
218 Citigroup, Inc. 13,834
273 Citizens Financial Group, Inc. 8,652
148 Comerica, Inc. 7,791
164 JPMorgan Chase & Co. 19,042
391 Regions Financial Corp. 5,286
333 Wells Fargo & Co. 13,603
205 Zions Bancorp N.A. 8,190
-------------
76,398
-------------
BEVERAGES -- 1.0%
77 Brown-Forman Corp., Class B 4,729
90 Coca-Cola (The) Co. 4,814
64 PepsiCo, Inc. 8,450
-------------
17,993
-------------
BIOTECHNOLOGY -- 2.5%
144 AbbVie, Inc. 12,342
57 Amgen, Inc. 11,385
26 Biogen, Inc. (a) 8,018
201 Gilead Sciences, Inc. 13,941
-------------
45,686
-------------
BUILDING PRODUCTS -- 0.8%
53 Allegion PLC 6,094
94 Fortune Brands Home &
Security, Inc. 5,805
48 Johnson Controls International
PLC 1,755
22 Masco Corp. 909
-------------
14,563
-------------
CAPITAL MARKETS -- 3.0%
8 Ameriprise Financial, Inc. 1,130
4 BlackRock, Inc. 1,852
182 Blackstone Group (The), Inc.,
Class A 9,799
19 Cboe Global Markets, Inc. 2,166
367 Franklin Resources, Inc. 7,986
27 Moody's Corp. 6,481
26 Morgan Stanley 1,171
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
CAPITAL MARKETS (CONTINUED)
35 MSCI, Inc. $ 10,340
10 Nasdaq, Inc. 1,025
25 S&P Global, Inc. 6,648
16 SEI Investments Co. 875
53 T. Rowe Price Group, Inc. 6,255
-------------
55,728
-------------
CHEMICALS -- 2.4%
25 Air Products and Chemicals, Inc. 5,490
9 Celanese Corp. 844
122 DuPont de Nemours, Inc. 5,234
26 Eastman Chemical Co. 1,599
107 FMC Corp. 9,962
34 Linde PLC 6,494
22 LyondellBasell Industries N.V.,
Class A 1,572
22 PPG Industries, Inc. 2,298
20 Sherwin-Williams (The) Co. 10,335
-------------
43,828
-------------
COMMERCIAL SERVICES & SUPPLIES
-- 0.8%
22 Cintas Corp. 5,869
115 Copart, Inc. (a) 9,715
-------------
15,584
-------------
COMMUNICATIONS EQUIPMENT
-- 1.8%
381 Cisco Systems, Inc. 15,213
72 F5 Networks, Inc. (a) 8,637
401 Juniper Networks, Inc. 8,509
8 Ubiquiti, Inc. 1,085
-------------
33,444
-------------
CONSTRUCTION & ENGINEERING
-- 0.1%
23 Jacobs Engineering Group, Inc. 2,124
-------------
CONSUMER FINANCE -- 0.9%
307 Ally Financial, Inc. 7,697
293 Synchrony Financial 8,526
-------------
16,223
-------------
CONTAINERS & PACKAGING -- 1.2%
75 Avery Dennison Corp. 8,587
81 Crown Holdings, Inc. (a) 5,710
234 International Paper Co. 8,649
-------------
22,946
-------------
DISTRIBUTORS -- 0.4%
228 LKQ Corp. (a) 6,744
-------------
DIVERSIFIED FINANCIAL SERVICES
-- 0.5%
447 Equitable Holdings, Inc. 9,566
-------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 2.7%
955 AT&T, Inc. 33,635
|
See Notes to Financial Statements Page 11
FIRST TRUST ACTIVE FACTOR LARGE CAP ETF (AFLG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
DIVERSIFIED TELECOMMUNICATION
SERVICES (CONTINUED)
321 Verizon Communications, Inc. $ 17,386
-------------
51,021
-------------
ELECTRIC UTILITIES -- 4.2%
91 Entergy Corp. 10,639
163 Evergy, Inc. 10,652
12 Eversource Energy 1,037
260 Exelon Corp. 11,209
160 FirstEnergy Corp. 7,125
58 NextEra Energy, Inc. 14,660
118 Pinnacle West Capital Corp. 10,560
196 Southern (The) Co. 11,830
-------------
77,712
-------------
ELECTRICAL EQUIPMENT -- 1.3%
198 Eaton Corp. PLC 17,963
92 Emerson Electric Co. 5,898
-------------
23,861
-------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 1.2%
49 CDW Corp. 5,597
38 FLIR Systems, Inc. 1,614
42 Keysight Technologies, Inc. (a) 3,980
122 TE Connectivity Ltd. 10,110
5 Zebra Technologies Corp.,
Class A (a) 1,055
-------------
22,356
-------------
ENTERTAINMENT -- 0.1%
18 Activision Blizzard, Inc. 1,047
39 Liberty Media Corp.-Liberty
Formula One, Series C (a) 1,523
-------------
2,570
-------------
EQUITY REAL ESTATE INVESTMENT
TRUSTS -- 5.8%
30 American Tower Corp. 6,804
143 Equity LifeStyle Properties, Inc. 9,771
48 Equity Residential 3,605
46 Gaming and Leisure Properties,
Inc. 2,055
606 Host Hotels & Resorts, Inc. 8,775
200 Invitation Homes, Inc. 5,738
77 Mid-America Apartment
Communities, Inc. 9,953
67 Prologis, Inc. 5,647
52 Public Storage 10,874
161 Regency Centers Corp. 9,248
78 Simon Property Group, Inc. 9,600
66 SL Green Realty Corp. 5,177
39 Sun Communities, Inc. 5,962
196 VICI Properties, Inc. 4,912
163 Vornado Realty Trust 8,733
-------------
106,854
-------------
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
FOOD & STAPLES RETAILING -- 2.5%
39 Costco Wholesale Corp. $ 10,964
146 Sysco Corp. 9,731
193 Walgreens Boots Alliance, Inc. 8,832
166 Walmart, Inc. 17,875
-------------
47,402
-------------
FOOD PRODUCTS -- 2.1%
220 Archer-Daniels-Midland Co. 8,283
109 Campbell Soup Co. 4,918
210 General Mills, Inc. 10,290
36 Hershey (The) Co. 5,184
96 J.M. Smucker (The) Co. 9,887
-------------
38,562
-------------
HEALTH CARE EQUIPMENT
& SUPPLIES -- 1.9%
24 Edwards Lifesciences Corp. (a) 4,916
18 Insulet Corp. (a) 3,419
71 Medtronic PLC 7,148
64 ResMed, Inc. 10,173
62 West Pharmaceutical Services,
Inc. 9,335
-------------
34,991
-------------
HEALTH CARE PROVIDERS & SERVICES
-- 4.4%
24 AmerisourceBergen Corp. 2,024
10 Anthem, Inc. 2,571
20 Cardinal Health, Inc. 1,042
181 CVS Health Corp. 10,711
98 DaVita, Inc. (a) 7,607
227 Henry Schein, Inc. (a) 13,833
48 Humana, Inc. 15,345
12 Laboratory Corp. of America
Holdings (a) 2,108
22 McKesson Corp. 3,077
56 Quest Diagnostics, Inc. 5,939
58 UnitedHealth Group, Inc. 14,788
16 Universal Health Services, Inc.,
Class B 1,980
-------------
81,025
-------------
HOTELS, RESTAURANTS & LEISURE
-- 0.7%
43 Hilton Worldwide Holdings, Inc. 4,180
191 Norwegian Cruise Line Holdings
Ltd. (a) 7,117
15 Starbucks Corp. 1,176
-------------
12,473
-------------
HOUSEHOLD DURABLES -- 3.0%
129 D.R. Horton, Inc. 6,872
69 Garmin Ltd. 6,099
97 Leggett & Platt, Inc. 3,847
116 Lennar Corp., Class A 6,999
1 NVR, Inc. (a) 3,667
514 PulteGroup, Inc. 20,663
|
Page 12 See Notes to Financial Statements
FIRST TRUST ACTIVE FACTOR LARGE CAP ETF (AFLG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
HOUSEHOLD DURABLES (CONTINUED)
56 Whirlpool Corp. $ 7,160
-------------
55,307
-------------
HOUSEHOLD PRODUCTS -- 0.5%
88 Procter & Gamble (The) Co. 9,964
-------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS -- 0.4%
371 Vistra Energy Corp. 7,134
-------------
INSURANCE -- 4.8%
70 Allstate (The) Corp. 7,367
26 Aon PLC 5,408
54 Arthur J. Gallagher & Co. 5,264
47 Assurant, Inc. 5,668
157 Brown & Brown, Inc. 6,753
4 Everest Re Group Ltd. 992
103 Fidelity National Financial, Inc. 3,992
10 Globe Life, Inc. 927
205 Loews Corp. 9,354
110 Marsh & McLennan Cos., Inc. 11,502
230 MetLife, Inc. 9,826
120 Prudential Financial, Inc. 9,054
16 Travelers (The) Cos., Inc. 1,917
333 Unum Group 7,762
59 W.R. Berkley Corp. 3,961
-------------
89,747
-------------
INTERACTIVE MEDIA & SERVICES
-- 1.5%
14 Alphabet, Inc., Class A (a) 18,750
47 Facebook, Inc., Class A (a) 9,046
-------------
27,796
-------------
INTERNET & DIRECT MARKETING RETAIL
-- 0.6%
311 eBay, Inc. 10,773
-------------
IT SERVICES -- 4.6%
74 Accenture PLC, Class A 13,364
16 Black Knight, Inc. (a) 1,067
45 Booz Allen Hamilton Holding
Corp. 3,209
18 Broadridge Financial Solutions,
Inc. 1,878
177 Cognizant Technology Solutions
Corp., Class A 10,785
17 EPAM Systems, Inc. (a) 3,794
54 Fiserv, Inc. (a) 5,905
29 Global Payments, Inc. 5,335
108 International Business Machines
Corp. 14,056
8 Jack Henry & Associates, Inc. 1,214
129 Leidos Holdings, Inc. 13,242
551 Western Union (The) Co. 12,337
-------------
86,186
-------------
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
MACHINERY -- 2.1%
60 Cummins, Inc. $ 9,077
58 Dover Corp. 5,959
51 Illinois Tool Works, Inc. 8,557
42 Ingersoll-Rand PLC 5,420
64 Snap-on, Inc. 9,264
-------------
38,277
-------------
MEDIA -- 3.2%
2 Cable One, Inc. 3,146
25 Charter Communications, Inc.,
Class A (a) 12,329
393 Comcast Corp., Class A 15,889
88 Discovery, Inc., Series A (a) 2,262
62 Liberty Broadband Corp.,
Class C (a) 7,805
332 Liberty Media Corp.-Liberty
SiriusXM, Series C (a) 14,814
26 Omnicom Group, Inc. 1,801
52 ViacomCBS, Inc., Class B 1,280
-------------
59,326
-------------
METALS & MINING -- 0.4%
