UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-23147
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First Trust Exchange-Traded Fund VIII
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(Exact name of registrant as specified in charter)
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
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(Address of principal executive offices) (Zip code)
W. Scott Jardine, Esq.
First Trust Portfolios L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
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(Name and address of agent for service)
Registrant's telephone number, including area code: (630) 765-8000
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Date of fiscal year end: August 31
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Date of reporting period: August 31, 2020
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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 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
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First Trust CEF Income Opportunity ETF (FCEF)
First Trust Municipal CEF Income Opportunity ETF (MCEF)
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Annual Report
For the Year Ended
August 31, 2020
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TABLE OF CONTENTS
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FIRST TRUST EXCHANGE-TRADED FUND VIII
ANNUAL REPORT
AUGUST 31, 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 Commentary......................................................... 9
Understanding Your Fund Expenses............................................. 11
Portfolio of Investments
First Trust CEF Income Opportunity ETF (FCEF)............................. 12
First Trust Municipal CEF Income Opportunity ETF (MCEF)................... 14
Statements of Assets and Liabilities......................................... 16
Statements of Operations..................................................... 17
Statements of Changes in Net Assets.......................................... 18
Financial Highlights......................................................... 19
Notes to Financial Statements................................................ 20
Report of Independent Registered Public Accounting Firm...................... 26
Additional Information....................................................... 27
Board of Trustees and Officers............................................... 33
Privacy Policy............................................................... 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 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's shares may therefore be less than what you paid
for them. Accordingly, you can lose money investing in a Fund. See "Risk
Considerations" in the Additional Information section of this report for a
discussion of 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.
By reading the portfolio commentary from the portfolio management team of the
Funds, you may obtain an understanding of how the market environment affected
each Fund's performance. 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.
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SHAREHOLDER LETTER
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FIRST TRUST EXCHANGE-TRADED FUND VIII
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
AUGUST 31, 2020
Dear Shareholders:
First Trust is pleased to provide you with the 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 twelve months ended August 31, 2020.
In case you missed the latest big news from the Federal Reserve ("Fed") in
September, it stated that it expects to hold short-term interest rates near zero
until two things happen: (1) the U.S. unemployment rate is back to normal, or
around the 4.0% level; and (2) the inflation rate is at, or above, 2.0%. As of
August 31, 2020, the U.S. unemployment rate stood at 8.4%, according to data
from the Bureau of Labor Statistics. The Fed's top benchmark for inflation (U.S.
Personal Consumption Expenditures Chain Type Price Index) stood at 1.0% on July
31, 2020. Brian Wesbury, Chief Economist at First Trust Advisors L.P., notes
that the Fed does not expect to achieve both goals until 2024.
What does this mean for investors? We believe that one of the Fed's motivations
in promoting a multi-year commitment to a near zero interest rate monetary
policy is to incentivize risk-taking. By holding interest rates artificially low
for an extended period, the Fed is essentially disincentivizing saving. The Fed
wants individuals to invest their capital in risk assets and is offering
valuable guidance on its monetary policy to instill confidence in the markets,
in my opinion.
In his testimony to the House Financial Services Committee on September 22,
2020, Fed Chairman Jerome Powell stated that the U.S. economy has a long road to
a full recovery and needs more financial support. U.S. Treasury Secretary Steven
Mnuchin also testified and said that he and the White House will continue to
push Congress to pass another fiscal relief package to help support American
workers. In pursuing additional fiscal support, the U.S. government is
ultimately looking to buy time until a coronavirus ("COVID-19") vaccine arrives.
With the U.S. Presidential election less than two months away, getting a
trillion dollar or so stimulus package through Congress will be no easy task, in
my opinion. Let us hope they surprise us.
Thanks to the monetary and fiscal support already brought to bear to fight
COVID-19, the securities markets appear to be in relatively good shape, in my
opinion. On September 22, 2020, the S&P 500(R) Index closed a little more than
two percentage points off its pre-COVID-19 high set on February 19, 2020,
according to data from Bloomberg. I find that to be an amazing feat in the
current climate. The combination of low interest rates and low inflation
continues to reward bond investors. Looking ahead, even bond investors are going
to need to assume some additional credit risk to achieve higher returns. Yields
on Treasury notes and bonds are poised at this time to stay low and fairly range
bound. The Fed's pledge to keep its benchmark rate low for up to three years
could lend some stability and reassurance to the debt markets, in my opinion.
We believe the U.S. economy is on its way back. While we have too many workers
still unemployed, I do find it encouraging that U.S. consumers have done such a
terrific job of getting their fiscal houses in order. Consumer spending
typically accounts for roughly 70% of U.S. gross domestic product output each
year. So goes the consumer, so goes the economy. The S&P/Experian Consumer
Credit Default Composite Index stood at 0.67% in August 2020, down from 0.92% in
August 2019 and well below its 1.79% average since its inception in July 2004,
according to S&P Dow Jones Indices. As we previously noted, the near-term
outlook rests on getting one or more FDA-approved vaccines or therapeutics. The
year-end target that has been touted by some, including President Donald J.
Trump, would coincide with the end to the government's moratorium on home
evictions and foreclosures, which is due to expire on December 31, 2020. Keep in
mind that the moratorium has already been extended three times. Things could get
interesting over the next few months. Stay tuned and stay the course.
Thank you for giving First Trust the opportunity to play a role in your
financial future. We value our relationship with you and will report on the
Funds again in six months.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 1
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FUND PERFORMANCE OVERVIEW (UNAUDITED)
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FIRST TRUST 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."
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PERFORMANCE
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AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year Ended Inception (9/27/16) Inception (9/27/16)
8/31/20 to 8/31/20 to 8/31/20
FUND PERFORMANCE
NAV -2.04% 5.64% 24.00%
Market Price -2.09% 5.63% 23.99%
INDEX PERFORMANCE
Prior Blended Benchmark (1) (2) N/A N/A N/A
Russell 3000(R) Index 21.44% 14.84% 72.16%
Blended Benchmark (3) -1.56% 5.32% 22.58%
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(See Notes to Fund Performance Overview on page 8.)
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(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. The indexes do not charge management fees or brokerage
expenses, and no such fees or expenses were deducted from the performance
shown. Indexes are unmanaged and an investor cannot invest directly in an
index. The Blended Index returns are calculated by using the monthly
return of the two indices during each period shown above. At the beginning
of each month the two indices are rebalanced to a 60-40 ratio to account
for divergence from that ratio that occurred during the course of each
month. The monthly returns are then compounded for each period shown
above, giving the performance for the Blended Index for each period shown
above.
Page 2
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST CEF INCOME OPPORTUNITY ETF (FCEF) (CONTINUED)
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% OF TOTAL
LONG-TERM
TOP TEN HOLDINGS INVESTMENTS
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BlackRock Science & Technology Trust 6.47%
Eaton Vance Tax-Advantaged Global Dividend
Income Fund 4.39
Cohen & Steers REIT and Preferred and
Income Fund, Inc. 4.20
Cohen & Steers Infrastructure Fund, Inc. 3.91
PIMCO Dynamic Credit and Mortgage
Income Fund 3.82
Eaton Vance Tax-Advantaged Dividend
Income Fund 3.64
Tekla Healthcare Opportunities Fund 3.45
Ares Dynamic Credit Allocation Fund, Inc. 3.40
Nuveen Credit Strategies Income Fund 3.30
Tekla Healthcare Investors 3.28
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Total 39.86%
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% OF TOTAL
LONG-TERM
WORLD REGIONS INVESTMENTS
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North America 73.99%
Europe 13.55
Asia 12.46
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Total 100.00%
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% OF TOTAL
LONG-TERM
MARKET CAPITALIZATION INVESTMENTS
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Mega 28.06%
Large 36.63
Mid 26.28
Small 7.17
Micro 1.86
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Total 100.00%
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% OF TOTAL
LONG-TERM
CREDIT QUALITY (4) INVESTMENTS
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AAA 7.85%
AA 0.60
A 1.81
BBB 18.36
BB 26.37
B 25.89
CCC-D 10.58
NR 8.54
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Total 100.00%
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(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
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST CEF INCOME OPPORTUNITY ETF (FCEF) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 27, 2016 - AUGUST 31, 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 12,451 14,434 12,117
8/31/20 12,399 17,215 12,258
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH AUGUST 31, 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 August 31, 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.
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NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
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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 - 8/31/20 163 0 1 0
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NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
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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 - 8/31/20 88 0 0 0
Page 4
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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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."
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PERFORMANCE
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AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
1 Year Ended Inception (9/27/16) Inception (9/27/16)
8/31/20 to 8/31/20 to 8/31/20
FUND PERFORMANCE
NAV 1.10% 2.41% 9.78%
Market Price 1.10% 2.38% 9.65%
INDEX PERFORMANCE
Morningstar US National & High Yield Municipal CEF
Index (1) (2) N/A N/A N/A
Bloomberg Barclays Municipal Bond Index 3.24% 3.45% 14.23%
First Trust Municipal Closed-End Fund Total Return
Index (3) 0.82% 3.10% 12.73%
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(See Notes to Fund Performance Overview on page 8.)
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(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. The index does not charge
management fees or brokerage expenses, and no such fees or expenses were
deducted from the performance shown. Indexes are unmanaged and an investor
cannot invest directly in an index.
Page 5
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST MUNICIPAL CEF INCOME OPPORTUNITY ETF (MCEF) (CONTINUED)
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% OF TOTAL
TOP TEN HOLDINGS INVESTMENTS
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Nuveen AMT-Free Quality Municipal Income
Fund 5.14%
Nuveen AMT-Free Municipal Credit Income
Fund 5.02
Nuveen Quality Municipal Income Fund 4.64
Nuveen Municipal Value Fund, Inc. 4.29
BlackRock Municipal 2030 Target Term Trust 4.11
BlackRock Muni Intermediate Duration Fund,
Inc. 4.03
Invesco Quality Municipal Income Trust 3.82
BlackRock MuniYield Quality Fund III, Inc. 3.76
Nuveen Enhanced Municipal Value Fund 3.70
Nuveen Municipal Credit Income Fund 3.35
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Total 41.86%
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% OF TOTAL
TOP STATE EXPOSURE INVESTMENTS
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Illinois 11.71%
California 9.57
Texas 8.41
Florida 7.71
New York 7.28
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Total 44.68%
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% OF TOTAL
CREDIT QUALITY (4) INVESTMENTS
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AAA 8.92%
AA 27.38
A 25.44
BBB 18.46
BB 6.45
B 1.84
CCC-D 0.98
NR 10.53
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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
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST MUNICIPAL CEF INCOME OPPORTUNITY ETF (MCEF) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 27, 2016 - AUGUST 31, 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 11,086 11,402 11,415
8/31/20 10,978 11,425 11,274
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH AUGUST 31, 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 August 31, 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 - 8/31/20 164 0 0 0
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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 - 8/31/20 87 1 0 0
Page 7
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NOTES TO FUND PERFORMANCE OVERVIEW (UNAUDITED)
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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
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PORTFOLIO COMMENTARY
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FIRST TRUST EXCHANGE-TRADED FUND VIII
ANNUAL REPORT
AUGUST 31, 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.
COMMENTARY
FCEF
MARKET RECAP
A strong start to the fiscal year ended August 31, 2020 and a strong finish to
the fiscal year bookended a brief, though volatile, downturn in the U.S.
financial markets as a result of the coronavirus ("COVID-19") pandemic. The
downturn, which began in mid-February 2020, was enough to keep the Fund from
posting positive returns for the fiscal year, despite a strong rally through the
end of the fiscal period.
Discounts to net asset value ("NAV") widened over the fiscal year ended August
31, 2020. Discounts in the equity space on average moved out to -11.62% (versus
-6.42% on August 31, 2019). The same held true in Taxable Fixed Income where the
average discount widened to -5.71% (versus 3.29% on August 31, 2019) during the
same period. The average discount of the underlying funds in which the Fund
invests widened during the same period from -5.78% to -9.24%.
PERFORMANCE ANALYSIS
On a NAV basis through the fiscal year ended August 31, 2020, the Fund provided
a total return of -2.04%. The Fund's Blended Benchmark (the "Blended Benchmark")
consists of 60% of the First Trust Equity Closed-End Fund Total Return Index and
40% of the First Trust Taxable Fixed Income Closed-End Fund Total Return Index
and provided a total return of -1.56% over the same period. The Fund's NAV total
return underperformed the Blended Benchmark's total return by 0.48% for the same
period. The Fund's share price return of -2.09% underperformed the Blended
Benchmark's total return by 0.53% for the same period.
The primary factor resulting in underperformance relative to the Blended
Benchmark was security selection within the Taxable Fixed-Income closed-end fund
market. Despite the volatility, the equity portion of the Fund did provide a
positive return versus the Blended Benchmark as a result of security selection,
according to Bloomberg. The Fund carried a cash position of approximately 3%
during the fiscal year ended August 31, 2020. Having cash on hand did allow the
Fund to take advantage of opportunities resulting from the COVID-19 pandemic
sell-off during the first quarter of 2020.
MARKET AND FUND OUTLOOK
While we believe we are early on in this recovery, we are beginning to see many
equity funds begin to adjust their distributions lower as the embedded gains
many had enjoyed were virtually wiped out when the market turned lower. We
expect that distributions will continue to be adjusted lower over the next few
months which may in turn cause some investors to adjust their expectations.
Page 9
--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
ANNUAL REPORT
AUGUST 31, 2020 (UNAUDITED)
The cost of short-term financing (leverage) looks to be low for the foreseeable
future, though this is not all good news in the taxable fixed income space, in
our opinion. Sectors like senior loans, which benefit from resets when short
rates are moving higher, will likely feel pressure on their distributions. Many
of these funds have been trading at substantial discounts and we would expect
that to continue into the near future.
And finally, recent weakness has emboldened some activist shareholders to step
up the pressure on fund sponsors to solve the widening of discounts. We expect
to see a heavy calendar of corporate actions as funds look to fend off these
shareholders by enacting mergers, tender offers and secondary market buybacks.
More often than not, closed-end funds with activist shareholders are left with a
smaller asset base, higher fixed costs per share and wider bid/ask spreads which
can make trading in and out more difficult.
As we have mentioned before, the sell-off created many opportunities for
investors to add to positions at much cheaper valuations. As in any market,
there will be winners and losers, so as of now we believe it is important to
stay active in that portion of the portfolio that invests in closed-end funds.
MCEF
MARKET RECAP
Through the fiscal year ended August 31, 2020, municipal closed-end funds have
returned 0.82% as measured by the Fund's closed-end fund benchmark, the First
Trust Municipal Closed-End Total Return Fund Index. Performance during the
fiscal year started out positive, was derailed by the impact of the COVID-19
pandemic during the first quarter of 2020, and then was back on track to finish
strong. Discounts, though wider at the end of the year, have tightened
dramatically since the first quarter sell-off brought on by COVID-19 and the
shuttering of the economy. The average discount in the national municipal space
widened from -3.83% to -5.25%, according to Morningstar.
Some drivers that will help the municipal space moving forward are lower cost of
borrowing (leverage), the view by retail investors that municipals offer a
safe-haven, and fund distribution increases.
PERFORMANCE ANALYSIS
On a NAV and share price basis through the fiscal year ended August 31, 2020,
the Fund provided a total return of 1.10%. The Fund's secondary benchmark, the
First Trust Municipal Closed-End Fund Total Return Index provided a total return
of 0.82%% over the same period. The Fund's NAV and share price total return beat
the secondary benchmark's total return by 0.28%. The outperformance was
primarily due to securities selection of national municipal closed-end funds.
Throughout the fiscal year, the Fund continued to roll out of its defensive
positioning as short-term rates fell, which in turn pushed borrowing costs
lower. This helped a number of funds begin to increase their distribution rates.
We did pause this push to lengthen duration when the market reacted to the
shuttering of the economy. Following the funds' push lower, we again began to
bid for shares.
Increased earnings in the Fund allowed for three increases in the monthly
distribution rate during the Fund's fiscal year. Overall, this amounted to a
15.8% increase in distributions for the fiscal year.
MARKET AND FUND OUTLOOK
Closed-end funds investing in municipal bonds benefited from the underlying
being seen as a "safe haven" investment in times of turmoil and market unease.