191 Nucor Corp. 7,898
-------------
MULTILINE RETAIL -- 1.0%
36 Dollar General Corp. 5,411
126 Kohl's Corp. 4,933
81 Target Corp. 8,343
-------------
18,687
-------------
OIL, GAS & CONSUMABLE FUELS
-- 3.0%
150 Cabot Oil & Gas Corp. 2,089
192 Chevron Corp. 17,921
302 ConocoPhillips 14,623
4 Devon Energy Corp. 65
38 HollyFrontier Corp. 1,280
50 Kinder Morgan, Inc. 959
154 ONEOK, Inc. 10,275
69 Phillips 66 5,165
59 Valero Energy Corp. 3,909
-------------
56,286
-------------
PHARMACEUTICALS -- 5.7%
515 Bristol-Myers Squibb Co. 30,416
54 Eli Lilly & Co. 6,811
220 Johnson & Johnson 29,585
266 Merck & Co., Inc. 20,365
466 Pfizer, Inc. 15,574
18 Zoetis, Inc. 2,398
-------------
105,149
-------------
PROFESSIONAL SERVICES -- 0.8%
90 IHS Markit Ltd. 6,411
175 Robert Half International, Inc. 8,822
-------------
15,233
-------------
|
See Notes to Financial Statements Page 13
FIRST TRUST ACTIVE FACTOR LARGE CAP ETF (AFLG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ROAD & RAIL -- 1.0%
58 Kansas City Southern $ 8,739
50 Old Dominion Freight Line, Inc. 9,690
-------------
18,429
-------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 2.9%
70 Advanced Micro Devices, Inc. (a) 3,184
18 Applied Materials, Inc. 1,046
339 Intel Corp. 18,821
28 KLA Corp. 4,304
29 Lam Research Corp. 8,510
24 NVIDIA Corp. 6,482
35 Qorvo, Inc. (a) 3,520
23 QUALCOMM, Inc. 1,801
17 Teradyne, Inc. 999
38 Texas Instruments, Inc. 4,337
-------------
53,004
-------------
SOFTWARE -- 6.3%
41 ANSYS, Inc. (a) 9,930
148 Citrix Systems, Inc. 15,302
21 Fair Isaac Corp. (a) 7,897
336 Microsoft Corp. 54,435
168 NortonLifeLock, Inc. 3,197
260 Oracle Corp. 12,860
10 RingCentral, Inc., Class A (a) 2,357
10 Synopsys, Inc. (a) 1,379
31 Tyler Technologies, Inc. (a) 9,714
-------------
117,071
-------------
SPECIALTY RETAIL -- 2.2%
1 AutoZone, Inc. (a) 1,032
44 Best Buy Co., Inc. 3,329
54 CarMax, Inc. (a) 4,715
52 Home Depot (The), Inc. 11,328
57 Lowe's Cos., Inc. 6,074
51 Ross Stores, Inc. 5,548
134 TJX (The) Cos., Inc. 8,013
-------------
40,039
-------------
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 6.3%
362 Apple, Inc. 98,956
401 Hewlett Packard Enterprise Co. 5,129
102 HP, Inc. 2,121
51 Seagate Technology PLC 2,445
265 Xerox Holdings Corp. 8,533
-------------
117,184
-------------
TEXTILES, APPAREL & LUXURY GOODS
-- 0.5%
103 NIKE, Inc., Class B 9,206
-------------
TOTAL COMMON STOCKS -- 99.5% 1,844,343
(Cost $2,060,572) -------------
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
MONEY MARKET FUNDS -- 0.3%
4,956 Morgan Stanley Institutional Liquidity
Funds - Treasury Portfolio -
Institutional Class - 1.44% (b) $ 4,956
(Cost $4,956) -------------
TOTAL INVESTMENTS -- 99.8% 1,849,299
(Cost $2,065,528) (c)
NET OTHER ASSETS AND
LIABILITIES -- 0.2% 3,322
-------------
NET ASSETS -- 100.0% $ 1,852,621
=============
|
(a) Non-income producing security.
(b) Rate shown reflects yield as of February 29, 2020.
(c) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of February 29, 2020, the
aggregate gross unrealized appreciation for all investments in which there
was an excess of value over tax cost was $470 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $216,699. The net unrealized depreciation was
$216,229.
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of February 29,
2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
---------------------------------------
Common Stocks* $1,844,343 $ -- $ --
Money Market
Funds 4,956 -- --
---------------------------------------
Total Investments $1,849,299 $ -- $ --
=======================================
|
* See Portfolio of Investments for industry breakout.
Page 14 See Notes to Financial Statements
FIRST TRUST ACTIVE FACTOR MID CAP ETF (AFMC)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS -- 99.7%
AEROSPACE & DEFENSE -- 1.4%
157 BWX Technologies, Inc. $ 8,610
48 Teledyne Technologies, Inc. (a) 16,191
-------------
24,801
-------------
AIR FREIGHT & LOGISTICS -- 0.3%
70 XPO Logistics, Inc. (a) 5,178
-------------
AIRLINES -- 0.6%
683 JetBlue Airways Corp. (a) 10,778
-------------
AUTO COMPONENTS -- 1.4%
228 BorgWarner, Inc. 7,205
320 Gentex Corp. 8,544
84 Lear Corp. 9,341
-------------
25,090
-------------
AUTOMOBILES -- 0.1%
56 Harley-Davidson, Inc. 1,706
-------------
BANKS -- 5.9%
545 Associated Banc-Corp. 9,227
136 Bank of Hawaii Corp. 10,121
282 BankUnited, Inc. 8,376
216 CIT Group, Inc. 8,577
175 Commerce Bancshares, Inc. 10,682
19 First Citizens BancShares, Inc.,
Class A 8,613
357 First Hawaiian, Inc. 8,550
670 Fulton Financial Corp. 9,682
325 PacWest Bancorp 10,283
593 Sterling Bancorp 9,832
508 Valley National Bancorp 4,724
196 Zions Bancorp N.A. 7,830
-------------
106,497
-------------
BIOTECHNOLOGY -- 1.0%
52 ACADIA Pharmaceuticals,
Inc. (a) 2,223
50 Arrowhead Pharmaceuticals,
Inc. (a) 1,768
276 Exelixis, Inc. (a) 5,131
62 Ligand Pharmaceuticals, Inc. (a) 5,803
84 Momenta Pharmaceuticals,
Inc. (a) 2,376
-------------
17,301
-------------
BUILDING PRODUCTS -- 1.3%
106 Advanced Drainage Systems, Inc. 4,437
144 Fortune Brands Home &
Security, Inc. 8,892
123 Simpson Manufacturing Co., Inc. 9,770
-------------
23,099
-------------
CAPITAL MARKETS -- 1.6%
101 Cohen & Steers, Inc. 6,328
32 Eaton Vance Corp. 1,320
92 Houlihan Lokey, Inc. 4,712
297 Janus Henderson Group PLC 6,297
12 LPL Financial Holdings, Inc. 954
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
CAPITAL MARKETS (CONTINUED)
178 SEI Investments Co. $ 9,738
-------------
29,349
-------------
CHEMICALS -- 1.6%
10 NewMarket Corp. 3,886
559 Olin Corp. 9,050
141 RPM International, Inc. 9,039
24 Scotts Miracle-Gro (The) Co. 2,544
264 Valvoline, Inc. 5,148
-------------
29,667
-------------
COMMERCIAL SERVICES & SUPPLIES
-- 2.4%
20 Deluxe Corp. 666
252 HNI Corp. 8,273
521 KAR Auction Services, Inc. 10,029
48 MSA Safety, Inc. 5,840
209 Stericycle, Inc. (a) 12,003
16 Tetra Tech, Inc. 1,294
24 UniFirst Corp. 4,460
-------------
42,565
-------------
COMMUNICATIONS EQUIPMENT
-- 2.1%
234 EchoStar Corp., Class A (a) 8,171
34 F5 Networks, Inc. (a) 4,078
387 Juniper Networks, Inc. 8,212
133 Lumentum Holdings, Inc. (a) 10,350
82 NetScout Systems, Inc. (a) 2,108
331 Viavi Solutions, Inc. (a) 4,366
-------------
37,285
-------------
CONSTRUCTION & ENGINEERING
-- 1.6%
316 AECOM (a) 14,201
142 EMCOR Group, Inc. 10,923
92 MasTec, Inc. (a) 4,515
-------------
29,639
-------------
CONSUMER FINANCE -- 1.3%
866 Navient Corp. 9,725
114 OneMain Holdings, Inc. 4,190
420 Santander Consumer USA
Holdings, Inc. 10,248
-------------
24,163
-------------
CONTAINERS & PACKAGING -- 0.5%
635 Graphic Packaging Holding Co. 8,585
-------------
DISTRIBUTORS -- 0.8%
65 Pool Corp. 13,712
-------------
DIVERSIFIED CONSUMER SERVICES
-- 0.6%
319 Adtalem Global Education,
Inc. (a) 9,848
-------------
DIVERSIFIED FINANCIAL SERVICES
-- 0.8%
296 Jefferies Financial Group, Inc. 5,834
|
See Notes to Financial Statements Page 15
FIRST TRUST ACTIVE FACTOR MID CAP ETF (AFMC)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
DIVERSIFIED FINANCIAL SERVICES
(CONTINUED)
168 Voya Financial, Inc. $ 8,844
-------------
14,678
-------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 0.8%
70 Cogent Communications
Holdings, Inc. 5,111
136 GCI Liberty, Inc., Class A (a) 9,399
-------------
14,510
-------------
ELECTRIC UTILITIES -- 2.4%
563 Hawaiian Electric Industries, Inc. 24,119
350 Portland General Electric Co. 19,043
-------------
43,162
-------------
ELECTRICAL EQUIPMENT -- 1.9%
118 Generac Holdings, Inc. (a) 12,153
452 GrafTech International Ltd. 3,688
49 Hubbell, Inc. 6,529
144 Regal Beloit Corp. 11,180
-------------
33,550
-------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 4.7%
168 Arrow Electronics, Inc. (a) 11,266
194 Avnet, Inc. 5,952
30 Dolby Laboratories, Inc., Class A 1,971
38 FLIR Systems, Inc. 1,614
567 Jabil, Inc. 18,172
14 Littelfuse, Inc. 2,236
171 SYNNEX Corp. 21,380
140 Trimble, Inc. (a) 5,527
591 Vishay Intertechnology, Inc. 11,052
31 Zebra Technologies Corp.,