This helped to insulate funds from experiencing the downside seen in other fixed
income securities. Moving forward, the municipal space will be faced with
challenges as COVID-19 drags on. State and local governments, because of wide
reaching "shelter in place" orders, have experienced never before seen drops in
tax revenues. While the consumer began to emerge from hibernation in the second
quarter of 2020, spikes in cases of COVID-19 and expectation of a possible
second wave may further impact tax revenue generation, which in turn could
impact state and local governments credit ratings. We move forward cautiously as
the world and our country continue to open up.
We believe that active management in the CEF space matters.
Page 10
FIRST TRUST EXCHANGE-TRADED FUND VIII
UNDERSTANDING YOUR FUND EXPENSES
AUGUST 31, 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 (12b-1) fees, if
any, and other Fund expenses. This Example is intended to help you understand
your ongoing costs of investing in the Funds and to compare these costs with the
ongoing costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended August 31, 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 six-month
period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on 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
MARCH 1, 2020 AUGUST 31, 2020 PERIOD (a) PERIOD (a) (b)
-------------------------------------------------------------------------------------------------------------------
FIRST TRUST CEF INCOME OPPORTUNITY ETF (FCEF)
Actual $1,000.00 $ 996.00 0.85% $4.26
Hypothetical (5% return before expenses) $1,000.00 $1,020.86 0.85% $4.32
FIRST TRUST MUNICIPAL CEF INCOME OPPORTUNITY ETF (MCEF)
Actual $1,000.00 $ 990.20 0.75% $3.75
Hypothetical (5% return before expenses) $1,000.00 $1,021.37 0.75% $3.81
(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 (March 1,
2020 through August 31, 2020), multiplied by 184/366 (to reflect the
six-month period).
Page 11
FIRST TRUST CEF INCOME OPPORTUNITY ETF (FCEF)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
CLOSED-END FUNDS -- 97.3%
CAPITAL MARKETS -- 97.3%
45,279 Advent Convertible and Income
Fund $ 657,451
20,869 AllianzGI Artificial Intelligence &
Technology Opportunities Fund 459,535
28,770 AllianzGI Convertible & Income
2024 Target 263,821
23,479 Apollo Tactical Income Fund, Inc. 296,070
87,530 Ares Dynamic Credit Allocation
Fund, Inc. 1,101,127
26,011 Barings Global Short Duration
High Yield Fund 347,507
25,883 BlackRock Corporate High Yield
Fund, Inc. 287,560
22,226 BlackRock Health Sciences
Trust II 540,759
24,398 BlackRock Income Trust, Inc. 151,024
29,195 BlackRock Multi-Sector Income
Trust 468,580
47,136 BlackRock Science & Technology
Trust 2,098,495
31,275 BlackRock Science & Technology
Trust II 838,170
54,702 Blackstone / GSO Strategic
Credit Fund 654,783
11,669 Central Securities Corp. 345,169
54,486 Cohen & Steers Infrastructure
Fund, Inc. 1,266,255
67,854 Cohen & Steers REIT and
Preferred and Income Fund, Inc. 1,363,187
56,306 DoubleLine Income Solutions
Fund 903,711
12,346 Eaton Vance Enhanced Equity
Income Fund 191,486
48,525 Eaton Vance Short Duration
Diversified Income Fund 556,097
57,693 Eaton Vance Tax-Advantaged
Dividend Income Fund 1,178,668
89,999 Eaton Vance Tax-Advantaged
Global Dividend Income Fund 1,421,984
33,004 Eaton Vance Tax-Advantaged
Global Dividend Opportunities
Fund 728,068
51,703 Gabelli Dividend & Income
Trust (The) 993,215
20,257 General American Investors Co.,
Inc. 718,313
11,281 John Hancock Financial
Opportunities Fund 259,689
49,425 John Hancock Tax-Advantaged
Dividend Income Fund 966,753
14,672 Lazard Global Total Return and
Income Fund, Inc. 231,377
38,979 Macquarie Global Infrastructure
Total Return Fund, Inc. 712,146
17,191 Morgan Stanley China A Share
Fund, Inc. 379,062
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
CAPITAL MARKETS (CONTINUED)
175,446 Nuveen Credit Strategies Income
Fund $ 1,070,221
82,144 Nuveen Preferred & Income
Opportunities Fund 722,046
32,278 Nuveen Real Asset Income and
Growth Fund 394,760
45,149 Nuveen Tax-Advantaged
Dividend Growth Fund 614,478
77,125 PGIM Global High Yield Fund,
Inc. 1,037,331
65,505 PIMCO Dynamic Credit and
Mortgage Income Fund 1,240,010
37,933 Principal Real Estate Income
Fund 439,643
18,865 Royce Micro-Cap Trust, Inc. 153,372
45,357 Royce Value Trust, Inc. 614,587
20,062 Source Capital, Inc. 744,100
50,028 Tekla Healthcare Investors 1,064,596
60,237 Tekla Healthcare Opportunities
Fund 1,117,396
22,334 Tekla Life Sciences Investors 398,215
25,374 Templeton Emerging Markets
Fund 390,252
32,346 Tri-Continental Corp. 876,900
54,300 Western Asset Emerging Markets
Debt Fund, Inc. 704,814
54,456 Western Asset High Income
Opportunity Fund, Inc. 274,458
15,760 Western Asset Inflation-Linked
Opportunities & Income Fund 182,186
-------------
TOTAL CLOSED-END FUNDS
-- 97.3% 32,419,427
(Cost $34,955,302) -------------
MONEY MARKET FUNDS -- 2.5%
820,415 Morgan Stanley Institutional Liquidity
Funds - Treasury Portfolio -
Institutional Class -
0.01% (a) 820,415
(Cost $820,415) -------------
TOTAL INVESTMENTS -- 99.8% 33,239,842
(Cost $35,775,717) (b)
NET OTHER ASSETS AND
LIABILITIES -- 0.2% 61,654
-------------
NET ASSETS -- 100.0% $ 33,301,496
=============
(a) Rate shown reflects yield as of August 31, 2020.
(b) Aggregate cost for federal income tax purposes is $35,802,298. As of
August 31, 2020, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$1,317,293 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$3,879,749. The net unrealized depreciation was $2,562,456.
Page 12 See Notes to Financial Statements
FIRST TRUST CEF INCOME OPPORTUNITY ETF (FCEF)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of August 31,
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* $ 32,419,427 $ -- $ --
Money Market Funds 820,415 -- --
---------------------------------------------
Total Investments $ 33,239,842 $ -- $ --
=============================================
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 13
FIRST TRUST MUNICIPAL CEF INCOME OPPORTUNITY ETF (MCEF)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
CLOSED-END FUNDS -- 95.1%
CAPITAL MARKETS -- 95.1%
11,598 BlackRock Florida Municipal
2020 Term Trust $ 170,955
16,875 BlackRock Investment Quality
Municipal Trust, Inc. 268,312
15,435 BlackRock Long-Term Municipal
Advantage Trust 188,153
24,125 BlackRock Muni Intermediate
Duration Fund, Inc. 341,610
14,048 BlackRock Municipal 2030 Target
Term Trust 347,828
8,944 BlackRock Municipal Income
Investment Quality Trust 128,704
1,643 BlackRock Municipal Income
Investment Trust 21,392
15,671 BlackRock Municipal Income
Trust 219,081
9,611 BlackRock Municipal Income
Trust II 142,531
14,234 BlackRock MuniHoldings
Investment Quality Fund 191,447
13,710 BlackRock MuniHoldings Quality
Fund, Inc. 174,254
11,706 BlackRock MuniYield Quality
Fund, Inc. 186,360
18,919 BlackRock MuniYield Quality
Fund II, Inc. 248,217
23,697 BlackRock MuniYield Quality
Fund III, Inc. 318,488
10,274 DTF Tax-Free Income, Inc. 147,535
9,874 Eaton Vance Municipal Bond
Fund 128,708
12,753 Eaton Vance Municipal Income
2028 Term Trust 273,738
15,447 Eaton Vance Municipal Income
Trust 194,169
11,841 Invesco Municipal Trust 146,355
6,647 Invesco Pennsylvania Value
Municipal Income Trust 83,619
26,197 Invesco Quality Municipal
Income Trust 323,795
12,700 Invesco Trust for Investment
Grade Municipals 161,163
6,014 MainStay MacKay DefinedTerm
Municipal Opportunities Fund 128,098
7,130 Neuberger Berman Municipal
Fund, Inc. 107,663
27,166 Nuveen AMT-Free Municipal
Credit Income Fund 424,605
30,719 Nuveen AMT-Free Quality
Municipal Income Fund 434,981
20,631 Nuveen Enhanced Municipal
Value Fund 313,591
6,344 Nuveen Intermediate Duration
Municipal Term Fund 84,883
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
CAPITAL MARKETS (CONTINUED)
6,607 Nuveen Intermediate Duration
Quality Municipal Term Fund $ 95,669
19,115 Nuveen Municipal Credit Income
Fund 284,049
17,536 Nuveen Municipal Credit
Opportunities Fund 227,442
19,911 Nuveen Municipal High Income
Opportunity Fund 268,599
34,011 Nuveen Municipal Value Fund,
Inc. 362,897
27,248 Nuveen Quality Municipal
Income Fund 392,916
4,288 Nuveen Select Tax-Free Income
Portfolio 71,867
21,302 Western Asset Intermediate Muni
Fund, Inc. 193,209
3,998 Western Asset Municipal Defined
Opportunity Trust, Inc. 80,999
8,408 Western Asset Municipal High
Income Fund, Inc. 62,219
19,423 Western Asset Municipal Partners
Fund, Inc. 280,274
-------------
TOTAL CLOSED-END
FUNDS -- 95.1% 8,220,375
(Cost $8,446,694) -------------
EXCHANGE-TRADED FUNDS -- 2.8%
CAPITAL MARKETS -- 2.8%
4,092 VanEck Vectors High-Yield
Muni ETF 246,257
(Cost $264,851) -------------
TOTAL INVESTMENTS -- 97.9% 8,466,632
(Cost $8,711,545) (a)
NET OTHER ASSETS AND
LIABILITIES -- 2.1% 179,725
-------------
NET ASSETS -- 100.0% $ 8,646,357
=============
(a) Aggregate cost for federal income tax purposes is $8,711,181. As of August
31, 2020, the aggregate gross unrealized appreciation for all investments
in which there was an excess of value over tax cost was $53,578 and the
aggregate gross unrealized depreciation for all investments in which there
was an excess of tax cost over value was $298,127. The net unrealized
depreciation was $244,549.
Page 14 See Notes to Financial Statements
FIRST TRUST MUNICIPAL CEF INCOME OPPORTUNITY ETF (MCEF)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of August 31,
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* $ 8,220,375 $ -- $ --
Exchange-Traded Funds* 246,257 -- --
---------------------------------------------
Total Investments $ 8,466,632 $ -- $ --
=============================================
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 15
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF ASSETS AND LIABILITIES
AUGUST 31, 2020
FIRST TRUST
FIRST TRUST MUNICIPAL CEF
CEF INCOME INCOME
OPPORTUNITY ETF OPPORTUNITY ETF
(FCEF) (MCEF)
--------------- ---------------
ASSETS:
Investments, at value.................................................. $ 33,239,842 $ 8,466,632
Cash................................................................... -- 161,137
Dividends receivable................................................... 85,347 24,149
--------------- ---------------
Total Assets........................................................ 33,325,189 8,651,918
--------------- ---------------
LIABILITIES:
Investment advisory fees payable....................................... 23,693 5,561
--------------- ---------------
Total Liabilities................................................... 23,693 5,561
--------------- ---------------
NET ASSETS............................................................. $ 33,301,496 $ 8,646,357
=============== ===============
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $ 36,244,062 $ 8,932,955
Par value.............................................................. 16,550 4,500
Accumulated distributable earnings (loss).............................. (2,959,116) (291,098)
--------------- ---------------
NET ASSETS............................................................. $ 33,301,496 $ 8,646,357
=============== ===============
NET ASSET VALUE, per share............................................. $ 20.12 $ 19.21
=============== ===============
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share).............................. 1,655,000 450,002
=============== ===============
Investments, at cost................................................... $ 35,775,717 $ 8,711,545
=============== ===============
Page 16 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 2020
FIRST TRUST
FIRST TRUST MUNICIPAL CEF
CEF INCOME INCOME
OPPORTUNITY ETF OPPORTUNITY ETF
(FCEF) (MCEF)
--------------- ---------------
INVESTMENT INCOME:
Dividends.............................................................. $ 1,746,838 $ 390,542
--------------- ---------------
Total investment income............................................. 1,746,838 390,542
--------------- ---------------
EXPENSES:
Investment advisory fees............................................... 305,585 69,115
--------------- ---------------
Total expenses...................................................... 305,585 69,115
--------------- ---------------
NET INVESTMENT INCOME (LOSS)........................................... 1,441,253 321,427
--------------- ---------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments......................................................... (634,482) 1,747
In-kind redemptions................................................. 1,788,345 8,989
Distribution of capital gains from investment companies............. 220,569 1,086
--------------- ---------------
Net realized gain (loss)............................................... 1,374,432 11,822
Net change in unrealized appreciation (depreciation) on investments.... (2,466,746) (559,211)
--------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ (1,092,314) (547,389)
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ 348,939 $ (225,962)
=============== ===============
See Notes to Financial Statements Page 17
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)
-------------------------------- --------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
8/31/2020 8/31/2019 8/31/2020 8/31/2019
--------------- --------------- --------------- ---------------
OPERATIONS:
Net investment income (loss)............................. $ 1,441,253 $ 1,498,152 $ 321,427 $ 350,546
Net realized gain (loss)................................. 1,374,432 1,123,865 11,822 (229,273)
Net change in unrealized appreciation (depreciation)..... (2,466,746) (1,972,125) (559,211) 883,685
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from operations....................................... 348,939 649,892 (225,962) 1,004,958
--------------- --------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations.................................... (2,002,675) (2,101,900) (289,376) (340,376)
--------------- --------------- --------------- ---------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................ 14,808,321 7,834,038 3,994,750 1,919,382
Cost of shares redeemed.................................. (16,937,688) (15,050,996) (5,618,446) (5,252,800)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from shareholder transactions......................... (2,129,367) (7,216,958) (1,623,696) (3,333,418)
--------------- --------------- --------------- ---------------
Total increase (decrease) in net assets.................. (3,783,103) (8,668,966) (2,139,034) (2,668,836)
NET ASSETS:
Beginning of period...................................... 37,084,599 45,753,565 10,785,391 13,454,227
--------------- --------------- --------------- ---------------
End of period............................................ $ 33,301,496 $ 37,084,599 $ 8,646,357 $ 10,785,391
=============== =============== =============== ===============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period.................. 1,705,000 2,055,000 550,002 750,002
Shares sold.............................................. 750,000 400,000 200,000 100,000
Shares redeemed.......................................... (800,000) (750,000) (300,000) (300,000)
--------------- --------------- --------------- ---------------
Shares outstanding, end of period........................ 1,655,000 1,705,000 450,002 550,002
=============== =============== =============== ===============
Page 18 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST CEF INCOME OPPORTUNITY ETF (FCEF)
YEAR ENDED AUGUST 31, PERIOD
---------------------------------- ENDED
2020 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).................................... 0.82 0.82 0.78 1.02
Net realized and unrealized gain (loss)......................... (1.29) (0.18) 0.93 1.61
-------- -------- -------- --------
Total from investment operations................................ (0.47) 0.64 1.71 2.63
-------- -------- -------- --------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income........................................... (1.10) (0.96) (1.01) (0.79)
Net realized gain............................................... (0.06) (0.19) (0.10) (0.12)
Return of capital............................................... -- -- -- (0.11)
-------- -------- -------- --------
Total distributions............................................. (1.16) (1.15) (1.11) (1.02)
-------- -------- -------- --------
Net asset value, end of period.................................. $ 20.12 $ 21.75 $ 22.26 $ 21.66
======== ======== ======== ========
TOTAL RETURN (b)................................................ (2.04)% 3.18% 8.09% 13.49%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)............................ $ 33,301 $ 37,085 $ 45,754 $ 31,517
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets (c)............... 0.85% 0.85% 0.85% 0.85% (d)
Ratio of net investment income (loss) to average net assets..... 4.01% 3.92% 3.14% 5.99% (d)
Portfolio turnover rate (e)..................................... 6% 13% 15% 23%
FIRST TRUST MUNICIPAL CEF INCOME OPPORTUNITY ETF (MCEF)
YEAR ENDED AUGUST 31, PERIOD
---------------------------------- ENDED
2020 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).................................... 0.68 0.62 0.64 0.61
Net realized and unrealized gain (loss)......................... (0.48) 1.65 (1.24) (0.80)
-------- -------- -------- --------
Total from investment operations................................ 0.20 2.27 (0.60) (0.19)
-------- -------- -------- --------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income........................................... (0.60) (0.60) (0.64) (0.61)
Return of capital............................................... -- -- (0.02) (0.05)
-------- -------- -------- --------
Total distributions............................................. (0.60) (0.60) (0.66) (0.66)
-------- -------- -------- --------
Net asset value, end of period.................................. $ 19.21 $ 19.61 $ 17.94 $ 19.20
======== ======== ======== ========
TOTAL RETURN (b)................................................ 1.10% 12.96% (3.09)% (0.81)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)............................ $ 8,646 $ 10,785 $ 13,454 $ 13,441
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets (c)............... 0.75% 0.75% 0.75% 0.75% (d)
Ratio of net investment income (loss) to average net assets..... 3.49% 3.49% 3.54% 3.59% (d)
Portfolio turnover rate (e)..................................... 7% 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.