Class A (a) 6,540
-------------
85,710
-------------
ENERGY EQUIPMENT & SERVICES
-- 0.4%
94 Helmerich & Payne, Inc. 3,468
795 Patterson-UTI Energy, Inc. 4,555
-------------
8,023
-------------
ENTERTAINMENT -- 0.1%
62 Cinemark Holdings, Inc. 1,609
-------------
EQUITY REAL ESTATE INVESTMENT
TRUSTS -- 9.8%
492 Alexander & Baldwin, Inc. 9,250
182 American Homes 4 Rent, Class A 4,712
625 Apple Hospitality REIT, Inc. 8,169
310 Brixmor Property Group, Inc. 5,645
28 Camden Property Trust 2,967
720 CoreCivic, Inc. 10,663
96 EastGroup Properties, Inc. 12,070
304 Equity Commonwealth 9,564
305 First Industrial Realty Trust, Inc. 11,742
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
EQUITY REAL ESTATE INVESTMENT
TRUSTS (CONTINUED)
222 Gaming and Leisure Properties,
Inc. $ 9,917
772 GEO Group (The), Inc. 11,302
160 Healthcare Trust of America, Inc.,
Class A 4,982
30 Highwoods Properties, Inc. 1,346
231 Kimco Realty Corp. 4,008
52 Life Storage, Inc. 5,611
381 Macerich (The) Co. 7,780
182 Omega Healthcare Investors, Inc. 7,207
575 Park Hotels & Resorts, Inc. 10,500
6 PS Business Parks, Inc. 891
206 Rexford Industrial Realty, Inc. 9,635
529 Service Properties Trust 9,564
125 Spirit Realty Capital, Inc. 5,688
122 STORE Capital Corp. 4,009
170 Terreno Realty Corp. 9,328
34 Weingarten Realty Investors 916
-------------
177,466
-------------
FOOD & STAPLES RETAILING -- 0.4%
39 Casey's General Stores, Inc. 6,358
22 Performance Food Group Co. (a) 933
-------------
7,291
-------------
FOOD PRODUCTS -- 1.2%
180 Hain Celestial Group (The),
Inc. (a) 4,272
174 Ingredion, Inc. 14,494
175 Pilgrim's Pride Corp. (a) 3,703
-------------
22,469
-------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 2.5%
46 Hill-Rom Holdings, Inc. 4,418
40 Integra LifeSciences Holdings
Corp. (a) 2,084
16 Masimo Corp. (a) 2,613
46 Nevro Corp. (a) 5,987
46 NuVasive, Inc. (a) 3,027
10 Penumbra, Inc. (a) 1,659
60 STERIS PLC 9,517
12 Tandem Diabetes Care, Inc. (a) 896
105 West Pharmaceutical Services,
Inc. 15,809
-------------
46,010
-------------
HEALTH CARE PROVIDERS & SERVICES
-- 5.5%
74 Amedisys, Inc. (a) 12,877
70 AMN Healthcare Services,
Inc. (a) 5,152
32 Chemed Corp. 13,364
255 DaVita, Inc. (a) 19,793
222 Encompass Health Corp. 16,614
32 LHC Group, Inc. (a) 3,887
76 MEDNAX, Inc. (a) 1,299
|
Page 16 See Notes to Financial Statements
FIRST TRUST ACTIVE FACTOR MID CAP ETF (AFMC)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
HEALTH CARE PROVIDERS & SERVICES
(CONTINUED)
76 Molina Healthcare, Inc. (a) $ 9,314
607 Patterson Cos., Inc. 14,441
66 Tenet Healthcare Corp. (a) 1,734
-------------
98,475
-------------
HEALTH CARE TECHNOLOGY -- 0.5%
192 Inovalon Holdings, Inc.,
Class A (a) 3,740
43 Teladoc Health, Inc. (a) 5,373
-------------
9,113
-------------
HOTELS, RESTAURANTS & LEISURE
-- 0.9%
42 Churchill Downs, Inc. 5,277
63 Marriott Vacations Worldwide
Corp. 6,097
86 Papa John's International, Inc. 4,954
-------------
16,328
-------------
HOUSEHOLD DURABLES -- 3.3%
34 Helen of Troy Ltd. (a) 5,596
158 KB Home 5,149
93 Leggett & Platt, Inc. 3,688
71 Tempur Sealy International,
Inc. (a) 5,307
321 Toll Brothers, Inc. 11,887
89 TopBuild Corp. (a) 8,989
720 TRI Pointe Group, Inc. (a) 11,038
68 Whirlpool Corp. 8,695
-------------
60,349
-------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS -- 0.6%
64 Ormat Technologies, Inc. 4,459
316 TerraForm Power, Inc., Class A 5,938
-------------
10,397
-------------
INDUSTRIAL CONGLOMERATES -- 0.5%
66 Carlisle Cos., Inc. 9,589
-------------
INSURANCE -- 4.0%
73 Assurant, Inc. 8,803
256 Brighthouse Financial, Inc. (a) 9,175
372 Brown & Brown, Inc. 16,000
638 CNO Financial Group, Inc. 10,221
221 First American Financial Corp. 12,619
12 Hanover Insurance Group (The),
Inc. 1,422
319 Old Republic International Corp. 6,291
325 Unum Group 7,576
-------------
72,107
-------------
IT SERVICES -- 3.4%
20 Alliance Data Systems Corp. 1,718
82 CACI International, Inc.,
Class A (a) 20,092
50 CoreLogic, Inc. 2,268
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
IT SERVICES (CONTINUED)
614 KBR, Inc. $ 15,939
102 MAXIMUS, Inc. 6,428
440 Perspecta, Inc. 10,987
152 Sabre Corp. 2,069
28 Science Applications International
Corp. 2,244
-------------
61,745
-------------
LIFE SCIENCES TOOLS & SERVICES
-- 2.9%
53 Bio-Rad Laboratories, Inc.,
Class A (a) 18,657
43 Bruker Corp. 1,873
82 Charles River Laboratories
International, Inc. (a) 12,757
12 Medpace Holdings, Inc. (a) 1,079
124 NeoGenomics, Inc. (a) 3,513
36 PRA Health Sciences, Inc. (a) 3,391
182 Syneos Health, Inc. (a) 11,530
-------------
52,800
-------------
MACHINERY -- 2.8%
18 AGCO Corp. 1,088
206 Allison Transmission Holdings,
Inc. 8,364
50 Graco, Inc. 2,466
60 Nordson Corp. 8,718
146 Oshkosh Corp. 10,534
62 Snap-on, Inc. 8,974
224 Timken (The) Co. 10,044
10 Watts Water Technologies, Inc.,
Class A 939
-------------
51,127
-------------
MEDIA -- 1.9%
270 AMC Networks, Inc., Class A (a) 8,370
8 Cable One, Inc. 12,584
244 Meredith Corp. 6,429
176 New York Times (The) Co.,
Class A 6,593
-------------
33,976
-------------
METALS & MINING -- 2.6%
290 Commercial Metals Co. 5,295
244 Reliance Steel & Aluminum Co. 24,959
60 Royal Gold, Inc. 5,788
422 Steel Dynamics, Inc. 11,238
-------------
47,280
-------------
MULTILINE RETAIL -- 1.5%
121 Dillard's, Inc., Class A 6,811
168 Kohl's Corp. 6,577
512 Macy's, Inc. 6,774
206 Nordstrom, Inc. 7,148
-------------
27,310
-------------
MULTI-UTILITIES -- 2.0%
102 Avista Corp. 4,809
448 MDU Resources Group, Inc. 12,423
|
See Notes to Financial Statements Page 17
FIRST TRUST ACTIVE FACTOR MID CAP ETF (AFMC)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MULTI-UTILITIES (CONTINUED)
260 NorthWestern Corp. $ 18,289
-------------
35,521
-------------
OIL, GAS & CONSUMABLE FUELS
-- 1.0%
123 Cabot Oil & Gas Corp. 1,713
23 CVR Energy, Inc. 654
439 Devon Energy Corp. 7,129
38 HollyFrontier Corp. 1,280
175 Murphy Oil Corp. 3,299
132 World Fuel Services Corp. 3,733
-------------
17,808
-------------
PAPER & FOREST PRODUCTS -- 0.8%
294 Domtar Corp. 8,459
194 Louisiana-Pacific Corp. 5,519
-------------
13,978
-------------
PERSONAL PRODUCTS -- 0.3%
202 Nu Skin Enterprises, Inc., Class A 4,953
-------------
PHARMACEUTICALS -- 0.8%
318 Prestige Consumer Healthcare,
Inc. (a) 11,881
11 Reata Pharmaceuticals, Inc.,
Class A (a) 2,142
-------------
14,023
-------------
PROFESSIONAL SERVICES -- 0.9%
56 FTI Consulting, Inc. (a) 6,305
138 ManpowerGroup, Inc. 10,480
-------------
16,785
-------------
ROAD & RAIL -- 0.7%
66 Old Dominion Freight Line, Inc. 12,791
-------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 2.0%
142 Cirrus Logic, Inc. (a) 9,747
94 Entegris, Inc. 5,012
114 Synaptics, Inc. (a) 7,530
220 Teradyne, Inc. 12,927
-------------
35,216
-------------
SOFTWARE -- 3.7%
40 Appfolio, Inc., Class A (a) 4,919
68 CDK Global, Inc. 3,129
60 Envestnet, Inc. (a) 4,529
42 Fair Isaac Corp. (a) 15,793
129 j2 Global, Inc. 11,266
19 Manhattan Associates, Inc. (a) 1,280
228 Nuance Communications, Inc. (a) 4,929
52 Pegasystems, Inc. 4,706
54 Tyler Technologies, Inc. (a) 16,921
-------------
67,472
-------------
SPECIALTY RETAIL -- 3.7%
627 American Eagle Outfitters, Inc. 8,076
335 AutoNation, Inc. (a) 14,314
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
SPECIALTY RETAIL (CONTINUED)
142 Dick's Sporting Goods, Inc. $ 5,170
256 Foot Locker, Inc. 9,280
12 Lithia Motors, Inc., Class A 1,430
50 Murphy USA, Inc. (a) 4,875
233 Penske Automotive Group, Inc. 10,723
35 RH (a) 6,349
117 Williams-Sonoma, Inc. 7,300
-------------
67,517
-------------
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 0.8%
72 NCR Corp. (a) 1,814
410 Xerox Holdings Corp. 13,202
-------------
15,016
-------------
TEXTILES, APPAREL & LUXURY GOODS
-- 0.8%
16 Deckers Outdoor Corp. (a) 2,781
188 Hanesbrands, Inc. 2,489
80 PVH Corp. 5,929
115 Steven Madden Ltd. 3,760
-------------
14,959
-------------
THRIFTS & MORTGAGE FINANCE
-- 1.5%
699 MGIC Investment Corp. 8,409
1,278 New York Community Bancorp,
Inc. 13,815
40 Radian Group, Inc. 850
156 Washington Federal, Inc. 4,678
-------------
27,752
-------------
TRADING COMPANIES & DISTRIBUTORS
-- 0.8%
52 HD Supply Holdings, Inc. (a) 1,977
156 MSC Industrial Direct Co., Inc.,
Class A 9,644
36 SiteOne Landscape Supply,
Inc. (a) 3,573
-------------
15,194
-------------
TOTAL COMMON STOCKS -- 99.7% 1,803,322
(Cost $2,049,741) -------------
MONEY MARKET FUNDS -- 0.2%
3,659 Morgan Stanley Institutional Liquidity
Funds - Treasury Portfolio -
Institutional Class - 1.44% (b) 3,659
(Cost $3,659) -------------
TOTAL INVESTMENTS -- 99.9% 1,806,981
(Cost $2,053,400) (c)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 1,813
-------------
NET ASSETS -- 100.0% $ 1,808,794
=============
|
Page 18 See Notes to Financial Statements
FIRST TRUST ACTIVE FACTOR MID CAP ETF (AFMC)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
(a) Non-income producing security.
(b) Rate shown reflects yield as of February 29, 2020.
(c) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of February 29, 2020, the
aggregate gross unrealized appreciation for all investments in which there
was an excess of value over tax cost was $2,747 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $249,166. The net unrealized depreciation was
$246,419.
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of February 29,
2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
---------------------------------------
Common Stocks* $1,803,322 $ -- $ --
Money Market
Funds 3,659 -- --
---------------------------------------
Total Investments $1,806,981 $ -- $ --
=======================================
|
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 19
FIRST TRUST ACTIVE FACTOR SMALL CAP ETF (AFSM)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE
COMMON STOCKS -- 99.7%
AEROSPACE & DEFENSE -- 0.5%
160 Maxar Technologies, Inc. $ 2,433
127 Triumph Group, Inc. 2,413
76 Vectrus, Inc. (a) 3,959
-------------
8,805
-------------
AUTO COMPONENTS -- 1.1%
663 Dana, Inc. 9,534
106 LCI Industries 10,234
-------------
19,768
-------------
AUTOMOBILES -- 0.4%
127 Winnebago Industries, Inc. 6,590
-------------
BANKS -- 6.5%
902 Boston Private Financial
Holdings, Inc. 8,799
154 Cathay General Bancorp 4,740
152 Columbia Banking System, Inc. 5,046
659 Fulton Financial Corp. 9,523
316 Great Western Bancorp, Inc. 8,491
680 Hilltop Holdings, Inc. 14,164
746 Hope Bancorp, Inc. 9,109
142 International Bancshares Corp. 4,842
933 Investors Bancorp, Inc. 9,834
336 Pacific Premier Bancorp, Inc. 8,679
312 Renasant Corp. 8,839
68 South State Corp. 4,632
130 Triumph Bancorp, Inc. (a) 4,403
209 Trustmark Corp. 5,622
180 United Community Banks, Inc. 4,459
498 Valley National Bancorp 4,631
-------------
115,813
-------------
BIOTECHNOLOGY -- 3.8%
77 ACADIA Pharmaceuticals,
Inc. (a) 3,291
180 Anika Therapeutics, Inc. (a) 7,517
108 Arena Pharmaceuticals, Inc. (a) 4,817
89 Arrowhead Pharmaceuticals,
Inc. (a) 3,147
46 Constellation Pharmaceuticals,
Inc. (a) 1,626
38 Eagle Pharmaceuticals, Inc. (a) 1,744
76 Eidos Therapeutics, Inc. (a) 3,844
168 Enanta Pharmaceuticals, Inc. (a) 8,548
50 Kodiak Sciences, Inc. (a) 3,198
48 Krystal Biotech, Inc. (a) 2,565
100 Ligand Pharmaceuticals, Inc. (a) 9,360
184 Molecular Templates, Inc. (a) 2,960
130 Momenta Pharmaceuticals,
Inc. (a) 3,678
80 Myriad Genetics, Inc. (a) 1,410
85 Natera, Inc. (a) 3,222
46 Principia Biopharma, Inc. (a) 2,970
431 Vanda Pharmaceuticals, Inc. (a) 4,754
-------------
68,651
-------------
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
BUILDING PRODUCTS -- 3.0%
22 Advanced Drainage Systems, Inc. $ 921
58 American Woodmark Corp. (a) 4,859
444 Builders FirstSource, Inc. (a) 10,083
121 Gibraltar Industries, Inc. (a) 6,131
85 Masonite International Corp. (a) 6,247
224 Patrick Industries, Inc. 11,834
83 Simpson Manufacturing Co., Inc. 6,593
136 Universal Forest Products, Inc. 6,373
-------------
53,041
-------------
CAPITAL MARKETS -- 2.5%
148 Ares Management Corp., Class A 5,119
337 Artisan Partners Asset
Management, Inc., Class A 9,632
93 Cohen & Steers, Inc. 5,826
205 Federated Hermes, Inc. 5,914
342 Hercules Capital, Inc. 4,514
84 Houlihan Lokey, Inc. 4,303
652 Waddell & Reed Financial, Inc.,
Class A 8,972
-------------
44,280
-------------
CHEMICALS -- 1.0%
92 Innospec, Inc. 7,962
586 Olin Corp. 9,487
-------------
17,449
-------------
COMMERCIAL SERVICES & SUPPLIES
-- 2.3%
97 Brady Corp., Class A 4,592
8 Cimpress PLC (a) 931
20 Deluxe Corp. 666
21 Herman Miller, Inc. 719
448 KAR Auction Services, Inc. 8,624
192 Knoll, Inc. 3,387
70 McGrath RentCorp 4,862
55 MSA Safety, Inc. 6,692
66 Tetra Tech, Inc. 5,337
28 UniFirst Corp. 5,203
-------------
41,013
-------------
COMMUNICATIONS EQUIPMENT
-- 1.3%
425 Comtech Telecommunications
Corp. 11,908
78 Lumentum Holdings, Inc. (a) 6,070
387 Viavi Solutions, Inc. (a) 5,105
-------------
23,083
-------------
CONSTRUCTION & ENGINEERING
-- 0.8%
114 Arcosa, Inc. 4,897
197 MasTec, Inc. (a) 9,669
-------------
14,566
-------------
CONSUMER FINANCE -- 0.6%
1,027 Navient Corp. 11,533
-------------
|
Page 20 See Notes to Financial Statements
FIRST TRUST ACTIVE FACTOR SMALL CAP ETF (AFSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
DIVERSIFIED FINANCIAL SERVICES
-- 0.6%
289 Cannae Holdings, Inc. (a) $ 10,777
-------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 0.7%
165 Cogent Communications
Holdings, Inc. 12,047
-------------
ELECTRIC UTILITIES -- 0.7%
244 Portland General Electric Co. 13,276
-------------
ELECTRICAL EQUIPMENT -- 1.4%
268 Atkore International Group,
Inc. (a) 9,892
38 AZZ, Inc. 1,402
129 Generac Holdings, Inc. (a) 13,285
20 Vicor Corp. (a) 865
-------------
25,444
-------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 3.7%
16 Badger Meter, Inc. 963
482 Benchmark Electronics, Inc. 13,101
168 Insight Enterprises, Inc. (a) 9,255
143 Methode Electronics, Inc. 4,384
150 Plexus Corp. (a) 9,953
234 Sanmina Corp. (a) 6,152
814 TTM Technologies, Inc. (a) 10,574
584 Vishay Intertechnology, Inc. 10,921
-------------
65,303
-------------
EQUITY REAL ESTATE INVESTMENT
TRUSTS -- 9.2%
96 Alexander & Baldwin, Inc. 1,805
114 Chatham Lodging Trust 1,589
705 CoreCivic, Inc. 10,441
24 CorEnergy Infrastructure Trust,
Inc. 838
459 Easterly Government Properties,
Inc. 10,910
47 EastGroup Properties, Inc. 5,909
293 First Industrial Realty Trust, Inc. 11,280
762 GEO Group (The), Inc. 11,156
340 Global Medical REIT, Inc. 4,750
156 Hannon Armstrong Sustainable
Infrastructure Capital, Inc. 5,296
736 Hersha Hospitality Trust 8,486
708 Independence Realty Trust, Inc. 9,388
68 Investors Real Estate Trust 4,791
344 iStar, Inc. 5,205
3 Kite Realty Group Trust 48
48 Office Properties Income Trust 1,398
56 Piedmont Office Realty Trust,
Inc., Class A 1,209
685 RLJ Lodging Trust 9,049
72 RPT Realty 933
96 Safehold, Inc. 5,243
892 Summit Hotel Properties, Inc. 8,269
832 Sunstone Hotel Investors, Inc. 9,110
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
EQUITY REAL ESTATE INVESTMENT
TRUSTS (CONTINUED)
695 Tanger Factory Outlet Centers,
Inc. $ 8,326
202 Terreno Realty Corp. 11,084
91 Universal Health Realty Income
Trust 9,803
534 Xenia Hotels & Resorts, Inc. 7,989
-------------
164,305
-------------
FOOD & STAPLES RETAILING -- 0.1%
102 Sprouts Farmers Market, Inc. (a) 1,630
-------------
FOOD PRODUCTS -- 1.3%
648 B&G Foods, Inc. 9,590
224 Darling Ingredients, Inc. (a) 5,757
78 Freshpet, Inc. (a) 5,184
51 John B. Sanfilippo & Son, Inc. 3,580
-------------
24,111
-------------
HEALTH CARE EQUIPMENT &
SUPPLIES -- 4.6%
667 AngioDynamics, Inc. (a) 7,664
130 AtriCure, Inc. (a) 4,995
68 CONMED Corp. 6,436
84 CryoLife, Inc. (a) 2,153
40 Globus Medical, Inc., Class A (a) 1,809
12 Heska Corp. (a) 1,146
146 Integer Holdings Corp. (a) 13,165
314 Merit Medical Systems, Inc. (a) 11,307
64 Natus Medical, Inc. (a) 1,720
68 Nevro Corp. (a) 8,850
64 Novocure Ltd. (a) 4,656
108 NuVasive, Inc. (a) 7,107
46 Orthofix Medical, Inc. (a) 1,626