See Notes to Financial Statements Page 19
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NOTES TO FINANCIAL STATEMENTS
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
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 twenty-five 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"). The Funds 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 20
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
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 August 31, 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 21
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
The tax character of distributions paid by each Fund during the fiscal year
ended August 31, 2020 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 $ 1,906,929 $ 95,746 $ -- $ --
First Trust Municipal CEF Income Opportunity ETF 2,603 -- 286,773 --
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, 2020, 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 $ -- $ (396,660) $ (2,562,456)
First Trust Municipal CEF Income Opportunity ETF 36,827 (83,376) (244,549)
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,
2019 and 2020 remain open to federal and state audit. As of August 31, 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, 2020, 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 83,376
During the taxable year ended August 31, 2020, the following Fund utilized
non-expiring capital loss carryforwards in the following amount:
Page 22
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
Capital Loss
Carryforward
Utilized
-------------
First Trust Municipal CEF Income Opportunity ETF $ 2,917
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, 2020, the following
Fund 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 CEF Income Opportunity ETF $ -- $ 396,660
In order to present paid-in capital and accumulated distributable earnings
(loss) (which consists of accumulated net investment income (loss), accumulated
net realized gain (loss) on investments and net unrealized appreciation
(depreciation) on investments) on the Statements of Assets and Liabilities that
more closely represent their tax character, certain adjustments have been made
to paid-in capital, accumulated net investment income (loss) and accumulated net
realized gain (loss) on investments. These adjustments are primarily due to the
difference between book and tax treatments of income and gains on various
investment securities held by the Funds and in-kind transactions. The results of
operations and net assets were not affected by these adjustments. For the fiscal
year ended August 31, 2020, the adjustments for each Fund were as follows:
Accumulated
Accumulated Net Realized
Net Investment Gain (Loss) Paid-in
Income (Loss) on Investments Capital
-------------- -------------- --------------
First Trust CEF Income Opportunity ETF $ 463,918 $ (1,699,818) $ 1,235,900
First Trust Municipal CEF Income Opportunity ETF (4,784) (5,532) 10,316
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 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.
Page 23
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
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 fiscal year ended August 31, 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 $ 3,037,662 $ 2,107,702
First Trust Municipal CEF Income Opportunity ETF 775,585 619,456
For the fiscal year ended August 31, 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 $ 14,303,631 $ 16,432,475
First Trust Municipal CEF Income Opportunity ETF 3,933,682 5,538,019
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 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.
Page 24
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
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, 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. OTHER MATTERS
By operation of law, each Fund now operates as a diversified open-end management
investment company as defined in Section 5(b) of the 1940 Act.
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 were the following subsequent events:
On September 21, 2020, FT Cboe Vest U.S. Equity Buffer ETF - September and FT
Cboe Vest U.S. Equity Deep Buffer ETF - September, additional series of the
Trust, began trading under the symbols "FSEP" and "DSEP", respectively, on Cboe
BZX Exchange, Inc.
On October 19, 2020, FT Cboe Vest U.S. Equity Buffer ETF - October and FT Cboe
Vest U.S. Equity Deep Buffer ETF - October, additional series of the Trust,
began trading under the symbols "FOCT" and "DOCT", respectively, on Cboe BZX
Exchange, Inc.
Page 25
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED FUND
VIII:
OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS
We have audited the accompanying statements of assets and liabilities of First
Trust CEF Income Opportunity ETF and First Trust Municipal CEF Income
Opportunity ETF (the "Funds"), each a series of the First Trust Exchange-Traded
Fund VIII, including the portfolios of investments, as of August 31, 2020, the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, the
financial highlights for the years ended August 31, 2020, 2019 and 2018, and the
period from September 27, 2016 (commencement of operations) through August 31,
2017, and the related notes. In our opinion, the financial statements and
financial highlights present fairly, in all material respects, the financial
position of the Funds as of August 31, 2020, and the results of their operations
for the year then ended, the changes in their net assets for each of the two
years in the period then ended, and the financial highlights for the years ended
August 31, 2020, 2019 and 2018, and for the period from September 27, 2016
(commencement of operations) through August 31, 2017, in conformity with
accounting principles generally accepted in the United States of America.
BASIS FOR OPINION
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on the Funds'
financial statements and financial highlights based on our audits. We are a
public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to
the Funds in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement, whether due to error or fraud. The Funds are not
required to have, nor were we engaged to perform, an audit of their internal
control over financial reporting. As part of our audits we are required to
obtain an understanding of internal control over financial reporting but not for
the purpose of expressing an opinion on the effectiveness of the Funds' internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material
misstatement of the financial statements and financial highlights, whether due
to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements and financial highlights. Our audits
also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of August 31, 2020, by correspondence with
the custodian and brokers. We believe that our audits provide a reasonable basis
for our opinion.
/s/ Deloitte & Touche LLP
Chicago, Illinois
October 22, 2020
We have served as the auditor of one or more First Trust investment companies
since 2001.
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ADDITIONAL INFORMATION
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 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.
FEDERAL TAX INFORMATION
For the taxable year ended August 31, 2020, the following percentages of income
dividend paid by the Funds qualify for the dividends received deduction
available to corporations:
Dividends Received Deduction
----------------------------
First Trust CEF Income Opportunity ETF *
First Trust Municipal CEF Income Opportunity ETF *
* The actual percentage of income dividends that qualify for the dividend
received deduction will be available to corporate shareholders shortly after the
calendar year end.
For the taxable year ended August 31, 2020, the following percentages of income
dividend paid by the Funds are hereby designated as qualified dividend income:
Qualified Dividend Income
----------------------------
First Trust CEF Income Opportunity ETF **
First Trust Municipal CEF Income Opportunity ETF **
** The actual qualified dividend income distributions will be reported to
shareholders on Form 1099-DIV which will be sent to shareholders shortly after
the calendar year end.
For the taxable year ended August 31, 2020, the following distribution
information is being provided as required by the Internal Revenue Code or to
meet a specific state's requirement. The First Trust Municipal CEF Income
Opportunity ETF designates the following amounts or, if subsequently determined
to be different, the maximum amount allowable for its fiscal year ended August
31, 2020:
Federal and State Income Tax Percentages
------------------------------------- ---------------
Tax-Exempt Interest Dividends 99.10%
Alternative Minimum Tax (AMT) 13.35%
For the fiscal year ended August 31, 2020, the amount of long-term capital gain
distributions designated by First Trust CEF Income Opportunity ETF was $95,746,
which is taxable at the applicable capital gain tax rates for federal income tax
purposes.
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
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.
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
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
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 COVID-19 pandemic may last
for an extended period of time and will continue to impact the economy for the
foreseeable future.
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
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
ADVISORY AGREEMENT
BOARD CONSIDERATIONS REGARDING CONTINUATION OF INVESTMENT MANAGEMENT AGREEMENT
The Board of Trustees of First Trust Exchange-Traded Fund VIII (the "Trust"),
including the Independent Trustees, unanimously approved the continuation of the
Investment Management Agreement (the "Agreement") with First Trust Advisors L.P.
(the "Advisor") on behalf of the following two series of the Trust (each a
"Fund" and collectively, the "Funds"):
First Trust CEF Income Opportunity ETF (FCEF)
First Trust Municipal CEF Income Opportunity ETF (MCEF)
The Board approved the continuation of the Agreement for each Fund for a
one-year period ending June 30, 2021 at a meeting held on June 8, 2020. The
Board determined for each Fund that the continuation of the Agreement is in the
best interests of the Fund in light of the nature, extent and quality of the
services provided and such other matters as the Board considered to be relevant
in the exercise of its 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. At meetings held on May 11, 2020 and June 8, 2020, the
Board, including the Independent Trustees, reviewed materials provided by the
Advisor responding to requests for information from counsel to the Independent
Trustees, submitted on behalf of the Independent Trustees, that, among other
things, outlined: the services provided by the Advisor to each Fund (including
the relevant personnel responsible for these services and their experience); the
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 expense ratio of each Fund as compared to expense ratios of
the funds in the Fund's Expense Group and Expense Universe; performance
information for each Fund, including comparisons of each Fund's performance to
that of one or more relevant benchmark indexes and to that of a performance
group of funds and a broad performance universe of funds (the "Performance
Universe"), each assembled by Broadridge; the nature of expenses incurred in
providing services to each Fund and the potential for the Advisor to realize
economies of scale, if any; profitability and other financial data for 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 Board reviewed initial materials with the Advisor at the meeting held on May
11, 2020, prior to which the Independent Trustees and their counsel met
separately to discuss the information provided by the Advisor. Following the May
meeting, counsel to the Independent Trustees, on behalf of the Independent
Trustees, requested certain clarifications and supplements to the materials
provided, and the information provided in response to those requests was
considered at an executive session of the Independent Trustees and their counsel
held prior to the June 8, 2020 meeting, as well as at the meeting held that day.
The Board considered supplemental information provided by the Advisor on the
operations of the Advisor and the performance of the Funds since the onset of
the COVID-19 pandemic. The Board applied its business judgment to determine
whether the arrangement between the Trust and the Advisor continues to be a
reasonable business arrangement from each Fund's perspective. The Board
determined that, given the totality of the information provided with respect to
the Agreement, the Board had received sufficient information to renew the
Agreement. The Board considered that shareholders chose to invest or remain
invested in a Fund knowing that the Advisor manages the Fund and knowing the
Fund's unitary fee.
In reviewing the Agreement for each Fund, the Board considered the nature,
extent and quality of the services provided by the Advisor under the Agreement.
The Board considered that the Advisor is responsible for the overall management
and administration of the Trust and each Fund and reviewed all of the services
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 is
an actively-managed ETF and noted that the Advisor's CEF Management Team is
responsible for the day-to-day management of the Funds' investments. The Board
considered the background and experience of the members of the CEF Management
Team, including the Board's prior meetings with members of the Team. The Board
considered the Advisor's statement that it applies the same oversight model
internally with its CEF Management Team as it uses for overseeing external
sub-advisors, including portfolio risk monitoring and performance review. In
reviewing the services provided, the Board noted the compliance program that had
been developed by the Advisor and considered that it includes a robust program
for monitoring the Advisor's and each Fund's compliance with the 1940 Act, as
well as each Fund's compliance with its investment objective, policies and
restrictions. The Board also considered a report from the Advisor with respect
to its risk management functions related to the operation of the Funds. Finally,
as part of the Board's consideration of the Advisor's services, the Advisor, in
its written materials and at the May 11, 2020 meeting, described to the Board
the scope of its ongoing investment in additional infrastructure and personnel
to maintain and improve the quality of services provided to the Funds and the
other funds in the First Trust Fund Complex. In light of the information
presented and the considerations made, the Board concluded that the nature,
extent and quality of the services provided to the Trust and each Fund by the
Advisor under the Agreement have been and are expected to remain satisfactory
and that the Advisor has managed each Fund consistent with its investment
objective, policies and restrictions.
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
The Board considered the unitary fee rate payable by each Fund under the
Agreement for the services provided. The Board considered that as part of the
unitary fee the Advisor is 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, acquired fund fees and expenses, brokerage
commissions and other expenses connected with the execution of portfolio
transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if
any, and extraordinary expenses, if any. The Board noted that, because each Fund
invests in underlying funds, the Fund incurs acquired fund fees and expenses,
which are not payable out of the unitary fee, and that such acquired fund fees
and expenses will change over time as assets are reallocated among the
underlying funds. The Board considered that, to the extent any of the underlying
funds are other funds in the First Trust Fund Complex, the Advisor has agreed to
offset the unitary fee paid by each Fund related to the Fund's assets invested
in the affiliated underlying funds. The Board received and reviewed information
showing the advisory 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 ETFs) and non-fund clients, as applicable. Because each
Fund pays a unitary fee, the Board determined that expense ratios were the most
relevant comparative data point. Based on the information provided, the Board
noted that the unitary fee rate for FCEF was below the median total (net)
expense ratio (excluding acquired fund fees and expenses) of the peer funds in
its Expense Group and that the unitary fee rate for MCEF was above the median
total (net) expense ratio (excluding acquired fund fees and expenses) of the
peer funds in its Expense Group. The Board also noted that each Fund's total
(net) expense ratio (including acquired fund fees and expenses) was above the
median total (net) expense ratio (including acquired fund fees and expenses) of
the peer funds in the respective Expense Group. With respect to the Expense
Groups, the Board, at the May 11, 2020 meeting, discussed with Broadridge its
methodology for assembling peer groups and discussed with the Advisor
limitations in creating peer groups for actively-managed ETFs, including that
the Expense Group for FCEF contained both actively-managed ETFs and open-end
mutual funds and there were no other actively-managed ETFs in the Expense Group
for MCEF, and different business models that may affect the pricing of services
among ETF sponsors. The Board took these limitations and differences into
account in considering the peer data. With respect to fees charged to other
non-ETF clients, the Board considered differences between the Funds and other
non-ETF clients that limited their comparability. In considering the unitary fee
rates overall, the Board also considered the Advisor's statement that it seeks
to meet investor needs through innovative and value-added investment solutions
and the Advisor's demonstrated long-term commitment to each Fund and the other
funds in the First Trust Fund Complex.
The Board considered performance information for each Fund. The Board noted the
process it has established for monitoring each Fund's performance and portfolio
risk on an ongoing basis, which includes quarterly performance reporting from
the Advisor for the Funds. The Board determined that this process continues to
be effective for reviewing each Fund's performance. The Board received and
reviewed information comparing each Fund's performance for periods ended
December 31, 2019 to the performance of the funds in its Performance Universe
and, for FCEF, to that of a blended benchmark and, for MCEF, to that of a
benchmark index. Based on the information provided, the Board noted that FCEF
outperformed its Performance Universe median for the one- and three-year periods
ended December 31, 2019 but underperformed its blended benchmark for the one-
and three-year periods ended December 31, 2019. The Board also noted that MCEF
outperformed its Performance Universe median for the one-year period ended
December 31, 2019 but underperformed its Performance Universe median for
three-year period ended December 31, 2019 and underperformed its benchmark index
for the one- and three-year periods ended December 31, 2019.
On the basis of all the information provided on the unitary fee and performance
of each Fund and the ongoing oversight by the Board, the Board concluded that
the unitary fee for each Fund continues to be reasonable and appropriate in
light of the nature, extent and quality of the services provided by the Advisor
to each Fund under the Agreement.
The Board considered information and discussed with the Advisor whether there
were any economies of scale in connection with providing advisory services to
the Funds and noted the Advisor's statement that it believes its expenses will
likely increase over the next twelve months as the Advisor continues to hire
personnel and build infrastructure, including technology, to improve the
services to the Funds. 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 considered the revenues and allocated costs (including the
allocation methodology) of the Advisor in serving as investment advisor to each
Fund for the twelve months ended December 31, 2019 and the estimated
profitability level for each Fund calculated by the Advisor based on such data,
as well as complex-wide and product-line profitability data, for the same
period. The Board noted the inherent limitations in the profitability analysis
and concluded that, based on the information provided, the Advisor's
profitability level for each Fund was not unreasonable. 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, and noted that the Advisor does 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 continue to be fair and reasonable and that the continuation of
the Agreement is in the best interests of each Fund. No single factor was
determinative in the Board's analysis.