17 Tactile Systems Technology,
Inc. (a) 857
14 Tandem Diabetes Care, Inc. (a) 1,045
352 Varex Imaging Corp. (a) 8,173
-------------
82,709
-------------
HEALTH CARE PROVIDERS & SERVICES
-- 5.2%
64 Acadia Healthcare Co., Inc. (a) 1,894
58 Addus HomeCare Corp. (a) 4,424
71 Amedisys, Inc. (a) 12,355
114 AMN Healthcare Services,
Inc. (a) 8,390
46 BioTelemetry, Inc. (a) 1,965
26 CorVel Corp. (a) 1,792
48 Ensign Group (The), Inc. 2,136
101 LHC Group, Inc. (a) 12,267
150 Magellan Health, Inc. (a) 9,001
76 MEDNAX, Inc. (a) 1,299
150 Patterson Cos., Inc. 3,569
178 RadNet, Inc. (a) 3,637
838 Select Medical Holdings Corp. (a) 20,062
140 Tenet Healthcare Corp. (a) 3,679
382 Tivity Health, Inc. (a) 4,840
|
See Notes to Financial Statements Page 21
FIRST TRUST ACTIVE FACTOR SMALL CAP ETF (AFSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
HEALTH CARE PROVIDERS & SERVICES
(CONTINUED)
18 US Physical Therapy, Inc. $ 1,876
-------------
93,186
-------------
HEALTH CARE TECHNOLOGY -- 1.5%
66 HMS Holdings Corp. (a) 1,516
539 Inovalon Holdings, Inc.,
Class A (a) 10,500
26 Omnicell, Inc. (a) 2,118
146 Simulations Plus, Inc. 4,754
70 Teladoc Health, Inc. (a) 8,747
-------------
27,635
-------------
HOTELS, RESTAURANTS & LEISURE
-- 0.5%
38 Marriott Vacations Worldwide
Corp. 3,678
84 Papa John's International, Inc. 4,839
-------------
8,517
-------------
HOUSEHOLD DURABLES -- 3.2%
146 Century Communities, Inc. (a) 4,866
32 Helen of Troy Ltd. (a) 5,267
97 Installed Building Products,
Inc. (a) 6,407
318 KB Home 10,364
120 M/I Homes, Inc. (a) 4,468
26 Meritage Homes Corp. (a) 1,650
90 Taylor Morrison Home Corp. (a) 2,027
104 TopBuild Corp. (a) 10,504
723 TRI Pointe Group, Inc. (a) 11,083
-------------
56,636
-------------
HOUSEHOLD PRODUCTS -- 0.5%
362 Central Garden & Pet Co.,
Class A (a) 9,162
-------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS -- 1.3%
564 Clearway Energy, Inc., Class C 11,867
73 Ormat Technologies, Inc. 5,087
331 TerraForm Power, Inc., Class A 6,219
-------------
23,173
-------------
INSURANCE -- 2.0%
90 AMERISAFE, Inc. 5,865
630 CNO Financial Group, Inc. 10,093
248 Employers Holdings, Inc. 9,558
46 Kinsale Capital Group, Inc. 5,588
61 RLI Corp. 4,903
-------------
36,007
-------------
INTERACTIVE MEDIA & SERVICES
-- 0.1%
62 EverQuote, Inc., Class A (a) 2,518
-------------
INTERNET & DIRECT MARKETING
RETAIL -- 0.1%
38 PetMed Express, Inc. 1,003
-------------
|
SHARES DESCRIPTION VALUE
IT SERVICES -- 3.2%
116 Cardtronics PLC, Class A (a) $ 4,207
130 CSG Systems International, Inc. 5,752
329 KBR, Inc. 8,541
4 ManTech International Corp.,
Class A 300
32 MAXIMUS, Inc. 2,017
238 NIC, Inc. 4,353
231 Perficient, Inc. (a) 9,464
440 Perspecta, Inc. 10,987
364 Sykes Enterprises, Inc. (a) 11,532
23 TTEC Holdings, Inc. 861
2 Verra Mobility Corp. (a) 30
-------------
58,044
-------------
LEISURE PRODUCTS -- 0.0%
34 Acushnet Holdings Corp. 865
-------------
LIFE SCIENCES TOOLS & SERVICES
-- 1.3%
42 Medpace Holdings, Inc. (a) 3,778
174 NeoGenomics, Inc. (a) 4,929
216 Syneos Health, Inc. (a) 13,684
-------------
22,391
-------------
MACHINERY -- 2.6%
24 Astec Industries, Inc. 901
58 ESCO Technologies, Inc. 5,273
526 Evoqua Water Technologies
Corp. (a) 11,030
19 Franklin Electric Co., Inc. 982
435 Meritor, Inc. (a) 9,870
286 Spartan Motors, Inc. 4,219
114 SPX Corp. (a) 4,780
14 Tennant Co. 1,002
659 Wabash National Corp. 7,236
11 Watts Water Technologies, Inc.,
Class A 1,033
-------------
46,326
-------------
MEDIA -- 0.9%
246 AMC Networks, Inc., Class A (a) 7,626
71 Cardlytics, Inc. (a) 5,637
58 Meredith Corp. 1,528
120 MSG Networks, Inc., Class A (a) 1,517
-------------
16,308
-------------
METALS & MINING -- 1.3%
282 Commercial Metals Co. 5,149
482 Schnitzer Steel Industries, Inc.,
Class A 7,944
538 Warrior Met Coal, Inc. 9,533
-------------
22,626
-------------
MULTILINE RETAIL -- 0.8%
425 Big Lots, Inc. 6,719
124 Dillard's, Inc., Class A 6,980
-------------
13,699
-------------
|
Page 22 See Notes to Financial Statements
FIRST TRUST ACTIVE FACTOR SMALL CAP ETF (AFSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MULTI-UTILITIES -- 1.8%
360 Avista Corp. $ 16,974
216 NorthWestern Corp. 15,193
-------------
32,167
-------------
OIL, GAS & CONSUMABLE FUELS
-- 2.3%
137 Arch Coal, Inc., Class A 6,898
23 CVR Energy, Inc. 654
685 Dorian LPG Ltd. (a) 7,617
205 Par Pacific Holdings, Inc. (a) 3,401
368 PDC Energy, Inc. (a) 7,003
20 Renewable Energy Group, Inc. (a) 529
126 Scorpio Tankers, Inc. 2,492
369 SFL Corp. Ltd. 4,480
238 Teekay Tankers Ltd., Class A (a) 3,939
130 World Fuel Services Corp. 3,676
-------------
40,689
-------------
PAPER & FOREST PRODUCTS -- 1.5%
280 Boise Cascade Co. 9,934
262 Domtar Corp. 7,538
186 Louisiana-Pacific Corp. 5,292
123 Schweitzer-Mauduit International,
Inc. 4,147
-------------
26,911
-------------
PERSONAL PRODUCTS -- 0.1%
54 Nu Skin Enterprises, Inc., Class A 1,324
-------------
PHARMACEUTICALS -- 2.2%
174 ANI Pharmaceuticals, Inc. (a) 8,354
34 Axsome Therapeutics, Inc. (a) 2,652
421 Corcept Therapeutics, Inc. (a) 5,313
156 Innoviva, Inc. (a) 2,101
86 Phibro Animal Health Corp.,
Class A 2,172
314 Prestige Consumer Healthcare,
Inc. (a) 11,731
388 Supernus Pharmaceuticals,
Inc. (a) 6,980
-------------
39,303
-------------
PROFESSIONAL SERVICES -- 1.3%
16 CBIZ, Inc. (a) 417
56 FTI Consulting, Inc. (a) 6,305
292 Korn Ferry 10,214
448 TrueBlue, Inc. (a) 6,666
-------------
23,602
-------------
REAL ESTATE MANAGEMENT &
DEVELOPMENT -- 1.2%
421 Newmark Group, Inc., Class A 4,020
608 Realogy Holdings Corp. 5,636
144 Redfin Corp. (a) 3,897
212 RMR Group (The), Inc., Class A 7,899
-------------
21,452
-------------
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
ROAD & RAIL -- 0.4%
362 ArcBest Corp. $ 7,171
-------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 3.7%
63 Ambarella, Inc. (a) 3,745
100 Cirrus Logic, Inc. (a) 6,864
238 Diodes, Inc. (a) 10,474
168 Enphase Energy, Inc. (a) 8,227
209 Lattice Semiconductor Corp. (a) 3,752
348 Rambus, Inc. (a) 4,865
216 SMART Global Holdings, Inc. (a) 5,798
128 Synaptics, Inc. (a) 8,454
314 Ultra Clean Holdings, Inc. (a) 6,566
438 Xperi Corp. 7,529
-------------
66,274
-------------
SOFTWARE -- 1.9%
90 Appfolio, Inc., Class A (a) 11,067
314 Ebix, Inc. 8,302
70 Envestnet, Inc. (a) 5,284
339 Model N, Inc. (a) 9,831
-------------
34,484
-------------
SPECIALTY RETAIL -- 5.2%
444 Abercrombie & Fitch Co.,
Class A 5,830
54 America's Car-Mart, Inc. (a) 5,550
754 American Eagle Outfitters, Inc. 9,711
50 Asbury Automotive Group,
Inc. (a) 4,432
220 Buckle (The), Inc. 4,979
278 Genesco, Inc. (a) 9,566
95 Group 1 Automotive, Inc. 8,097
52 Guess?, Inc. 842
388 Hibbett Sports, Inc. (a) 7,574
36 Lithia Motors, Inc., Class A 4,290
9 Murphy USA, Inc. (a) 877
417 Rent-A-Center, Inc. 8,878
44 RH (a) 7,982
264 Signet Jewelers Ltd. 6,156
21 Sleep Number Corp. (a) 925
98 Sonic Automotive, Inc., Class A 2,744
222 Urban Outfitters, Inc. (a) 5,219
-------------
93,652
-------------
TEXTILES, APPAREL & LUXURY GOODS
-- 0.7%
58 Crocs, Inc. (a) 1,518
32 Deckers Outdoor Corp. (a) 5,561
334 Movado Group, Inc. 4,910
24 Steven Madden Ltd. 785
-------------
12,774
-------------
THRIFTS & MORTGAGE FINANCE
-- 2.4%
164 HomeStreet, Inc. 4,443
140 Meta Financial Group, Inc. 4,599
154 PennyMac Financial Services,
Inc. 5,430
|
See Notes to Financial Statements Page 23
FIRST TRUST ACTIVE FACTOR SMALL CAP ETF (AFSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
THRIFTS & MORTGAGE FINANCE
(CONTINUED)
620 Radian Group, Inc. $ 13,169
156 Walker & Dunlop, Inc. 10,117
154 Washington Federal, Inc. 4,618
-------------
42,376
-------------
TOBACCO -- 0.7%
204 Universal Corp. 10,068
157 Vector Group Ltd. 1,824
-------------
11,892
-------------
TRADING COMPANIES & DISTRIBUTORS
-- 3.2%
497 BMC Stock Holdings, Inc. (a) 12,191
305 Foundation Building Materials,
Inc. (a) 4,758
410 GMS, Inc. (a) 9,369
916 NOW, Inc. (a) 8,088
46 Rush Enterprises, Inc., Class A 1,928
54 SiteOne Landscape Supply,
Inc. (a) 5,360