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
LIQUIDITY RISK MANAGEMENT PROGRAM
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as
amended (the "1940 Act"), the Funds and each other fund in the First Trust Fund
Complex, other than the closed-end funds, have adopted and implemented a
liquidity risk management program (the "Program") reasonably designed to assess
and manage the funds' liquidity risk, i.e., the risk that a fund could not meet
requests to redeem shares issued by the fund without significant dilution of
remaining investors' interests in the fund. The Board of Trustees of the First
Trust Funds has appointed First Trust Advisors, L.P. (the "Advisor") as the
person designated to administer the Program, and in this capacity the Advisor
performs its duties primarily through the activities and efforts of the First
Trust Liquidity Committee.
Pursuant to the Program, the Liquidity Committee classifies the liquidity of
each fund's portfolio investments into one of the four liquidity categories
specified by Rule 22e-4: highly liquid investments, moderately liquid
investments, less liquid investments and illiquid investments. The Liquidity
Committee determines certain of the inputs for this classification process,
including reasonably anticipated trade sizes and significant investor dilution
thresholds. The Liquidity Committee also determines and periodically reviews a
highly liquid investment minimum for certain funds, monitors the funds' holdings
of assets classified as illiquid investments to seek to ensure they do not
exceed 15% of a fund's net assets and establishes policies and procedures
regarding redemptions in kind.
At the May 11, 2020 meeting of the Board of Trustees, as required by Rule 22e-4
and the Program, the Advisor provided the Board with a written report prepared
by the Advisor that addressed the operation of the Program during the period
from June 1, 2019 (the initial compliance date for certain requirements of Rule
22e-4) through the Liquidity Committee's annual meeting held on March 20, 2020
and assessed the Program's adequacy and effectiveness of implementation during
this period, including the operation of the highly liquid investment minimum for
each fund that is required under the Program to have one, and any material
changes to the Program. Note that because the Funds primarily hold assets that
are highly liquid investments, the Funds have not adopted a highly liquid
investment minimum.
As stated in the written report, during the review period, no fund breached the
15% limitation on illiquid investments, no fund with a highly liquid investment
minimum breached that minimum and no fund filed a Form N-LIQUID. The Advisor
concluded that each fund's investment strategy is appropriate for an open-end
fund; that the Program operated effectively in all material respects during the
review period; and that the Program is reasonably designed to assess and manage
the liquidity risk of each fund and to maintain compliance with Rule 22e-4.
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BOARD OF TRUSTEES AND OFFICERS
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
The following tables identify the Trustees and Officers of the Trust. Unless
otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite
400, Wheaton, IL 60187.
The Trust's statement of additional information includes additional information
about the Trustees and is available, without charge, upon request, by calling
(800) 988-5891.
NUMBER OF OTHER
PORTFOLIOS IN TRUSTEESHIPS OR
TERM OF OFFICE THE FIRST TRUST DIRECTORSHIPS
NAME, AND YEAR FIRST FUND COMPLEX HELD BY TRUSTEE
YEAR OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST
POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
------------------------------------------------------------------------------------------------------------------------------------
Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 185 None
(1951) Limited Partner, Gundersen Real Estate
o Since Inception Limited Partnership (June 1992 to
December 2016); Member, Sportsmed LLC
(April 2007 to November 2015)
Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 185 Director of ADM
(1957) (Futures Commission Merchant) Investor Services,
o Since Inception Inc., ADM
Investor Services
International,
Futures Industry
Association, and
National Futures
Association
Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 185 Director of Trust
(1956) and Management Consulting) Company of
o Since Inception Illinois
Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 185 None
(1954) Managing Director and Chief Operating
o Since Inception Officer (January 2015 to August 2018),
Pelita Harapan Educational Foundation
(Educational Product and Services);
President and Chief Executive Officer
(June 2012 to September 2014), Servant
Interactive LLC (Educational Products
and Services); President and Chief
Executive Officer (June 2012 to
September 2014), Dew Learning LLC
(Educational Products and Services)
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 185 None
Chairman of the Board Advisors L.P. and First Trust
(1955) o Since Inception Portfolios L.P.; Chairman of the
Board of Directors, BondWave LLC
(Software Development Company)
and Stonebridge Advisors LLC
(Investment Advisor)
-----------------------------
(1) Mr. Bowen is deemed an "interested person" of the Trust due to his
position as Chief Executive Officer of First Trust Advisors L.P.,
investment advisor of the Trust.
Page 33
--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
POSITION AND TERM OF OFFICE
NAME OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS
AND YEAR OF BIRTH WITH TRUST SERVICE DURING PAST 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS(2)
------------------------------------------------------------------------------------------------------------------------------------
James M. Dykas President and Chief Executive o Indefinite Term Managing Director and Chief Financial Officer
(1966) Officer (January 2016 to Present), Controller (January 2011
o Since Inception to January 2016), Senior Vice President (April 2007
to January 2016), First Trust Advisors L.P. and First
Trust Portfolios L.P.; Chief Financial Officer
(January 2016 to Present), BondWave LLC
(Software Development Company) and Stonebridge
Advisors LLC (Investment Advisor)
Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President (July 2016 to Present), Vice
(1972) Officer and Chief President (April 2012 to July 2016), First Trust
Accounting Officer o Since Inception Advisors L.P. and First Trust Portfolios L.P.
W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and
(1960) Legal Officer First Trust Portfolios L.P.; Secretary and General
o Since Inception Counsel, BondWave LLC; Secretary, Stonebridge
Advisors LLC
Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and
(1970) First Trust Portfolios L.P.
o Since Inception
Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P.
(1966) and Assistant Secretary and First Trust Portfolios L.P.
o Since Inception
Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
(1966) and First Trust Portfolios L.P.
o Since Inception
Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
(1970) and First Trust Portfolios L.P.
o Since Inception
-----------------------------
(2) The term "officer" means the president, vice president, secretary,
treasurer, controller or any other officer who performs a policy making
function.
Page 34
--------------------------------------------------------------------------------
PRIVACY POLICY
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
PRIVACY POLICY
First Trust values our relationship with you and considers your privacy an
important priority in maintaining that relationship. We are committed to
protecting the security and confidentiality of your personal information.
SOURCES OF INFORMATION
We collect nonpublic personal information about you from the following sources:
o Information we receive from you and your broker-dealer, investment
advisor or financial representative through interviews,
applications, agreements or other forms;
o Information about your transactions with us, our affiliates or
others;
o Information we receive from your inquiries by mail, e-mail or
telephone; and
o Information we collect on our website through the use of "cookies".
For example, we may identify the pages on our website that your
browser requests or visits.
INFORMATION COLLECTED
The type of data we collect may include your name, address, social security
number, age, financial status, assets, income, tax information, retirement and
estate plan information, transaction history, account balance, payment history,
investment objectives, marital status, family relationships and other personal
information.
DISCLOSURE OF INFORMATION
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. In addition to using
this information to verify your identity (as required under law), the permitted
uses may also include the disclosure of such information to unaffiliated
companies for the following reasons:
o In order to provide you with products and services and to effect
transactions that you request or authorize, we may disclose your
personal information as described above to unaffiliated financial
service providers and other companies that perform administrative or
other services on our behalf, such as transfer agents, custodians
and trustees, or that assist us in the distribution of investor
materials such as trustees, banks, financial representatives, proxy
services, solicitors and printers.
o We may release information we have about you if you direct us to do
so, if we are compelled by law to do so, or in other legally limited
circumstances (for example to protect your account from fraud).
In addition, in order to alert you to our other financial products and services,
we may share your personal information within First Trust.
USE OF WEBSITE ANALYTICS
We currently use third party analytics tools, Google Analytics and AddThis, to
gather information for purposes of improving First Trust's website and marketing
our products and services to you. These tools employ cookies, which are small
pieces of text stored in a file by your web browser and sent to websites that
you visit, to collect information, track website usage and viewing trends such
as the number of hits, pages visited, videos and PDFs viewed and the length of
user sessions in order to evaluate website performance and enhance navigation of
the website. We may also collect other anonymous information, which is generally
limited to technical and web navigation information such as the IP address of
your device, internet browser type and operating system for purposes of
analyzing the data to make First Trust's website better and more useful to our
users. The information collected does not include any personal identifiable
information such as your name, address, phone number or email address unless you
provide that information through the website for us to contact you in order to
answer your questions or respond to your requests. To find out how to opt-out of
these services click on: Google Analytics and AddThis.
CONFIDENTIALITY AND SECURITY
With regard to our internal security procedures, First Trust restricts access to
your nonpublic personal information to those First Trust employees who need to
know that information to provide products or services to you. We maintain
physical, electronic and procedural safeguards to protect your nonpublic
personal information.
POLICY UPDATES AND INQUIRIES
As required by federal law, we will notify you of our privacy policy annually.
We reserve the right to modify this policy at any time, however, if we do change
it, we will tell you promptly. For questions about our policy, or for additional
copies of this notice, please go to www.ftportfolios.com, or contact us at
1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust
Advisors).
March 2019
Page 35
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)
First Trust TCW Securitized Plus ETF (DEED)
----------------------------
Annual Report
For the Period Ended
August 31, 2020
----------------------------
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
ANNUAL REPORT
AUGUST 31, 2020
Shareholder Letter........................................................... 1
Fund Performance Overview
TCW Opportunistic Fixed Income ETF (FIXD)................................. 2
TCW Unconstrained Plus Bond ETF (UCON).................................... 5
TCW Securitized Plus ETF (DEED)........................................... 8
Notes to Fund Performance Overview........................................... 11
Portfolio Commentary......................................................... 12
Understanding Your Fund Expenses............................................. 16
Portfolio of Investments
TCW Opportunistic Fixed Income ETF (FIXD)................................. 17
TCW Unconstrained Plus Bond ETF (UCON).................................... 46
TCW Securitized Plus ETF (DEED)........................................... 64
Statements of Assets and Liabilities......................................... 70
Statements of Operations..................................................... 71
Statements of Changes in Net Assets.......................................... 72
Financial Highlights......................................................... 74
Notes to Financial Statements................................................ 76
Report of Independent Registered Public Accounting Firm...................... 86
Additional Information....................................................... 87
Board of Trustees and Officers............................................... 95
Privacy Policy............................................................... 97
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
the 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's shares may therefore be less than what you paid
for them. Accordingly, you can lose money investing in a Fund. See "Risk
Considerations" in the Additional Information section of this report for a
discussion of 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.
By reading the portfolio commentary from the portfolio management team of the
Funds, you may obtain an understanding of how the market environment affected
each Fund's performance. 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
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
AUGUST 31, 2020
Dear Shareholders:
First Trust is pleased to provide you with the annual report for certain series
of the First Trust Exchange-Traded Fund VIII (the "Funds"), which contains
detailed information about the Funds for the twelve months ended August 31,
2020. Please note that the First Trust TCW Securitized Plus ETF ("DEED") was
incepted on April 29, 2020, and so information in this letter and the report
prior to that date will not apply to this Fund.
In case you missed the latest big news from the Federal Reserve ("Fed") in
September, it stated that it expects to hold short-term interest rates near zero
until two things happen: (1) the U.S. unemployment rate is back to normal, or
around the 4.0% level; and (2) the inflation rate is at, or above, 2.0%. As of
August 31, 2020, the U.S. unemployment rate stood at 8.4%, according to data
from the Bureau of Labor Statistics. The Fed's top benchmark for inflation (U.S.
Personal Consumption Expenditures Chain Type Price Index) stood at 1.0% on July
31, 2020. Brian Wesbury, Chief Economist at First Trust Advisors L.P., notes
that the Fed does not expect to achieve both goals until 2024.
What does this mean for investors? We believe that one of the Fed's motivations
in promoting a multi-year commitment to a near zero interest rate monetary
policy is to incentivize risk-taking. By holding interest rates artificially low
for an extended period, the Fed is essentially disincentivizing saving. The Fed
wants individuals to invest their capital in risk assets and is offering
valuable guidance on its monetary policy to instill confidence in the markets,
in my opinion.
In his testimony to the House Financial Services Committee on September 22,
2020, Fed Chairman Jerome Powell stated that the U.S. economy has a long road to
a full recovery and needs more financial support. U.S. Treasury Secretary Steven
Mnuchin also testified and said that he and the White House will continue to
push Congress to pass another fiscal relief package to help support American
workers. In pursuing additional fiscal support, the U.S. government is
ultimately looking to buy time until a coronavirus ("COVID-19") vaccine arrives.
With the U.S. Presidential election less than two months away, getting a
trillion dollar or so stimulus package through Congress will be no easy task, in
my opinion. Let us hope they surprise us.
Thanks to the monetary and fiscal support already brought to bear to fight
COVID-19, the securities markets appear to be in relatively good shape, in my
opinion. On September 22, 2020, the S&P 500(R) Index closed a little more than
two percentage points off its pre-COVID-19 high set on February 19, 2020,
according to data from Bloomberg. I find that to be an amazing feat in the
current climate. The combination of low interest rates and low inflation
continues to reward bond investors. Looking ahead, even bond investors are going
to need to assume some additional credit risk to achieve higher returns. Yields
on Treasury notes and bonds are poised at this time to stay low and fairly range
bound. The Fed's pledge to keep its benchmark rate low for up to three years
could lend some stability and reassurance to the debt markets, in my opinion.
We believe the U.S. economy is on its way back. While we have too many workers
still unemployed, I do find it encouraging that U.S. consumers have done such a
terrific job of getting their fiscal houses in order. Consumer spending
typically accounts for roughly 70% of U.S. gross domestic product output each
year. So goes the consumer, so goes the economy. The S&P/Experian Consumer
Credit Default Composite Index stood at 0.67% in August 2020, down from 0.92% in
August 2019 and well below its 1.79% average since its inception in July 2004,
according to S&P Dow Jones Indices. As we previously noted, the near-term
outlook rests on getting one or more FDA-approved vaccines or therapeutics. The
year-end target that has been touted by some, including President Donald J.
Trump, would coincide with the end to the government's moratorium on home
evictions and foreclosures, which is due to expire on December 31, 2020. Keep in
mind that the moratorium has already been extended three times. Things could get
interesting over the next few months. Stay tuned and stay the course.
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); agency and non-agency
residential mortgage-backed securities (RMBS); agency and non-agency commercial
mortgage-backed securities (CMBS); agency and non-agency asset-backed securities
(ABS); 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 utilize listed and
over-the-counter derivatives instruments. 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
1 Year Ended Inception (2/14/17) Inception (2/14/17)
8/31/20 to 8/31/20 to 8/31/20
FUND PERFORMANCE
NAV 7.57% 5.73% 21.82%
Market Price 7.44% 5.74% 21.88%
INDEX PERFORMANCE
Bloomberg Barclays U.S. Aggregate Bond Index 6.47% 5.29% 20.04%
------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 11.)
Page 2
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD) (CONTINUED)
----------------------------------------------------------
% OF TOTAL
FUND ALLOCATION NET ASSETS
----------------------------------------------------------
U.S. Government Agency Mortgage-Backed
Securities 31.78%
U.S. Government Bonds and Notes 29.56
Corporate Bonds and Notes 19.21
Asset-Backed Securities 6.47
Mortgage-Backed Securities 5.96
Foreign Corporate Bonds and Notes 2.92
Foreign Sovereign Bonds and Notes 0.90
Municipal Bonds 0.74
Senior Floating-Rate Loan Interests 0.16
Capital Preferred Securities 0.01
U.S. Treasury Bills 20.02
Money Market Funds 2.08
Net Other Assets and Liabilities* (19.81)
--------
Total 100.00%
========
* Includes variation margin on futures contracts.
----------------------------------------------------------
% OF
FIXED-INCOME
CREDIT QUALITY(1) INVESTMENTS
----------------------------------------------------------
Government/Agency 69.11%
AAA 1.35
AA+ 0.44
AA 0.56
AA- 0.88
A+ 0.67
A 0.27
A- 2.32
BBB+ 3.70
BBB 4.29
BBB- 3.40
BB+ 1.09
BB 0.60
BB- 0.84
B+ 0.53
B 0.63
B- 0.23
CCC+ 0.00**
CCC 0.76
CCC- 0.01
CC 2.80
D 0.52
NR 5.00
--------
Total 100.00%
========
** Amount is less than 0.01%.
----------------------------------------------------------
% OF
FIXED-INCOME
TOP TEN HOLDINGS INVESTMENTS
----------------------------------------------------------
U.S. Treasury Note, 0.13%, 07/31/22 7.62%
Federal National Mortgage Association,
Pool TBA, 2.50%, 09/15/50 6.23
U.S. Treasury Bond, 1.25%, 05/15/50 3.79
Federal National Mortgage Association,
Pool TBA, 2.00%, 09/15/50 3.37
U.S. Treasury Note, 0.25%, 06/30/25 3.36
U.S. Treasury Bill, 0.00%, 11/05/20 3.12
U.S. Treasury Bill, 0.00%, 01/21/21 2.70
U.S. Treasury Bill, 0.00%, 10/27/20 2.46
U.S. Treasury Note, 0.25%, 08/31/25 2.43
U.S. Treasury Bill, 0.00%, 11/19/20 2.32
--------
Total 37.40%
========
-----------------------------
(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 - AUGUST 31, 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 10,116
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
8/31/20 12,182 12,004
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 AUGUST 31, 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 August 31, 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 - 8/31/20 226 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%
2/15/17 - 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 - 8/31/20 17 4 3 1
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. 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);
agency and non-agency residential mortgage-backed securities (RMBS); agency and
non-agency commercial mortgage-backed securities (CMBS); agency and non-agency
asset-backed securities (ABS); 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 and the Fund may utilize listed and
over-the-counter derivatives. 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
1 Year Ended Inception (6/4/18) Inception (6/4/18)
8/31/20 to 8/31/20 to 8/31/20
FUND PERFORMANCE
NAV 4.97% 5.44% 12.61%
Market Price 5.01% 5.53% 12.83%
INDEX PERFORMANCE
ICE BofA US Dollar 3-Month Deposit Offered Rate Average Index 1.52% 2.09% 4.75%
------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 11.)
Page 5
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON) (CONTINUED)
----------------------------------------------------------
% OF TOTAL
FUND ALLOCATION NET ASSETS
----------------------------------------------------------
Corporate Bonds and Notes 36.04%
U.S. Government Agency Mortgage-Backed
Securities 14.54
Mortgage-Backed Securities 12.28
Asset-Backed Securities 10.77
Foreign Corporate Bonds and Notes 8.94
Foreign Sovereign Bonds and Notes 3.33
Municipal Bonds 1.92
Commercial Paper 0.29
U.S. Treasury Bills 16.69
Money Market Funds 2.04
Net Other Assets and Liabilities* (6.84)
--------
Total 100.00%
========
* Includes variation margin on futures contracts.
----------------------------------------------------------
% OF
FIXED-INCOME
CREDIT QUALITY(1) INVESTMENTS
----------------------------------------------------------
Government/Agency 29.80%
AAA 0.27
AA+ 1.01
AA 1.53
AA- 1.10
A+ 1.40
A 0.85
A- 4.44
BBB+ 11.26
BBB 10.39
BBB- 8.75
BB+ 2.10
BB 1.91
BB- 1.28
B+ 0.75
B 2.14
B- 1.18
CCC 7.86
CCC- 0.07
CC 3.60
D 2.12
NR 6.19
--------
Total 100.00%
========
----------------------------------------------------------
% OF
FIXED-INCOME
TOP TEN HOLDINGS INVESTMENTS
----------------------------------------------------------
Federal National Mortgage Association
Pool TBA, 2.50%, 09/15/50 3.67%
Federal National Mortgage Association
Pool TBA, 2.00%, 09/15/50 3.20
U.S. Treasury Bill, 0.00%, 01/28/21 3.09
U.S. Treasury Bill, 0.00%, 01/21/21 3.07
U.S. Cash Management Bill, 0.00%, 01/12/21 2.73
U.S. Treasury Bill, 0.00%, 02/04/21 1.75
U.S. Treasury Bill, 0.00%, 11/12/20 1.19
U.S. Treasury Bill, 0.00%, 02/11/21 0.92
Morgan Stanley, Global Medium-Term
Note, 3.70%, 10/23/24 0.89
GE Capital International Funding Co.
Unlimited Co. (USD), 4.42%, 11/15/35 0.82
--------
Total 21.33%
========
-----------------------------
(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 - AUGUST 31, 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
8/31/20 11,261 10,475
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 AUGUST 31, 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 August 31, 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 - 8/31/20 158 3 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%
6/5/18 - 8/31/18 13 0 0 0
9/1/18 - 8/31/19 46 0 0 1
9/1/19 - 8/31/20 41 24 17 8
Page 7
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST TCW SECURITIZED PLUS ETF (DEED)
The First Trust TCW Securitized Plus ETF seeks to maximize long-term total
return. Under normal market conditions, the Fund will invest at least 80% of its
net assets (including investment borrowings) in securitized debt securities,
including asset-backed securities, residential and commercial mortgage-backed
securities and collateralized loan obligations ("CLOs"). The Fund's investment
sub-advisor, TCW Investment Management Company LLC ("TCW" or the "Sub-Advisor")
seeks to outperform the Bloomberg Barclays U.S. Mortgage-Backed Securities Index
over time through the utilization of independent, bottom-up research to identify
securities that are relatively undervalued. Under normal conditions, the Fund's
average portfolio duration varies within two years (plus or minus) of the
portfolio duration of the securities comprising the Bloomberg Barclays U.S.
Mortgage-Backed Securities Index. As a separate measure, there is no limit on
the weighted average maturity of the Fund's portfolio. While maturity refers to
the expected life of a security, duration is a measure of the expected price
volatility of a debt security as a result of changes in market rates of
interest. Shares of the Fund are listed on The NYSE Arca, Inc. under the ticker
symbol "DEED."
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURNS
Inception (4/29/20)
to 8/31/20
FUND PERFORMANCE
NAV 3.80%
Market Price 3.72%
INDEX PERFORMANCE
Bloomberg Barclays U.S. Mortgage-Backed Securities Index 0.36%
------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 11.)
Page 8
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST TCW SECURITIZED PLUS ETF (DEED) (CONTINUED)
----------------------------------------------------------
% OF TOTAL
FUND ALLOCATION NET ASSETS
----------------------------------------------------------
U.S. Government Agency Mortgage-Backed
Securities 53.19%
Asset-Backed Securities 24.62
Mortgage-Backed Securities 16.41
U.S. Government Bonds and Notes 0.52
U.S. Treasury Bills 22.20
Money Market Funds 2.06
Net Other Assets and Liabilities* (19.00)
--------
Total 100.00%
========
* Includes variation margin on futures contracts.
----------------------------------------------------------
% OF
FIXED-INCOME
CREDIT QUALITY(1) INVESTMENTS
----------------------------------------------------------
Government/Agency 64.91%
AAA 5.81
AA+ 0.28
AA 0.69
A+ 1.30
A 1.70
BBB- 0.39
BB+ 0.58
BB 0.36
B 1.34
B- 1.24
CCC 7.27
CC 2.75
D 1.73
NR 9.65
--------
Total 100.00%
========
----------------------------------------------------------
% OF
FIXED-INCOME
TOP TEN HOLDINGS INVESTMENTS
----------------------------------------------------------
U.S. Treasury Bill, 0.00%, 10/29/20 16.52%
Federal National Mortgage Association,
Pool TBA, 2.50%, 09/15/50 4.43
Federal National Mortgage Association,
Pool TBA, 2.00%, 09/15/50 3.83
Government National Mortgage Association,
Pool TBA, 3.00%, 09/15/50 2.52
U.S. Treasury Bill, 0.00%, 10/22/20 1.85
Government National Mortgage Association,
Pool TBA, 2.50%, 09/15/50 1.74
Federal Home Loan Mortgage Corporation,
Pool G67710, 3.50%, 03/01/48 1.64
Federal National Mortgage Association,
Series 2018-50, Class BA, 3.00%, 07/25/48 1.32
GoldenTree Loan Opportunities Ltd., Series
2014-9A, Class AR2, 1.38%, 10/29/29 1.31
Palmer Square CLO Ltd., Series 2018-1A,
Class A1, 1.30%, 04/18/31 1.30
--------
Total 36.46%
========
-----------------------------
(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 9
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST TCW SECURITIZED PLUS ETF (DEED) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
APRIL 29, 2020 - AUGUST 31, 2020
Bloomberg Barclays
First Trust TCW U.S. Mortgage-Backed
Securitized Plus ETF Securities Index
4/29/20 $10,000 $10,000
8/31/20 10,380 10,036
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 AUGUST 31, 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 30, 2020 (commencement
of trading) through August 31, 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%
4/30/20 - 8/31/20 42 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%
4/30/20 - 8/31/20 43 1 0 0
Page 10
--------------------------------------------------------------------------------
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 11
--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
ANNUAL REPORT
AUGUST 31, 2020 (UNAUDITED)
ADVISOR
First Trust Advisors L.P. ("First Trust") is the investment advisor to the First
Trust TCW Opportunistic Fixed Income ETF ("FIXD"), the First Trust TCW
Unconstrained Plus Bond ETF ("UCON"), and the First Trust TCW Securitized Plus
ETF ("DEED") (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 1987, 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 $234 billion under management or committed to
management, including $211 billion of U.S. fixed income investments, as of
August 31, 2020.
PORTFOLIO MANAGEMENT TEAM
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
Bryan T. Whalen, CFA, Generalist Portfolio Manager in TCW's Fixed Income Group
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
FIRST TRUST TCW SECURITIZED PLUS ETF (DEED)
Bryan T. Whalen, CFA, Generalist Portfolio Manager in TCW's Fixed Income Group
Mitchell Flack, Managing Director of Securitized Products at TCW
Harrison Choi, Specialist Portfolio Manager of Securitized Products in the Fixed
Income Group of TCW
Elizabeth Crawford, Specialist Portfolio Manager of Securitized Products in the
Fixed Income Group of TCW
COMMENTARY
MARKET RECAP
In the latter part of 2019 and early 2020, the Federal Reserve (the "Fed")
interest rate cuts and liquidity injections sustained elevated asset prices and
assuaged tensions derived from a U.S./China trade war. In March 2020, the
longest bull market in U.S. history was brought to an end, laid low by the
transmission of the coronavirus ("COVID-19") and the strict economic curbs
invoked to slow its further spread. The consequent market volatility sent risk
premiums soaring across the bond markets, and Treasury yields collapsed,
illustrated by the 10-Year slumping from 1.5% at the end of August 2019 to
record lows near the 0.5% handle in March 2020. No sector was spared of the
repricing, particularly as levered investor (forced) sales and more routine
redemptions tested liquidity in a fashion unhappily reminiscent of 2008. In
equities, the S&P 500(R) Index saw all of its gains since 2016 erased in a near
-20% first quarter 2020 loss, punctuated by a 34% tumble from February 19
through March 23, 2020 and a one-day plummet of -12% on March 16, 2020. COVID-19
and its associated lockdowns prompted the loss of a slew of jobs, with more than
29 million Americans still collecting some form of jobless relief around the end
of August 2020. The knock-on effects on consumption and confidence from the
bleak job outlook were evident in the gross domestic product growth of the
second quarter of 2020 of -32.9% (annualized rate), the sharpest contraction
ever registered in the U.S. In response to the adverse impact from the COVID-19
pandemic, monetary and fiscal accommodations unprecedented in size and scope
were instituted, including a return to zero interest rate policy, asset
purchases across fixed income (notably unlimited Fed buying of agency
mortgage-back securities ("MBS")), and a $2.2 trillion CARES Act, provisioning
money to individuals (including $600/week enhanced unemployment benefit),
businesses, and local governments. Markets, as a result, recovered beginning
around April/May with Treasury yields stabilizing and U.S. equities topping
historic peaks, buoyed further by vaccine hopes notwithstanding surging COVID-19
cases in the U.S.
With the strong policy support, the S&P 500(R) Index soared by over 50% since
March 23, ending at a record high of 3,500 at the end of August 2020, up
approximately 20% from a year ago. In bonds, the Aggregate Fixed Income Index
gained 6.5% for the one-year period ending August 31, 2020, eking out 9 basis
points ("bps") in excess return over Treasuries on a duration-adjusted basis,
Page 12
--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
ANNUAL REPORT
AUGUST 31, 2020 (UNAUDITED)
though spreads persisted wider by 9 bps. Investment grade corporates delivered
total returns of 7.5% but remained behind comparable Treasuries by over 40 bps
with yield premiums 9 bps higher. Notably, financials outpaced duration-matched
Treasuries by 85 bps, led by banking which went into the crisis
well-capitalized. High yield corporates and emerging market debt lagged
comparable Treasuries by 15 and 152 bps with yield spreads increasing by 84 and
13 bps, respectively. In securitized, non-agency MBS rose 2.2% while asset-back
securities ("ABS") and commercial mortgage-backed securities ("CMBS") returned
4.3% and 5.6% with spreads widening 12 and 41 bps, respectively. On a
duration-adjusted basis, ABS posted 54 bps in excess return over Treasuries
while CMBS was weighed down by private labels to generate 128 bps of negative
excess return. Reversing 2019 underperformance, agency MBS performed well
following the Fed's massive sponsorship with returns subsequently moderating,
resulting in the sector ending the period wider by 9 bps, though excess returns
held ahead of comparable Treasuries by 52 bps. In the government bond market,
the narrative diverged, with Treasury yields holding near the depths of March,
exemplified by the 10-Year confined around 0.6% to 0.7%.
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PERFORMANCE ANALYSIS
The First Trust TCW Opportunistic Fixed Income ETF (the "Fund") returned 7.57%
based on net asset value ("NAV") and 7.44% based on market price for the
12-month period ended August 31, 2020, while the Bloomberg Barclays U.S.
Aggregate Bond Index (the "Index") gained 6.47%. Early in the period, the Fund
maintained an underweight to corporate credit given what we viewed to be late
cycle dynamics (i.e. high corporate leverage and share buybacks) - which
benefitted performance amid the COVID-19-induced spread widening early in 2020.
This conservative posture further rewarded returns as defensive industries such
as healthcare and pharmaceuticals outperformed more market-sensitive areas like
energy, cyclicals, and non-U.S. sovereigns. During this cheapening phase, the
Fund took the opportunity to purchase credits at compelling levels, which
delivered another boost to returns as yield premiums remediated in the second
quarter of 2020. Positioning has since been trimmed and currently represents a
relative underweight to the Index. Among securitized products, the allocation to
agency MBS increased at favorable entry points as the sector was weighed down by
Fed tapering and low rates in 2019. This upsized shift benefited performance
given the Fed's massive sponsorship instituted in March. In ABS and CMBS, the
negative effects from the health crisis overshadowed solid performance in 2019
and the rebound from the March liquidity crunch, though issue selection favoring
senior, higher quality CMBS was additive on the margin, with an additional
contribution coming from legacy non-agency MBS. Meanwhile, Treasury futures used
to manage duration were a drag as financing rates exceeded yields. Finally, the
Fund's duration profile modestly reined in returns, with a longer stance
shifting to neutral as yields fell as the Fed trimmed rates, then moving shorter
as yields plunged and remained near historic lows to end the period.
MARKET AND FUND OUTLOOK
Uncertainty persists at the forefront of positioning as the COVID-19 pandemic is
far from over, especially given the evolving nature of U.S. economic
"re-openings." Although certain metrics have indicated a bounce-back, like
housing and retail sales, the expiration of the enhanced unemployment benefit,
stalled manufacturing, an impasse on Capitol Hill with regard to a Phase 4
fiscal stimulus deal, and contentious U.S. elections on the horizon cast clouds
of uncertainty and will likely weigh on growth going forward. The COVID-19
pandemic was the catalyst that ended the cycle, but the durability of the sharp
recovery is questionable as government subsidy effects fade and the virus
situation remains fluid and are likely to spur additional challenges to
stability. Despite relatively encouraging news on vaccines and drugs, a true
recovery cannot take place without real mitigations of COVID-19 as monetary and
fiscal stimulus is simply a bandage to postpone the full negative effects of the
pandemic, in our view. The unknowns are plenty owing to the highly contagious
nature of COVID-19 which will limit economic activity through varying degrees of
social distancing. Unemployment is a major concern in this environment, and
there is heightened potential for another leg down in the equity and credit
markets, with increased debt loads that will be harder to service as companies
struggle if lockdowns persist.