210 Triton International Ltd. 7,218
184 WESCO International, Inc. (a) 7,465
-------------
56,377
-------------
WIRELESS TELECOMMUNICATION
SERVICES -- 0.5%
419 Telephone & Data Systems, Inc. 8,439
-------------
TOTAL COMMON STOCKS -- 99.7% 1,781,177
(Cost $2,040,333) -------------
MONEY MARKET FUNDS -- 0.3%
4,825 Morgan Stanley Institutional Liquidity
Funds - Treasury Portfolio -
Institutional Class - 1.44% (b) 4,825
(Cost $4,825) -------------
TOTAL INVESTMENTS -- 100.0% 1,786,002
(Cost $2,045,158) (c)
NET OTHER ASSETS AND
LIABILITIES -- (0.0)% (22)
-------------
NET ASSETS -- 100.0% $ 1,785,980
=============
|
(a) Non-income producing security.
(b) Rate shown reflects yield as of February 29, 2020.
(c) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of February 29, 2020, the
aggregate gross unrealized appreciation for all investments in which there
was an excess of value over tax cost was $5,211 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $264,367. The net unrealized depreciation was
$259,156.
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of February 29,
2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
---------------------------------------
Common Stocks* $1,781,177 $ -- $ --
Money Market
Funds 4,825 -- --
---------------------------------------
Total Investments $1,786,002 $ -- $ --
=======================================
|
* See Portfolio of Investments for industry breakout.
Page 24 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF ASSETS AND LIABILITIES
FEBRUARY 29, 2020 (UNAUDITED)
FIRST TRUST FIRST TRUST FIRST TRUST
ACTIVE FACTOR ACTIVE FACTOR ACTIVE FACTOR
LARGE CAP ETF MID CAP ETF SMALL CAP ETF
(AFLG) (AFMC) (AFSM)
--------------- --------------- ---------------
ASSETS:
Investments, at value............................................. $ 1,849,299 $ 1,806,981 $ 1,786,002
Dividends receivable.............................................. 4,274 2,918 1,237
--------------- --------------- ---------------
Total Assets................................................... 1,853,573 1,809,899 1,787,239
--------------- --------------- ---------------
LIABILITIES:
Investment advisory fees payable.................................. 952 1,105 1,259
--------------- --------------- ---------------
Total Liabilities.............................................. 952 1,105 1,259
--------------- --------------- ---------------
NET ASSETS........................................................ $ 1,852,621 $ 1,808,794 $ 1,785,980
=============== =============== ===============
NET ASSETS CONSIST OF:
Paid-in capital................................................... $ 1,995,473 $ 1,997,128 $ 2,006,314
Par value......................................................... 1,000 1,000 1,000
Accumulated distributable earnings (loss)......................... (143,852) (189,334) (221,334)
--------------- --------------- ---------------
NET ASSETS........................................................ $ 1,852,621 $ 1,808,794 $ 1,785,980
=============== =============== ===============
NET ASSET VALUE, per share........................................ $ 18.53 $ 18.09 $ 17.86
=============== =============== ===============
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share)......................... 100,002 100,002 100,002
=============== =============== ===============
Investments, at cost.............................................. $ 2,065,528 $ 2,053,400 $ 2,045,158
=============== =============== ===============
|
See Notes to Financial Statements Page 25
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF OPERATIONS
FOR THE PERIOD DECEMBER 3, 2019 (a) THROUGH FEBRUARY 29, 2020 (UNAUDITED)
FIRST TRUST FIRST TRUST FIRST TRUST
ACTIVE FACTOR ACTIVE FACTOR ACTIVE FACTOR
LARGE CAP ETF MID CAP ETF SMALL CAP ETF
(AFLG) (AFMC) (AFSM)
--------------- --------------- ---------------
INVESTMENT INCOME:
Dividends......................................................... $ 11,113 $ 10,595 $ 8,867
--------------- --------------- ---------------
Total investment income........................................ 11,113 10,595 8,867
--------------- --------------- ---------------
EXPENSES:
Investment advisory fees.......................................... 2,770 3,243 3,735
--------------- --------------- ---------------
Total expenses................................................. 2,770 3,243 3,735
--------------- --------------- ---------------
NET INVESTMENT INCOME (LOSS)...................................... 8,343 7,352 5,132
--------------- --------------- ---------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments.................................................... (23,973) (35,612) (65,242)
In-kind redemptions............................................ 92,007 91,345 104,432
--------------- --------------- ---------------
Net realized gain (loss).......................................... 68,034 55,733 39,190
--------------- --------------- ---------------
Net change in unrealized appreciation (depreciation) on
investments.................................................... (216,229) (246,419) (259,156)
--------------- --------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS)........................... (148,195) (190,686) (219,966)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS................................................ $ (139,852) $ (183,334) $ (214,834)
=============== =============== ===============
|
(a) Inception date is consistent with the commencement of investment
operations and is the date the initial creation units were established.
Page 26 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD DECEMBER 3, 2019 (a) THROUGH FEBRUARY 29, 2020 (UNAUDITED)
FIRST TRUST FIRST TRUST FIRST TRUST
ACTIVE FACTOR ACTIVE FACTOR ACTIVE FACTOR
LARGE CAP ETF MID CAP ETF SMALL CAP ETF
(AFLG) (AFMC) (AFSM)
--------------- --------------- ---------------
OPERATIONS:
Net investment income (loss)...................................... $ 8,343 $ 7,352 $ 5,132
Net realized gain (loss).......................................... 68,034 55,733 39,190
Net change in unrealized appreciation (depreciation).............. (216,229) (246,419) (259,156)
--------------- --------------- ---------------
Net increase (decrease) in net assets resulting from operations... (139,852) (183,334) (214,834)
--------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations............................................. (4,000) (6,000) (6,500)
--------------- --------------- ---------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold......................................... 3,045,020 3,032,718 3,026,068
Cost of shares redeemed........................................... (1,048,547) (1,034,590) (1,018,754)
--------------- --------------- ---------------
Net increase (decrease) in net assets resulting from shareholder
transactions................................................... 1,996,473 1,998,128 2,007,314
--------------- --------------- ---------------
Total increase (decrease) in net assets........................... 1,852,621 1,808,794 1,785,980
NET ASSETS:
Beginning of period............................................... -- -- --
--------------- --------------- ---------------
End of period..................................................... $ 1,852,621 $ 1,808,794 $ 1,785,980
=============== =============== ===============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period........................... -- -- --
Shares sold....................................................... 150,002 150,002 150,002
Shares redeemed................................................... (50,000) (50,000) (50,000)
--------------- --------------- ---------------
Shares outstanding, end of period................................. 100,002 100,002 100,002
=============== =============== ===============
|
(a) Inception date is consistent with the commencement of investment
operations and is the date the initial creation units were established.