Against this background, the Fund is cautious and strategy and potential
repositioning will continue to be guided by TCW's views on valuations across the
allocable sectors, with the Fund equipped by ample levels of liquidity to
respond to rapidly changing valuations. As mentioned, market volatility in the
first quarter of 2020 provided an expanded opportunity set among spread
products, with the Fund taking advantage of attractive entry points to add
exposures in high quality sectors that have resilience or are likely to benefit
from Fed activities or support. Specific positioning shifts included an increase
to corporates to an overweight, with a focus on long-dated high quality names
with sound business models. This position was subsequently trimmed at measurable
gains, returning the relative exposure to an underweight versus the benchmark,
though non-cyclicals and communications remained an overweight. High yield,
meanwhile, is focused on defensive, larger, more liquid, and relatively high
quality credit, with an expectation for the allocation to increase should better
valuations materialize. Within the securitized space, after adding significantly
Page 13
--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
ANNUAL REPORT
AUGUST 31, 2020 (UNAUDITED)
to the agency MBS exposure in the first quarter of 2020 on weakness, the
position was trimmed as spreads remediated. The sector nonetheless remains
attractive given Fed support, with a Fund bias for TBAs versus specified pools.
Non-agency MBS continues to offer compelling relative value, particularly legacy
securities that have strong underlying fundamentals, with the Fund inclined
toward adding exposure in higher quality and currently amortizing bonds. Within
CMBS, the small allocation is split between agency and non-agency issues, while
in ABS the preference is in government guaranteed student loans and AAA-rated
collateralized loan obligations. Finally, the Fund's duration positioning, as of
August 31, 2020, is approximately 0.5 year shorter than the benchmark as
Treasury rates remained near record lows.
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PERFORMANCE ANALYSIS
The First Trust TCW Unconstrained Plus Bond ETF (the "Fund") returned 4.97%
based on net asset value ("NAV") and 5.01% based on market price for the
12-month period ended August 31, 2020, while the ICE BofA US Dollar 3-Month
Deposit Offered Rate Average Index returned 1.52%. During the same period, the
allocation to corporate credit was a significant driver of performance. Given
what we believed were late cycle dynamics in 2019, including elevated corporate
leverage and shareholder-friendly activities such as share buybacks, TCW was
cautious going into 2020, reflected in a defensive credit positioning favoring
industries such as non-cyclicals, financials, and communications, which
benefitted performance early in the period. As the coronavirus ("COVID-19") took
hold in the U.S. starting in March 2020 and spreads widened owing to COVID-19
induced shutdowns, even more conservative sectors were not immune from rising
yield premiums. TCW capitalized on this cheapening phase by purchasing credits
across not only the investment grade space, but also emerging market and high
yield, at compelling levels. As spreads remediated beginning in the second
quarter of 2020, this larger position rewarded the Fund, and the exposure to
these credits was subsequently reduced into strength. In securitized, CMBS, ABS,
and non-agency MBS sectors were weighed down by the health crisis and attendant
forbearance concerns. As securitized spreads tightened amid partial economic
re-openings and some Fed support, CMBS and ABS were able to partially offset the
aforementioned drag while the impact from legacy non-agency MBS for the year
turned positive, sustained by a strong housing backdrop fueled by low rates.
Delivering another boost to Fund returns was the duration profile of 1.8 years
as rates plunged during March, with the position moving slightly lower to 1.7
years as of August 31, 2020 as rates anchored near historic lows.
MARKET AND FUND OUTLOOK
Uncertainty persists at the forefront of positioning as the pandemic is far from
over, especially given the evolving nature of U.S. economic "re-openings."
Although certain metrics have indicated a bounce-back, like housing and retail
sales, the expiration of the enhanced unemployment benefit, stalled
manufacturing, an impasse on Capitol Hill with regard to a Phase 4 fiscal
stimulus deal, and contentious U.S. elections on the horizon cast clouds of
uncertainty and will likely weigh on growth going forward. The pandemic was the
catalyst that ended the cycle, but the durability of the sharp recovery is
questionable as government subsidy effects fade and the virus situation remains
fluid and are likely to spur additional challenges to stability. Despite
relatively encouraging news on vaccines and drugs, a true recovery cannot take
place without real mitigations of COVID-19 as monetary and fiscal stimulus is
simply a bandage to postpone the full negative effects of the pandemic, in our
view. The unknowns are plenty owing to the highly contagious nature of
coronavirus which will limit economic activity through varying degrees of social
distancing. Unemployment is a major concern in this environment and there is
heightened potential for another leg down in the equity and credit markets, with
increased debt loads that will be harder to service as companies struggle if
lockdowns persist.
Against this background, the Fund remains cautious and strategy and potential
repositioning will continue to be guided by TCW's views on valuations across the
allocable sectors. As mentioned, market volatility in the first quarter 2020
provided an expanded opportunity set among spread products, with the Fund taking
advantage of attractive entry points to add exposures in high quality sectors
that have resilience or are likely to benefit from Fed activities or support.
Specific positioning shifts included an increase to corporates, with a focus on
long-dated high-quality names with sound business models that should withstand a
recession. Additions were also made in high yield and emerging market, focused
on defensive, larger, more liquid, and relatively high quality credit, while the
agency MBS exposure also increased during the same period. As markets
remediated, risk was trimmed, and the Fund is again positioned with ample levels
of liquidity to respond to rapidly changing market valuations. Overall,
positioning is conservative, emphasizing high conviction names in the financial
and non-cyclical parts of the corporate market, while the Fund continues to hold
an allocation to high yield and emerging market debt, which may increase if
valuations improve. Senior areas of securitized products are also an emphasis,
with the CMBS exposure favoring agency issues (though the position was
meaningfully reduced), while the ABS exposure consists largely of government
guaranteed student loans. Agency MBS was recently upsized as relative value
Page 14
--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
ANNUAL REPORT
AUGUST 31, 2020 (UNAUDITED)
presented itself, specifically within the TBA market give Fed support, while
non-agency MBS continues to offer compelling relative value, particularly legacy
securities that have strong underlying fundamentals, with the Fund inclined
toward adding to the exposure in higher quality currently amortizing bonds.
Finally, the duration of the Fund is 1.7 years as of August 31, 2020.
FIRST TRUST TCW SECURITIZED PLUS ETF (DEED)
PERFORMANCE ANALYSIS
For the period since the Fund's inception on April 29, 2020 through August 31,
2020, the First Trust TCW Securitized Plus ETF (the "Fund") gained 3.80% based
on net asset value ("NAV") and 3.72% based on market price, while the Bloomberg
Barclays U.S. Mortgage-Backed Securities Index returned 0.36%. Bolstering Fund
performance was issue selection among residential mortgage issues amid a strong
housing backdrop, with the bias for subprime and option ARM collateral types
particularly additive as these segments returned 9.2% and 9.5% for the period to
lead legacy non-agency MBS. Delivering another boost to Fund performance was
agency MBS issue selection with a preference for TBAs focused on coupons
sponsored by the Fed (i.e., 2s through 3.5s). Meanwhile, the allocation to
fixed-rate agency collateralized mortgage obligations ("CMOs") and an
underweight to lagging Ginnie Maes modestly provided additional contributions.
Further benefiting the Fund was issue selection among CMBS and ABS favoring
higher quality, up-in-capital structure issues, with the former led by
non-agency bonds, which outpaced their agency counterparts for the past four
months, while government guaranteed student loans contributed most to Fund
performance among the ABS selections. MARKET AND FUND OUTLOOK
MARKET AND FUND OUTLOOK
Uncertainty persists at the forefront of positioning as the pandemic is far from
over, especially given the evolving nature of U.S. economic "re-openings."
Although certain metrics have indicated a bounce-back, like housing and retail
sales, the expiration of the enhanced unemployment benefit, stalled
manufacturing, an impasse on Capitol Hill with regard to a Phase 4 fiscal
stimulus deal, and contentious U.S. elections on the horizon cast clouds of
uncertainty and will likely weigh on growth going forward. The pandemic was the
catalyst that ended the cycle, but the durability of the sharp recovery is
questionable as government subsidy effects fade and the virus situation remains
fluid and are likely to spur additional challenges to stability. Despite
relatively encouraging news on vaccines and drugs, a true recovery cannot take
place without real mitigations of COVID-19 as monetary and fiscal stimulus is
simply a bandage to postpone the full negative effects of the pandemic, in our
view. The unknowns are plenty owing to the highly contagious nature of
coronavirus which will limit economic activity through varying degrees of social
distancing. Unemployment is a major concern in this environment and there is
heightened potential for another leg down in the equity and credit markets, with
increased debt loads that will be harder to service as companies struggle if
lockdowns persist.
Against this background, the Fund is cautious and strategy and potential
repositioning will be guided by TCW's views on valuations across the allocable
sectors, with the Fund equipped by ample levels of liquidity to respond to
rapidly changing valuations. The Fund incepted on April 29, 2020, and portfolio
construction centered on adding exposures to high quality securitized sectors
that have the resilience to withstand a recession or are likely to benefit from
Fed activities/support. In the agency MBS segment, the preference is for low
coupon conventional 30-year TBAs, while the exposures to Ginnie Maes and CMOs
are modest. Legacy non-agency MBS offers compelling relative value, with the
exposure heavily slanted toward higher quality currently amortizing issues.
Within ABS, the Fund avoids more vulnerable collateral such as credit card and
auto loans, preferring instead AAA-rated CLOs and government guaranteed student
loans. In CMBS, the exposure has a slight bias for agency issues (Fed purchasing
program providing some support), while the private label construction favors
senior, seasoned securities as well as single asset/single borrower deals.
Finally, Fund duration positioning, as of August 31, 2020, is approximately 0.55
years shorter than the benchmark as Treasury rates remained near historic lows.
Page 15
FIRST TRUST EXCHANGE-TRADED FUND VIII
UNDERSTANDING YOUR FUND EXPENSES
AUGUST 31, 2020 (UNAUDITED)
As a shareholder of First Trust TCW Opportunistic Fixed Income ETF, First Trust
TCW Unconstrained Plus Bond ETF or First Trust TCW Securitized Plus ETF (each a
"Fund" and collectively, the "Funds"), you incur two types of costs: (1)
transaction costs; and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, if any, and other Fund expenses. This
Example is intended to help you understand your ongoing costs of investing in
the Funds and to compare these costs with the ongoing costs of investing in
other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period (or since inception) and held through the six-month (or shorter) period
ended August 31, 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 six-month
(or shorter) 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
MARCH 1, 2020 AUGUST 31, 2020 PERIOD (a) PERIOD (b)
------------------------------------------------------------------------------------------------------------------------------
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
Actual $1,000.00 $1,041.30 0.55% $2.82
Hypothetical (5% return before expenses) $1,000.00 $1,022.37 0.55% $2.80
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
Actual $1,000.00 $1,027.50 0.75% $3.82
Hypothetical (5% return before expenses) $1,000.00 $1,021.37 0.75% $3.81
------------------------------------------------------------------------------------------------------------------------------
ANNUALIZED EXPENSES PAID
EXPENSE RATIO DURING THE PERIOD
BEGINNING ENDING BASED ON THE APRIL 29, 2020 (c)
ACCOUNT VALUE ACCOUNT VALUE NUMBER OF DAYS TO
APRIL 29, 2020 (c) AUGUST 31, 2020 IN THE PERIOD (a) AUGUST 31, 2020 (d)
------------------------------------------------------------------------------------------------------------------------------
FIRST TRUST TCW SECURITIZED PLUS ETF (DEED)
Actual $1,000.00 $1,038.00 0.65% $2.26
Hypothetical (5% return before expenses) $1,000.00 $1,021.87 0.65% $3.30
(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 (March 1,
2020 through August 31, 2020), multiplied by 184/366 (to reflect the
six-month period).
(c) Inception date.
(d) Actual expenses are equal to the annualized expense ratio as indicated in
the table multiplied by the average account value over the period (April
29, 2020 through August 31, 2020), multiplied by 125/366. Hypothetical
expenses are assumed for the most recent six-month period.
Page 16
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 31.8%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.6%
Federal Home Loan Mortgage Corporation
$ 253,001 Series 2017-4656, Class EZ....................................... 4.00% 02/15/47 $ 294,989
Federal National Mortgage Association
3,364,764 Series 2012-20, Class ZT......................................... 3.50% 03/25/42 3,709,701
2,984,508 Series 2012-84, Class VZ......................................... 3.50% 08/25/42 3,304,524
945,291 Series 2018-38, Class PA......................................... 3.50% 06/25/47 991,189
2,371,181 Series 2018-43, Class CT......................................... 3.00% 06/25/48 2,480,174
1,019,272 Series 2018-86, Class JA......................................... 4.00% 05/25/47 1,068,382
397,609 Series 2018-94, Class KD......................................... 3.50% 12/25/48 420,649
448,806 Series 2019-1, Class KP.......................................... 3.25% 02/25/49 470,943
615,886 Series 2019-20, Class BA......................................... 3.50% 02/25/48 643,852
239,957 Series 2019-52, Class PA......................................... 3.00% 09/25/49 247,031
Government National Mortgage Association
492,644 Series 2018-115, Class DE........................................ 3.50% 08/20/48 526,213
479,715 Series 2018-124, Class NW........................................ 3.50% 09/20/48 518,889
2,095,676 Series 2019-12, Class QA......................................... 3.50% 09/20/48 2,206,609
366,154 Series 2019-71, Class PT......................................... 3.00% 06/20/49 384,146
2,363,766 Series 2019-119, Class JE........................................ 3.00% 09/20/49 2,451,664
--------------
19,718,955
--------------
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 0.4%
Federal National Mortgage Association
4,712,806 Series 2020-M10, Class X1, IO (a)................................ 1.92% 12/25/30 634,839
11,162,088 Series 2020-M10, Class X2, IO (a)................................ 1.83% 12/25/30 1,544,527
3,595,000 Series 2020-M10, Class X8, IO (a)................................ 0.78% 12/25/27 146,760
Freddie Mac Multifamily Structured Pass-Through Certificates
6,963,000 Series 2017-K068, Class A2....................................... 3.24% 08/25/27 8,032,520
876,233 Series 2017-Q006, Class APT2 (b)................................. 2.55% 09/25/26 892,167
3,980,000 Series 2018-K155, Class A2....................................... 3.75% 11/25/32 4,825,482
--------------
16,076,295
--------------
PASS-THROUGH SECURITIES -- 30.8%
Federal Home Loan Mortgage Corporation
179,171 Pool C91981...................................................... 3.00% 02/01/38 189,057
120,345 Pool G07961...................................................... 3.50% 03/01/45 130,398
130,672 Pool G08692...................................................... 3.00% 02/01/46 138,540
3,832,607 Pool G08715...................................................... 3.00% 08/01/46 4,054,900
76,102 Pool G08721...................................................... 3.00% 09/01/46 80,516
880,863 Pool G08726...................................................... 3.00% 10/01/46 933,018
2,083,926 Pool G08732...................................................... 3.00% 11/01/46 2,207,037
283,288 Pool G08738...................................................... 3.50% 12/01/46 301,799
511,277 Pool G08741...................................................... 3.00% 01/01/47 540,431
334,048 Pool G08747...................................................... 3.00% 02/01/47 352,688
285,177 Pool G08748...................................................... 3.50% 02/01/47 303,027
1,091,780 Pool G08750...................................................... 3.00% 03/01/47 1,154,109
378,629 Pool G08766...................................................... 3.50% 06/01/47 401,330
998,176 Pool G08788...................................................... 3.50% 11/01/47 1,057,775
3,185,288 Pool G08792...................................................... 3.50% 12/01/47 3,373,029
452,440 Pool G08800...................................................... 3.50% 02/01/48 478,667
808,667 Pool G08816...................................................... 3.50% 06/01/48 853,844
193,901 Pool G08833...................................................... 5.00% 07/01/48 213,247
See Notes to Financial Statements Page 17
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
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)
$ 34,194 Pool G08838...................................................... 5.00% 09/01/48 $ 37,582
687,441 Pool G08843...................................................... 4.50% 10/01/48 743,425
150,774 Pool G08844...................................................... 5.00% 10/01/48 165,577
424,493 Pool G08849...................................................... 5.00% 11/01/48 465,962
760,566 Pool G16085...................................................... 2.50% 02/01/32 810,467
522,068 Pool G16350...................................................... 2.50% 10/01/32 555,595
732,602 Pool G16396...................................................... 3.50% 02/01/33 777,345
2,012,320 Pool G16524...................................................... 3.50% 05/01/33 2,158,667
860,430 Pool G16598...................................................... 2.50% 12/01/31 915,822
2,330,781 Pool G18622...................................................... 2.50% 12/01/31 2,451,973
249,603 Pool G18670...................................................... 3.00% 12/01/32 262,162
80,798 Pool G18691...................................................... 3.00% 06/01/33 84,864
261,549 Pool G18713...................................................... 3.50% 11/01/33 276,399
2,651,774 Pool G60038...................................................... 3.50% 01/01/44 2,877,986
673,831 Pool G60080...................................................... 3.50% 06/01/45 740,555
1,414,127 Pool G60344...................................................... 4.00% 12/01/45 1,567,638
440,276 Pool G60440...................................................... 3.50% 03/01/46 479,237
1,456,486 Pool G60582...................................................... 3.50% 05/01/46 1,583,600
1,175,329 Pool G60658...................................................... 3.50% 07/01/46 1,304,782
718,023 Pool G61556...................................................... 3.50% 08/01/48 781,480
4,104,846 Pool G61748...................................................... 3.50% 11/01/48 4,509,093
1,296,838 Pool G67700...................................................... 3.50% 08/01/46 1,423,838
2,935,723 Pool G67703...................................................... 3.50% 04/01/47 3,225,552
11,408,116 Pool G67706...................................................... 3.50% 12/01/47 12,472,455
2,443,731 Pool G67707...................................................... 3.50% 01/01/48 2,711,062
16,271,583 Pool G67708...................................................... 3.50% 03/01/48 17,769,209
2,815,365 Pool G67709...................................................... 3.50% 03/01/48 3,080,626
2,598,066 Pool G67710...................................................... 3.50% 03/01/48 2,800,409
3,734,242 Pool G67714...................................................... 4.00% 07/01/48 4,117,353
5,157,779 Pool G67717...................................................... 4.00% 11/01/48 5,680,805
9,165,660 Pool G67718...................................................... 4.00% 01/01/49 9,873,746
289,006 Pool Q44452...................................................... 3.00% 11/01/46 305,646
662,988 Pool Q50135...................................................... 3.50% 08/01/47 702,520
13,856,649 Pool QA7837...................................................... 3.50% 03/01/50 15,223,280
10,380,711 Pool RB5054...................................................... 2.50% 06/01/40 10,934,720
5,526,203 Pool RE6029...................................................... 3.00% 02/01/50 5,696,470
8,168,385 Pool SD7511...................................................... 3.50% 01/01/50 8,854,934
21,388,344 Pool SD7513...................................................... 3.50% 04/01/50 23,325,413
479,358 Pool U90772...................................................... 3.50% 01/01/43 519,808
643,509 Pool U99114...................................................... 3.50% 02/01/44 697,750
1,662,578 Pool WA3208...................................................... 3.98% 04/01/34 1,982,826
1,509,684 Pool ZA4692...................................................... 3.50% 06/01/46 1,631,660
646,915 Pool ZM0063...................................................... 4.00% 08/01/45 701,127
691,543 Pool ZS8602...................................................... 3.00% 03/01/31 726,835
1,200,103 Pool ZS9844...................................................... 3.50% 07/01/46 1,295,653
3,736,606 Pool ZT0277...................................................... 3.50% 10/01/46 4,037,732
1,439,545 Pool ZT0531...................................................... 3.50% 04/01/47 1,581,176
1,581,218 Pool ZT0536...................................................... 3.50% 03/01/48 1,726,218
924,803 Pool ZT0542...................................................... 4.00% 07/01/48 1,019,402
Page 18 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
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)
$ 266,002 Pool ZT1403...................................................... 3.50% 11/01/33 $ 281,347
3,029,115 Pool ZT1703...................................................... 4.00% 01/01/49 3,262,213
Federal National Mortgage Association
5,667,222 Pool AL8825...................................................... 3.50% 06/01/46 6,171,904
112,550 Pool AM5673...................................................... 3.65% 04/01/23 119,600
114,845 Pool AM7122...................................................... 3.61% 11/01/34 138,968
41,604 Pool AN0550...................................................... 3.63% 02/01/31 48,566
118,234 Pool AN2786...................................................... 2.76% 09/01/36 132,591
198,403 Pool AN4665...................................................... 3.49% 02/01/32 232,025
2,631,865 Pool AS0225...................................................... 4.00% 08/01/43 2,883,139
3,058,257 Pool AS3134...................................................... 3.50% 08/01/44 3,302,435
794,672 Pool AS6620...................................................... 3.50% 02/01/46 857,498
251,697 Pool AS9334...................................................... 3.00% 03/01/32 264,163
272,972 Pool AS9749...................................................... 4.00% 06/01/47 292,376
242,259 Pool BD7081...................................................... 4.00% 03/01/47 260,072
2,515,011 Pool BJ2692...................................................... 3.50% 04/01/48 2,665,353
2,120,000 Pool BL6060...................................................... 2.46% 04/01/40 2,270,668
1,889,089 Pool BM1903...................................................... 3.50% 08/01/47 2,052,219
735,014 Pool BM2000...................................................... 3.50% 05/01/47 778,977
1,906,751 Pool BM3260...................................................... 3.50% 01/01/48 2,052,283
926,660 Pool BM4299...................................................... 3.00% 03/01/30 972,885
904,625 Pool BM4304...................................................... 3.00% 02/01/30 949,248
1,554,245 Pool BM4472...................................................... 3.50% 07/01/48 1,706,779
2,054,046 Pool CA0854...................................................... 3.50% 12/01/47 2,236,233
934,346 Pool CA0907...................................................... 3.50% 12/01/47 1,017,150
838,432 Pool CA0996...................................................... 3.50% 01/01/48 913,536
6,314,775 Pool CA1182...................................................... 3.50% 02/01/48 6,873,405
1,684,702 Pool CA1187...................................................... 3.50% 02/01/48 1,789,810
1,047,733 Pool CA1710...................................................... 4.50% 05/01/48 1,130,974
693,696 Pool CA1711...................................................... 4.50% 05/01/48 750,174
431,981 Pool CA2208...................................................... 4.50% 08/01/48 466,644
977,797 Pool CA2327...................................................... 4.00% 09/01/48 1,086,803
6,494,258 Pool CA3633...................................................... 3.50% 06/01/49 7,045,859
7,474,247 Pool FM2870...................................................... 3.00% 03/01/50 7,981,053
552,898 Pool MA1146...................................................... 4.00% 08/01/42 605,873
823,679 Pool MA1373...................................................... 3.50% 03/01/43 892,861
915,205 Pool MA2077...................................................... 3.50% 11/01/34 989,493
241,224 Pool MA2145...................................................... 4.00% 01/01/45 264,044
1,245,863 Pool MA2670...................................................... 3.00% 07/01/46 1,317,226
1,135,153 Pool MA2806...................................................... 3.00% 11/01/46 1,198,200
34,814 Pool MA2896...................................................... 3.50% 02/01/47 36,906
1,424,251 Pool MA3057...................................................... 3.50% 07/01/47 1,508,932
609,714 Pool MA3088...................................................... 4.00% 08/01/47 654,871
1,380,823 Pool MA3210...................................................... 3.50% 12/01/47 1,462,016
15,138,456 Pool MA3238...................................................... 3.50% 01/01/48 16,015,745
1,289,626 Pool MA3239...................................................... 4.00% 01/01/48 1,381,942
672,831 Pool MA3276...................................................... 3.50% 02/01/48 711,880
1,957,265 Pool MA3332...................................................... 3.50% 04/01/48 2,070,876
479,999 Pool MA3336...................................................... 3.50% 04/01/38 509,555
See Notes to Financial Statements Page 19
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
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)
$ 335,611 Pool MA3410...................................................... 3.50% 07/01/33 $ 354,662
591,419 Pool MA3537...................................................... 4.50% 12/01/48 638,174
3,590,410 Pool MA3846...................................................... 3.00% 11/01/49 3,703,758
4,618,671 Pool MA4016...................................................... 2.50% 05/01/40 4,862,724
13,661,714 Pool MA4054...................................................... 2.50% 06/01/40 14,386,481
14,157,067 Pool MA4072...................................................... 2.50% 07/01/40 14,908,129
14,866,639 Pool MA4093...................................................... 2.00% 08/01/40 15,502,573
10,000,000 Pool MA4128...................................................... 2.00% 09/01/40 10,345,516
10,180,000 Pool MA4152...................................................... 2.00% 10/01/40 10,531,557
12,650,000 Pool TBA (c)..................................................... 1.50% 09/15/35 12,949,202
47,550,000 Pool TBA (c)..................................................... 2.00% 09/15/35 49,478,932
24,600,000 Pool TBA (c)..................................................... 2.50% 09/15/35 25,808,379
140,100,000 Pool TBA (c)..................................................... 2.00% 09/15/50 144,489,071
253,800,000 Pool TBA (c)..................................................... 2.50% 09/15/50 267,124,497
34,195,000 Pool TBA (c)..................................................... 3.00% 09/15/50 36,049,010
1,075,000 Pool TBA (c)..................................................... 5.00% 09/15/50 1,178,469
41,075,000 Pool TBA (c)..................................................... 3.00% 10/15/50 43,214,582
Government National Mortgage Association
362,358 Pool MA1157...................................................... 3.50% 07/20/43 392,751
484,072 Pool MA3521...................................................... 3.50% 03/20/46 516,845
355,016 Pool MA4069...................................................... 3.50% 11/20/46 377,220
205,033 Pool MA4195...................................................... 3.00% 01/20/47 216,876
249,905 Pool MA4196...................................................... 3.50% 01/20/47 266,655
1,155,923 Pool MA4261...................................................... 3.00% 02/20/47 1,218,420
331,693 Pool MA4262...................................................... 3.50% 02/20/47 353,695
9,377,271 Pool MA4382...................................................... 3.50% 04/20/47 9,997,734
108,954 Pool MA4453...................................................... 4.50% 05/20/47 118,906
122,524 Pool MA4586...................................................... 3.50% 07/20/47 130,094
779,608 Pool MA4588...................................................... 4.50% 07/20/47 849,000
2,018,819 Pool MA4651...................................................... 3.00% 08/20/47 2,128,977
3,119,470 Pool MA4652...................................................... 3.50% 08/20/47 3,328,296
1,126,954 Pool MA4719...................................................... 3.50% 09/20/47 1,202,497
124,753 Pool MA4722...................................................... 5.00% 09/20/47 137,729
104,358 Pool MA4777...................................................... 3.00% 10/20/47 110,075
2,794,012 Pool MA4778...................................................... 3.50% 10/20/47 2,981,293
2,525,061 Pool MA4836...................................................... 3.00% 11/20/47 2,664,151
2,733,121 Pool MA4837...................................................... 3.50% 11/20/47 2,915,852
926,667 Pool MA4838...................................................... 4.00% 11/20/47 995,237
152,672 Pool MA4901...................................................... 4.00% 12/20/47 164,211
663,782 Pool MA4961...................................................... 3.00% 01/20/48 699,791
991,458 Pool MA4962...................................................... 3.50% 01/20/48 1,053,993
1,447,332 Pool MA4963...................................................... 4.00% 01/20/48 1,555,418
803,424 Pool MA5078...................................................... 4.00% 03/20/48 863,503
1,889,452 Pool MA5136...................................................... 3.50% 04/20/48 2,006,839
1,731,691 Pool MA5399...................................................... 4.50% 08/20/48 1,870,285
646,892 Pool MA5466...................................................... 4.00% 09/20/48 694,119
184,865 Pool MA5467...................................................... 4.50% 09/20/48 200,253
551,892 Pool MA5597...................................................... 5.00% 11/20/48 600,304
1,879,202 Pool MA5976...................................................... 3.50% 06/20/49 1,939,998
Page 20 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
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)
$ 343,691 Pool MA6030...................................................... 3.50% 07/20/49 $ 354,778
1,716,715 Pool MA6080...................................................... 3.00% 08/20/49 1,768,439
16,875,000 Pool TBA (c)..................................................... 2.00% 09/15/50 17,485,401
92,450,000 Pool TBA (c)..................................................... 2.50% 09/15/50 97,419,187
27,575,000 Pool TBA (c)..................................................... 3.00% 09/15/50 29,037,768
--------------
1,121,181,524
--------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES....................................... 1,156,976,774
(Cost $1,143,111,940) --------------
U.S. GOVERNMENT BONDS AND NOTES -- 29.6%
170,899,000 U.S. Treasury Bond.................................................. 1.25% 05/15/50 162,380,753