See Notes to Financial Statements Page 27
FIRST TRUST EXCHANGE-TRADED FUND VIII
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FIRST TRUST ACTIVE FACTOR LARGE CAP ETF (AFLG)
PERIOD
ENDED
2/29/2020 (a)
(UNAUDITED)
---------------
Net asset value, beginning of period........................... $ 19.87
---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... 0.08
Net realized and unrealized gain (loss)........................ (1.38)
---------
Total from investment operations............................... (1.30)
---------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.......................................... (0.04)
---------
Net asset value, end of period................................. $ 18.53
=========
TOTAL RETURN (b)............................................... (6.56)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 1,853
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets.................. 0.55% (c)
Ratio of net investment income (loss) to average net assets.... 1.66% (c)
Portfolio turnover rate (d).................................... 18%
|
FIRST TRUST ACTIVE FACTOR MID CAP ETF (AFMC)
PERIOD
ENDED
2/29/2020 (a)
(UNAUDITED)
---------------
Net asset value, beginning of period........................... $ 19.88
---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... 0.07
Net realized and unrealized gain (loss)........................ (1.80)
---------
Total from investment operations............................... (1.73)
---------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.......................................... (0.06)
---------
Net asset value, end of period................................. $ 18.09
=========
TOTAL RETURN (b)............................................... (8.74)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 1,809
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets.................. 0.65% (c)
Ratio of net investment income (loss) to average net assets.... 1.47% (c)
Portfolio turnover rate (d).................................... 25%
|
(a) Inception date is December 3, 2019, 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 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.
(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 28 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FIRST TRUST ACTIVE FACTOR SMALL CAP ETF (AFSM)
PERIOD
ENDED
2/29/2020 (a)
(UNAUDITED)
---------------
Net asset value, beginning of period........................... $ 19.95
---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... 0.06
Net realized and unrealized gain (loss)........................ (2.08)
---------
Total from investment operations............................... (2.02)
---------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.......................................... (0.07)
---------
Net asset value, end of period................................. $ 17.86
=========
TOTAL RETURN (b)............................................... (10.19)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 1,786
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets.................. 0.75% (c)
Ratio of net investment income (loss) to average net assets.... 1.03% (c)
Portfolio turnover rate (d).................................... 27%
|
(a) Inception date is December 3, 2019, 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 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.
(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.
See Notes to Financial Statements Page 29
NOTES TO FINANCIAL STATEMENTS
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
1. ORGANIZATION
First Trust Exchange-Traded Fund VIII (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on February 22,
2016, 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 sixteen funds that are offering shares. This
report covers the three funds listed below. The shares of each fund are listed
and traded on the NYSE Arca, Inc. ("NYSE Arca").
First Trust Active Factor Large Cap ETF - (NYSE Arca ticker "AFLG")(1)
First Trust Active Factor Mid Cap ETF - (NYSE Arca ticker "AFMC")(1)
First Trust Active Factor Small Cap ETF - (NYSE Arca ticker "AFSM")(1)
(1) Commenced investment operations on December 3, 2019.
Each fund represents a separate series of shares of beneficial interest in the
Trust (each a "Fund" and collectively, the "Funds"). Unlike conventional mutual
funds, each Fund issues and redeems shares on a continuous basis, at net asset
value ("NAV"), only in large specified blocks consisting of 50,000 shares called
a "Creation Unit." Each Fund's Creation Units are generally issued and redeemed
in-kind for securities in which the Fund invests, and in certain circumstances,
for cash, and only to and from broker-dealers and large institutional investors
that have entered into participation agreements. Except when aggregated in
Creation Units, each Fund's shares are not redeemable securities.
Each Fund is an actively managed exchange-traded fund. Each Fund's investment
objective is to seek to provide capital appreciation.
Under normal market conditions, AFLG will invest at least 80% of its net assets
(including investment borrowings) in U.S.-listed equity securities issued by
large capitalization companies.
Under normal market conditions, AFMC will invest at least 80% of its net assets
(including investment borrowings) in U.S.-listed equity securities issued by mid
capitalization companies.
Under normal market conditions, AFSM will invest at least 80% of its net assets
(including investment borrowings) in U.S.-listed equity securities issued by
small capitalization companies.
There can be no assurance that a Fund will achieve its investment objective. The
Funds may not be appropriate for all investors.
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds are each considered an investment company and follow accounting and
reporting guidance under Financial Accounting Standards Board Accounting
Standards Codification Topic 946, "Financial Services-Investment Companies." The
following is a summary of significant accounting policies consistently followed
by the Funds in the preparation of the financial statements. The preparation of
the financial statements in accordance with accounting principles generally
accepted in the United States of America ("U.S. GAAP") requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
Each Fund's NAV is determined daily as of the close of regular trading on the
New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day
the NYSE is open for trading. If the NYSE closes early on a valuation day, the
NAV is determined as of that time. Each 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.
Each 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 Funds'
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. Each Fund's investments are valued as
follows:
Page 30
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
Common stocks and other equity securities listed on any national or
foreign exchange (excluding The Nasdaq Stock Market LLC ("Nasdaq") and the
London Stock Exchange Alternative Investment Market ("AIM")) are valued at
the last sale price on the exchange on which they are principally traded
or, for Nasdaq and AIM securities, the official closing price. Securities
traded on more than one securities exchange are valued at the last sale
price or official closing price, as applicable, at the close of the
securities exchange representing the principal market for such securities.
Securities traded in an over-the-counter market are fair valued at the
mean of their most recent bid and asked price, if available, and otherwise
at their closing bid price.
Shares of open-end funds are valued at fair value which is based on NAV
per share.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Trust's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities
which may not be publicly sold without registration under the Securities Act of
1933, as amended) for which a third-party pricing service is unable to provide a
market price; securities whose trading has been formally suspended; a security
whose market or fair value price is not available from a pre-established pricing
source; a security with respect to which an event has occurred that is likely to
materially affect the value of the security after the market has closed but
before the calculation of a Fund's NAV or make it difficult or impossible to
obtain a reliable market quotation; and a security whose price, as provided by
the third-party pricing service, does not reflect the security's fair value. As
a general principle, the current fair value of a security would appear to be the
amount which the owner might reasonably expect to receive for the security upon
its current sale. When fair value prices are used, generally they will differ
from market quotations or official closing prices on the applicable exchanges. A
variety of factors may be considered in determining the fair value of such
securities, including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or third-party pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect
the value of the security.
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 February 29, 2020, 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.
Withholding taxes and tax reclaims on foreign dividends have been provided for
in accordance with each Fund's understanding of the applicable country's tax
rules and rates.
Page 31
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
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 is 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. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income of each Fund, if any, are declared and paid
quarterly, or as the Board of Trustees may determine from time to time.
Distributions of net realized gains earned by each Fund, if any, are distributed
at least annually.
Distributions from net investment income and realized capital gains are
determined in accordance with federal income tax regulations, which may differ
from U.S. GAAP. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These permanent differences are primarily due to the varying
treatment of income and gain/loss on 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.
D. INCOME TAXES
Each Fund intends 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.
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. As of February 29, 2020,
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.
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.
E. 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 supervising the selection and 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.
Pursuant to the Investment Management Agreement between the Trust and the
Advisor, First Trust manages the investment of each Fund's assets and is
responsible for the expenses of each Fund, including the cost of transfer
agency, custody, fund administration, legal, audit, license and other services,
but excluding fee payments under the Investment Management Agreement, interest,
taxes, pro rata share of fees and expenses attributable to investments in other
investment companies ("acquired fund fees and expenses"), brokerage commissions
and other expenses connected with the execution of portfolio transactions,
distribution and service fees payable pursuant to a Rule 12b-1 plan, if any, and
extraordinary expenses. Each Fund has agreed to pay First Trust an annual
unitary management fee based on each Fund's average daily net assets at a rate
set forth below:
Rate
---------------
First Trust Active Factor Large Cap ETF 0.55%
First Trust Active Factor Mid Cap ETF 0.65%
First Trust Active Factor Small Cap ETF 0.75%
|
Page 32
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services and transfer agency services for
each Fund. As custodian, BNYM is responsible for custody of each Fund's assets.
As fund accountant and administrator, BNYM is responsible for maintaining the
books and records of each Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for each Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
a defined-outcome fund or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen 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
Chairmen 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 February 29, 2020, 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 Active Factor Large Cap ETF $ 362,174 $ 363,243
First Trust Active Factor Mid Cap ETF 483,261 482,506
First Trust Active Factor Small Cap ETF 520,320 521,672
|
For the period ended February 29, 2020, the cost of in-kind purchases and
proceeds from in-kind sales for each Fund were as follows:
Purchases Sales
------------ ------------
First Trust Active Factor Large Cap ETF $ 3,039,172 $ 1,045,512
First Trust Active Factor Mid Cap ETF 3,027,702 1,034,199
First Trust Active Factor Small Cap ETF 3,021,362 1,018,636
|
5. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
Shares are created and redeemed by each Fund only in Creation Unit size
aggregations of 50,000 shares in transactions with broker-dealers or large
institutional investors that have entered into a participation agreement (an
"Authorized Participant"). In order to purchase Creation Units of each Fund, an
Authorized Participant must deposit (i) a designated portfolio of securities
determined by First Trust (the "Deposit Securities") and generally make or
receive a cash payment referred to as the "Cash Component," which is an amount
equal to the difference between the NAV of the Fund Shares (per Creation Unit
Aggregation) and the market value of the Deposit Securities, and/or (ii) cash in
lieu of all or a portion of the Deposit Securities. If the Cash Component is a
positive number (i.e., the NAV per Creation Unit Aggregation exceeds the Deposit
Amount), the Authorized Participant will deliver the Cash Component. If the Cash
Component is a negative number (i.e., the NAV per Creation Unit Aggregation is
less than the Deposit Amount), the Authorized Participant will receive the Cash
Component. Authorized Participants purchasing Creation Units must pay to BNYM,
as transfer agent, a creation transaction fee (the "Creation Transaction Fee")
regardless of the number of Creation Units purchased in the transaction. The
Creation Transaction Fee may vary and is based on the composition of the
securities included in each Fund's portfolio and the countries in which the
transactions are settled. The Creation Transaction Fee may increase or decrease
with changes in each Fund's portfolio. The price for each Creation Unit will
equal the daily NAV per share 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 or stamp taxes. When a Fund permits an Authorized
Participant to substitute cash or a different security in lieu of depositing one
or more of the requisite Deposit Securities, the Authorized Participant may also
be assessed an amount to cover the cost of purchasing the Deposit Securities
and/or disposing of the substituted securities, including 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 such Deposit
Securities and/or substitute securities.
Page 33
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
Authorized Participants redeeming Creation Units must pay to BNYM, as transfer
agent, a redemption transaction fee (the "Redemption Transaction Fee"),
regardless of the number of Creation Units redeemed in the transaction. The
Redemption Transaction Fee may vary and is based on the composition of the
securities included in each Fund's portfolio and the countries in which the
transactions are settled. The Redemption Transaction Fee may increase or
decrease with changes in each Fund's portfolio. Each Fund reserves the right to
effect redemptions in cash. An Authorized Participant may request cash
redemption in lieu of securities; however, a Fund may, in its discretion, reject
any such request.
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 November 24, 2021.
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:
Beginning in December 2019, the outbreak of the respiratory disease designated
as COVID-19 has caused significant volatility and declines in global financial
markets, which have caused losses for investors. The impact of this COVID-19
pandemic may be short-term or may last for an extended period of time and, in
either case, could result in a substantial economic downturn or recession.
Management is continuing to monitor this event.
Page 34
ADDITIONAL INFORMATION
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (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 large
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
not concentrated.
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.
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.
Page 35
ADDITIONAL INFORMATION (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
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 CONSTITUENT RISK. Certain funds may be a constituent of one or more
indices. 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
significantly 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.
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. In 2017, the United Kingdom's
Financial Conduct Authority announced that LIBOR will cease to be available for
use after 2021. The unavailability or replacement of LIBOR may affect the value,
liquidity or return on certain fund investments and may result in costs incurred
in connection with closing out positions and entering into new trades. Any
potential effects of the transition away from LIBOR on the fund or on certain
instruments in which the fund invests can be difficult to ascertain, and they
may vary depending on a variety of factors. Any such effects of the transition
away from LIBOR, as well as other unforeseen effects, could result in losses to
the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are
subject to market fluctuations caused by factors such as general economic
conditions, political events, regulatory or market developments, changes in
interest rates and perceived trends in securities prices. Shares of a fund could
decline in value or underperform other investments as a result of the risk of
loss associated with these market fluctuations. In addition, local, regional or
global events such as war, acts of terrorism, spread of infectious diseases or
other public health issues, recessions, or other events could have a significant
negative impact on a fund and its investments. Such events may affect certain
geographic regions, countries, sectors and industries more significantly than
others. The outbreak of the respiratory disease designated as COVID-19 in
December 2019 has caused significant volatility and declines in global financial
markets, which have caused losses for investors. The impact of this COVID-19
pandemic may be short term or may last for an extended period of time, and in
either case could result in a substantial economic downturn or recession.
Page 36
ADDITIONAL INFORMATION (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
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; lack
of liquidity; currency exchange rates; excessive taxation; government seizure of
assets; 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.
Passive Investment Risk. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
ADVISORY AGREEMENT
BOARD CONSIDERATIONS REGARDING APPROVAL OF INVESTMENT MANAGEMENT AGREEMENT
The Board of Trustees of First Trust Exchange-Traded Fund VIII (the "Trust"),
including the Independent Trustees, unanimously approved the Investment
Management Agreement (the "Agreement") with First Trust Advisors L.P. (the
"Advisor"), on behalf of the following three series of the Trust (each a "Fund"
and collectively, the "Funds"):
First Trust Active Factor Large Cap ETF (AFLG)
First Trust Active Factor Mid Cap ETF (AFMC)
First Trust Active Factor Small Cap ETF (AFSM)
The Board approved the Agreement for each Fund for an initial two-year term at a
meeting held on September 9, 2019. The Board determined for each Fund that the
Agreement is 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 reasonable business
judgment.
To reach this determination for each Fund, 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 Agreement for
each Fund, the Independent Trustees received a report from the Advisor in
advance of the Board meeting responding to a request 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 to each Fund (including the relevant personnel responsible for these
services and their experience); the proposed unitary fee rate payable by each
Fund as compared to fees charged to a peer group of funds (the "Expense Group")
and a broad peer universe of funds (the "Expense Universe"), each assembled by
Broadridge Financial Solutions, Inc. ("Broadridge"), an independent source, and
as compared to fees charged to other clients of the Advisor, including other
exchange-traded funds ("ETFs") managed by the Advisor; the estimated expense
ratio of each 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 each Fund and the potential for economies of scale, if
any; financial data on the Advisor; any fall-out benefits to the Advisor and its
affiliate, First Trust Portfolios L.P. ("FTP"); and information on the Advisor's
compliance program. The Independent Trustees and their counsel also met
separately to discuss the information provided by the Advisor. The Board applied
its business judgment to determine whether the arrangement between the Trust and
the Advisor is a reasonable business arrangement from each Fund's perspective.
In evaluating whether to approve the Agreement for each Fund, the Board
considered the nature, extent and quality of the services to be provided by the
Advisor under the Agreement and considered that employees of the Advisor provide
management services to other ETFs and to other investment companies in the First
Trust Fund Complex with diligence and care. The Board considered that the
Advisor will be responsible for the overall management and administration of
each Fund and reviewed all of the services to be provided by the Advisor to the
Funds, as well as the background and experience of the persons responsible for
such services. The Board noted that each Fund will be an actively-managed ETF
and noted that the Advisor's Investment Committee will be responsible for the
day-to-day management of the Fund's investments. The Board considered the
background and experience of the members of the Investment Committee. The Board
considered the investment models to be used in implementing the Funds'
Page 37
ADDITIONAL INFORMATION (CONTINUED)
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
investment strategies, including the process for reviewing and testing the
models and the personnel responsible for developing the models and their
experience. 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 and each Fund's
compliance with the 1940 Act, as well as each Fund's compliance with its
investment objective, policies and restrictions. At the meeting, the Trustees
received a presentation from the members of the Advisor's Strategy Research
Group who developed the investment models on which the Funds will be based, and
were able to ask questions about the operation of the models and the proposed
investment strategies for the Funds. Because the Funds had yet to commence
investment operations, the Board could not consider the historical investment
performance of the Funds; however, the Board considered the historical
investment performance of seed accounts that are based on the same investment
models on which the Funds will be based. 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 each Fund by the Advisor under the
Agreement are expected to be satisfactory.
The Board considered the proposed unitary fee rate payable by each Fund under
the Agreement for the services to be provided. The Board noted that, under the
unitary fee arrangement, AFLG would pay the Advisor a unitary fee equal to an
annual rate of 0.55% of its average daily net assets, AFMC would pay the Advisor
a unitary fee equal to an annual rate of 0.65% of its average daily net assets,
and AFSM would pay the Advisor a unitary fee equal to an annual rate of 0.75% of
its average daily net assets. The Board noted that the Advisor would be
responsible for each Fund's expenses, including the cost of transfer agency,
custody, fund administration, legal, audit and other services and license fees,
if any, but excluding the fee payment under the Agreement and interest, taxes,
brokerage commissions and other expenses connected with the execution of
portfolio transactions, distribution and service fees pursuant to a Rule 12b-1
plan, if any, and extraordinary expenses. The Board received and reviewed
information showing the advisory or unitary fee rates and expense ratios of the
peer funds in the Expense Groups, as well as advisory and unitary fee rates
charged by the Advisor to other fund (including ETF) and non-fund clients, as
applicable. Because each 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 noted that the unitary fee for each of AFLG and
AFSM was below the median total (net) expense ratio of the peer funds in its
Expense Group and that the unitary fee for AFMC was above the median total (net)
expense ratio of the peer funds in its Expense Group. With respect to the
Expense Groups, the Board discussed with representatives of the Advisor how the
Expense Groups were assembled and how each 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
differences between each Fund and other clients that limited their
comparability, noting the Advisor's statements that each Fund is unique within
the First Trust Fund Complex, as it is a systemic and risk-managed approach to
dynamic factor investing, and that the Advisor does not provide advisory
services to any non-fund clients with investment objectives and policies similar
to those of the Funds. The Board also noted the Advisor's explanations for the
differences in the unitary fees across the Funds. In light of the information
considered and the nature, extent and quality of the services expected to be
provided to each Fund under the Agreement, the Board determined that the
proposed unitary fee for each Fund was fair and reasonable.
The Board noted that the proposed unitary fee for each 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 Funds would benefit the Advisor, but that the unitary fee
structure provides a level of certainty in expenses for the Funds. The Board
noted that the Advisor has continued to hire personnel and build infrastructure,
including technology, 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 each Fund
under the Agreement and noted that the Advisor was unable to estimate the
profitability of the Agreement for each Fund to the Advisor at this time. In
addition, the Board considered fall-out benefits described by the Advisor that
may be realized from its relationship with the Funds. The Board considered that
the Advisor had identified as a fall-out benefit to the Advisor and FTP their
exposure to investors and brokers who, absent their exposure to the Funds, may
have had no dealings with the Advisor or FTP. The Board also noted that the
Advisor would not utilize soft dollars in connection with the Funds. The Board
concluded that the character and amount of potential fall-out benefits to the
Advisor were not unreasonable.
Based on all of the information considered and the conclusions reached, the
Board, including the Independent Trustees, unanimously determined that the terms
of the Agreement are fair and reasonable and that the approval of the Agreement
is in the best interests of each Fund. No single factor was determinative in the
Board's analysis.
Page 38
This page intentionally left blank.
This page intentionally left blank.
FIRST TRUST
First Trust Exchange-Traded Fund VIII
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
[BLANK BACK COVER]