7,045,000 U.S. Treasury Bond.................................................. 1.38% 08/15/50 6,914,007
15,040,255 U.S. Treasury Inflation Indexed Bond (d)............................ 0.25% 02/15/50 17,934,743
8,446,970 U.S. Treasury Inflation Indexed Note (d)............................ 0.13% 04/15/25 9,089,320
15,490,211 U.S. Treasury Inflation Indexed Note (d)............................ 0.13% 07/15/30 17,427,810
41,083,000 U.S. Treasury Note.................................................. 0.13% 05/31/22 41,071,766
326,856,000 U.S. Treasury Note.................................................. 0.13% 07/31/22 326,779,392
143,840,000 U.S. Treasury Note.................................................. 0.25% 06/30/25 143,828,763
96,518,000 U.S. Treasury Note.................................................. 0.25% 07/31/25 96,472,757
104,097,000 U.S. Treasury Note.................................................. 0.25% 08/31/25 104,036,005
52,735,000 U.S. Treasury Note.................................................. 0.38% 07/31/27 52,380,687
98,370,000 U.S. Treasury Note.................................................. 0.63% 08/15/30 97,716,762
--------------
TOTAL U.S. GOVERNMENT BONDS AND NOTES......................................................... 1,076,032,765
(Cost $1,074,303,053) --------------
CORPORATE BONDS AND NOTES -- 19.2%
AEROSPACE/DEFENSE -- 0.1%
143,000 BAE Systems Holdings, Inc. (e)...................................... 3.85% 12/15/25 161,829
1,705,000 Northrop Grumman Corp............................................... 5.25% 05/01/50 2,460,328
--------------
2,622,157
--------------
AGRICULTURE -- 0.2%
280,000 BAT Capital Corp.................................................... 4.39% 08/15/37 305,567
545,000 BAT Capital Corp.................................................... 4.54% 08/15/47 593,766
1,010,000 Reynolds American, Inc.............................................. 5.70% 08/15/35 1,254,701
3,735,000 Reynolds American, Inc.............................................. 5.85% 08/15/45 4,646,561
--------------
6,800,595
--------------
AIRLINES -- 0.6%
1,052,359 American Airlines Pass-Through Trust, Series 2014-1, Class A........ 3.70% 10/01/26 882,597
121,582 American Airlines Pass-Through Trust, Series 2015-2, Class AA....... 3.60% 09/22/27 115,531
4,046,847 American Airlines Pass-Through Trust, Series 2016-1, Class AA....... 3.58% 01/15/28 3,921,210
910,708 Continental Airlines Pass-Through Trust, Series 2007-1, Class A..... 5.98% 04/19/22 867,411
123,284 Delta Air Lines Pass-Through Trust, Series 2002-1, Class G1......... 6.72% 01/02/23 118,475
5,000,000 Delta Air Lines Pass-Through Trust, Series 2020-1, Class AA......... 2.00% 06/10/28 4,889,334
9,000,000 JetBlue Pass-Through Trust, Series 2020-1, Class A.................. 4.00% 11/15/32 9,299,388
485,167 US Airways Pass-Through Trust, Series 2012-1, Class A............... 5.90% 10/01/24 455,230
--------------
20,549,176
--------------
See Notes to Financial Statements Page 21
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
AUTO MANUFACTURERS -- 0.9%
$ 1,440,000 Daimler Finance North America LLC (e)............................... 2.20% 10/30/21 $ 1,465,471
1,965,000 Daimler Finance North America LLC, 3 Mo. LIBOR +
0.90% (b) (e).................................................... 1.18% 02/15/22 1,970,350
885,000 Ford Motor Credit Co. LLC........................................... 2.34% 11/02/20 884,447
2,000,000 Ford Motor Credit Co. LLC........................................... 5.09% 01/07/21 2,007,500
4,190,000 Ford Motor Credit Co. LLC........................................... 3.20% 01/15/21 4,200,475
1,020,000 Ford Motor Credit Co. LLC........................................... 5.75% 02/01/21 1,034,015
3,135,000 Ford Motor Credit Co. LLC, 3 Mo. LIBOR + 0.81% (b).................. 1.11% 04/05/21 3,088,319
285,000 Ford Motor Credit Co. LLC, 3 Mo. LIBOR + 0.88% (b).................. 1.15% 10/12/21 275,017
1,585,000 Ford Motor Credit Co. LLC........................................... 3.81% 10/12/21 1,594,748
2,916,000 Ford Motor Credit Co. LLC........................................... 5.60% 01/07/22 3,003,393
2,285,000 Ford Motor Credit Co. LLC........................................... 3.22% 01/09/22 2,281,892
390,000 Ford Motor Credit Co. LLC, 3 Mo. LIBOR + 1.27% (b).................. 1.58% 03/28/22 375,555
705,000 Ford Motor Credit Co. LLC........................................... 3.34% 03/28/22 709,265
150,000 Ford Motor Credit Co. LLC, 3 Mo. LIBOR + 1.08% (b).................. 1.33% 08/03/22 141,456
655,000 Ford Motor Credit Co. LLC........................................... 4.25% 09/20/22 666,390
1,822,000 General Motors Financial Co., Inc................................... 3.20% 07/06/21 1,851,310
2,360,000 General Motors Financial Co., Inc................................... 4.38% 09/25/21 2,441,338
2,140,000 General Motors Financial Co., Inc................................... 4.20% 11/06/21 2,213,545
760,000 General Motors Financial Co., Inc................................... 3.45% 04/10/22 782,499
2,095,000 General Motors Financial Co., Inc................................... 3.15% 06/30/22 2,159,309
--------------
33,146,294
--------------
BANKS -- 2.0%
180,000 Bank of America Corp. (f)........................................... 3.00% 12/20/23 189,753
1,500,000 Bank of America Corp., Medium-Term Note (f)......................... 1.32% 06/19/26 1,520,606
210,000 Bank of America Corp., Medium-Term Note (f)......................... 4.27% 07/23/29 248,546
840,000 Bank of America Corp., Medium-Term Note (f)......................... 2.50% 02/13/31 886,456
9,990,000 Bank of America Corp., Medium-Term Note (f)......................... 4.08% 03/20/51 12,556,151
1,505,000 Citigroup, Inc...................................................... 3.20% 10/21/26 1,678,458
1,670,000 Citigroup, Inc. (f)................................................. 4.41% 03/31/31 2,034,650
3,605,000 Citigroup, Inc. (f)................................................. 2.57% 06/03/31 3,820,633
2,720,000 Fifth Third Bancorp................................................. 2.55% 05/05/27 2,951,004
750,000 Goldman Sachs Group, (The), Inc. (f)................................ 2.91% 07/24/23 782,498
1,950,000 Goldman Sachs Group, (The), Inc. (f)................................ 3.27% 09/29/25 2,128,615
800,000 Goldman Sachs Group, (The), Inc. (f)................................ 3.69% 06/05/28 907,958
920,000 Goldman Sachs Group, (The), Inc..................................... 2.60% 02/07/30 982,446
1,890,000 JPMorgan Chase & Co. (f)............................................ 4.02% 12/05/24 2,091,610
500,000 JPMorgan Chase & Co................................................. 3.90% 07/15/25 569,095
1,455,000 JPMorgan Chase & Co................................................. 3.20% 06/15/26 1,629,707
4,055,000 JPMorgan Chase & Co. (f)............................................ 4.49% 03/24/31 5,001,744
2,360,000 JPMorgan Chase & Co. (f)............................................ 2.52% 04/22/31 2,534,251
2,505,000 JPMorgan Chase & Co. (f)............................................ 3.11% 04/22/51 2,737,940
2,145,000 Morgan Stanley, Global Medium-Term Note, SOFR + 0.70% (b)........... 0.79% 01/20/23 2,151,095
425,000 Morgan Stanley, Global Medium-Term Note (f)......................... 4.43% 01/23/30 513,745
400,000 PNC Bank N.A........................................................ 3.80% 07/25/23 436,411
690,000 PNC Bank N.A., Bank Note............................................ 2.50% 01/22/21 694,786
4,135,000 Wells Fargo & Co. (f)............................................... 3.07% 04/30/41 4,391,917
1,600,000 Wells Fargo & Co., Medium-Term Note (f)............................. 3.58% 05/22/28 1,796,813
2,895,000 Wells Fargo & Co., Medium-Term Note (f)............................. 2.39% 06/02/28 3,027,412
Page 22 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$ 5,790,000 Wells Fargo & Co., Medium-Term Note (f)............................. 2.88% 10/30/30 $ 6,237,077
4,460,000 Wells Fargo & Co., Medium-Term Note (f)............................. 2.57% 02/11/31 4,713,998
1,500,000 Wells Fargo & Co., Medium-Term Note (f)............................. 5.01% 04/04/51 2,054,767
--------------
71,270,142
--------------
BEVERAGES -- 0.2%
2,700,000 Anheuser-Busch Cos. LLC / Anheuser-Busch InBev Worldwide,
Inc.............................................................. 4.90% 02/01/46 3,344,443
635,000 Anheuser-Busch InBev Worldwide, Inc................................. 4.75% 01/23/29 775,063
1,200,000 Anheuser-Busch InBev Worldwide, Inc................................. 4.60% 04/15/48 1,432,911
200,000 Anheuser-Busch InBev Worldwide, Inc................................. 4.44% 10/06/48 233,745
2,000,000 Constellation Brands, Inc........................................... 3.75% 05/01/50 2,218,845
--------------
8,005,007
--------------
BIOTECHNOLOGY -- 0.2%
1,412,000 Amgen, Inc.......................................................... 4.40% 05/01/45 1,776,945
175,000 Gilead Sciences, Inc................................................ 3.65% 03/01/26 200,902
5,510,000 Regeneron Pharmaceuticals, Inc...................................... 1.75% 09/15/30 5,409,403
--------------
7,387,250
--------------
CHEMICALS -- 0.2%
5,744,000 International Flavors & Fragrances, Inc............................. 5.00% 09/26/48 7,155,776
--------------
COMMERCIAL SERVICES -- 0.3%
2,000,000 Brown University in Providence in the State of Rhode Island and
Providence Plant, Series A....................................... 2.92% 09/01/50 2,198,096
2,035,000 Duke University, Series 2020........................................ 2.83% 10/01/55 2,173,728
2,500,000 RELX Capital, Inc................................................... 3.00% 05/22/30 2,751,345
950,000 University of (The) Chicago, Series 20B............................. 2.76% 04/01/45 1,011,573
1,750,000 William Marsh Rice University....................................... 3.77% 05/15/55 2,268,821
--------------
10,403,563
--------------
COMPUTERS -- 0.1%
1,500,000 Apple, Inc.......................................................... 2.65% 05/11/50 1,556,117
732,000 Dell International LLC / EMC Corp. (e).............................. 4.42% 06/15/21 751,003
--------------
2,307,120
--------------
DIVERSIFIED FINANCIAL SERVICES -- 0.3%
1,485,000 Air Lease Corp...................................................... 3.50% 01/15/22 1,518,224
1,890,000 Air Lease Corp...................................................... 3.25% 03/01/25 1,919,397
360,000 Air Lease Corp., Medium-Term Note................................... 2.30% 02/01/25 353,895
2,010,000 GE Capital Funding LLC (e).......................................... 4.40% 05/15/30 2,124,967
3,445,000 Intercontinental Exchange, Inc...................................... 1.85% 09/15/32 3,505,315
450,000 Raymond James Financial, Inc........................................ 4.95% 07/15/46 576,784
--------------
9,998,582
--------------
ELECTRIC -- 1.5%
4,128,000 Alliant Energy Finance LLC (e)...................................... 3.75% 06/15/23 4,445,432
200,000 Ameren Illinois Co.................................................. 3.70% 12/01/47 240,180
3,000,000 Appalachian Power Co., Series Z..................................... 3.70% 05/01/50 3,414,234
5,000,000 Arizona Public Service Co........................................... 3.35% 05/15/50 5,614,381
750,000 Cleco Power LLC..................................................... 6.00% 12/01/40 991,697
See Notes to Financial Statements Page 23
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
ELECTRIC (CONTINUED)
$ 500,000 Consolidated Edison Co. of New York, Inc............................ 4.50% 05/15/58 $ 643,310
1,695,000 Dominion Energy, Inc., Series A..................................... 3.30% 03/15/25 1,887,000
155,000 Duke Energy Carolinas LLC........................................... 3.70% 12/01/47 187,316
7,229,000 Duquesne Light Holdings, Inc. (e)................................... 5.90% 12/01/21 7,626,821
750,000 Entergy Texas, Inc.................................................. 3.45% 12/01/27 819,296
1,250,000 Interstate Power and Light Co....................................... 3.25% 12/01/24 1,379,783
4,855,000 Interstate Power and Light Co....................................... 2.30% 06/01/30 5,106,479
3,000,000 ITC Holdings Corp. (e).............................................. 2.95% 05/14/30 3,266,300
830,000 Metropolitan Edison Co. (e)......................................... 4.00% 04/15/25 919,880
2,253,000 Metropolitan Edison Co. (e)......................................... 4.30% 01/15/29 2,660,543
10,000,000 Niagara Mohawk Power Corp. (e)...................................... 3.03% 06/27/50 10,710,275
1,150,000 PNM Resources, Inc.................................................. 3.25% 03/09/21 1,165,300
825,000 Public Service Co. of New Mexico.................................... 3.85% 08/01/25 908,827
300,000 Southwestern Electric Power Co...................................... 3.55% 02/15/22 310,841
700,000 Trans-Allegheny Interstate Line Co. (e)............................. 3.85% 06/01/25 770,022
750,000 Tucson Electric Power Co............................................ 5.15% 11/15/21 780,445
355,000 Virginia Electric and Power Co...................................... 4.60% 12/01/48 493,237
1,505,000 Xcel Energy, Inc.................................................... 4.80% 09/15/41 1,929,383
--------------
56,270,982
--------------
ENGINEERING & CONSTRUCTION -- 0.1%
3,254,000 PowerTeam Services LLC (e).......................................... 9.03% 12/04/25 3,467,544
--------------
ENTERTAINMENT -- 0.2%
1,842,000 Caesars Entertainment, Inc. (e)..................................... 6.25% 07/01/25 1,954,814
1,997,000 Churchill Downs, Inc. (e)........................................... 5.50% 04/01/27 2,101,473
740,000 Churchill Downs, Inc. (e)........................................... 4.75% 01/15/28 756,513
1,329,000 Live Nation Entertainment, Inc. (e)................................. 6.50% 05/15/27 1,450,311
488,000 Live Nation Entertainment, Inc. (e)................................. 4.75% 10/15/27 461,616
--------------
6,724,727
--------------
ENVIRONMENTAL CONTROL -- 0.1%
1,573,000 Clean Harbors, Inc. (e)............................................. 5.13% 07/15/29 1,723,119
1,722,000 Waste Pro USA, Inc. (e)............................................. 5.50% 02/15/26 1,778,663
--------------
3,501,782
--------------
FOOD -- 0.5%
1,000,000 Campbell Soup Co., 3 Mo. LIBOR + 0.63% (b).......................... 0.94% 03/15/21 1,001,982
1,500,000 Kraft Heinz Foods Co................................................ 5.00% 07/15/35 1,739,605
2,405,000 Kraft Heinz Foods Co................................................ 5.00% 06/04/42 2,666,764
2,635,000 Kraft Heinz Foods Co................................................ 5.20% 07/15/45 3,003,044
3,845,000 Kraft Heinz Foods Co................................................ 4.38% 06/01/46 3,950,364
2,755,000 Kraft Heinz Foods Co. (e)........................................... 4.88% 10/01/49 3,043,087
97,000 Kroger (The) Co..................................................... 5.40% 01/15/49 133,756
20,000 Lamb Weston Holdings, Inc. (e)...................................... 4.63% 11/01/24 20,923
1,611,000 Pilgrim's Pride Corp. (e)........................................... 5.88% 09/30/27 1,713,701
1,250,000 Post Holdings, Inc. (e)............................................. 5.50% 12/15/29 1,370,344
377,000 Post Holdings, Inc. (e)............................................. 4.63% 04/15/30 393,965
--------------
19,037,535
--------------
Page 24 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
FOREST PRODUCTS & PAPER -- 0.1%
$ 2,200,000 Georgia-Pacific LLC (e)............................................. 2.30% 04/30/30 $ 2,340,531
--------------
GAS -- 0.0%
500,000 Piedmont Natural Gas Co., Inc....................................... 3.35% 06/01/50 561,494
400,000 Southern Co. Gas Capital Corp....................................... 5.88% 03/15/41 555,267
200,000 Spire, Inc.......................................................... 3.54% 02/27/24 212,418
--------------
1,329,179
--------------
HEALTHCARE-PRODUCTS -- 0.2%
2,390,000 Alcon Finance Corp. (e)............................................. 2.75% 09/23/26 2,601,886
1,500,000 Alcon Finance Corp. (e)............................................. 2.60% 05/27/30 1,593,434
3,015,000 DENTSPLY SIRONA, Inc................................................ 3.25% 06/01/30 3,273,120
1,180,000 Zimmer Biomet Holdings, Inc......................................... 3.55% 03/20/30 1,319,146
--------------
8,787,586
--------------
HEALTHCARE-SERVICES -- 1.8%
1,300,000 Advocate Health & Hospitals Corp., Series 2020...................... 3.01% 06/15/50 1,385,400
120,000 Anthem, Inc......................................................... 3.65% 12/01/27 137,894
2,300,000 Anthem, Inc......................................................... 2.88% 09/15/29 2,512,600
2,485,000 Banner Health, Series 2020.......................................... 3.18% 01/01/50 2,738,214
200,000 Centene Corp. (e)................................................... 5.38% 08/15/26 212,563
8,070,000 Centene Corp........................................................ 4.63% 12/15/29 8,865,097
5,154,000 Encompass Health Corp............................................... 4.75% 02/01/30 5,380,106
5,215,000 Hackensack Meridian Health, Inc., Series 2020....................... 2.88% 09/01/50 5,215,159
1,428,000 HCA, Inc............................................................ 4.75% 05/01/23 1,571,135
2,315,000 HCA, Inc............................................................ 5.00% 03/15/24 2,618,008
3,490,000 HCA, Inc............................................................ 4.13% 06/15/29 4,025,483
3,379,000 HCA, Inc............................................................ 3.50% 09/01/30 3,561,217
400,000 HCA, Inc............................................................ 5.13% 06/15/39 498,164
1,540,000 HCA, Inc............................................................ 5.25% 06/15/49 1,940,033
500,000 Humana, Inc......................................................... 3.15% 12/01/22 526,341
360,000 Humana, Inc......................................................... 2.90% 12/15/22 378,411
3,475,000 Methodist (The) Hospital, Series 20A................................ 2.71% 12/01/50 3,474,638
1,386,000 Molina Healthcare, Inc.............................................. 5.38% 11/15/22 1,454,780
2,000,000 Molina Healthcare, Inc. (e)......................................... 4.38% 06/15/28 2,092,000
200,000 New York and Presbyterian (The) Hospital............................ 3.56% 08/01/36 223,506
3,230,000 NYU Langone Hospitals, Series 2020.................................. 3.38% 07/01/55 3,374,035
650,000 Partners Healthcare System, Inc., Series 2020....................... 3.34% 07/01/60 715,422
1,509,000 Stanford Health Care, Series 2018................................... 3.80% 11/15/48 1,900,252
101,000 Tenet Healthcare Corp............................................... 4.63% 07/15/24 103,424
1,213,000 Tenet Healthcare Corp. (e).......................................... 4.88% 01/01/26 1,263,024
3,943,000 Tenet Healthcare Corp. (e).......................................... 5.13% 11/01/27 4,170,511
1,440,000 UnitedHealth Group, Inc............................................. 3.75% 07/15/25 1,651,843
160,000 UnitedHealth Group, Inc............................................. 4.45% 12/15/48 213,610
605,000 UnitedHealth Group, Inc............................................. 3.70% 08/15/49 735,265
1,185,000 UnitedHealth Group, Inc............................................. 2.90% 05/15/50 1,262,937
725,000 UnitedHealth Group, Inc............................................. 3.88% 08/15/59 909,945
--------------
65,111,017
--------------
INSURANCE -- 0.8%
3,050,000 Aon Corp............................................................ 2.80% 05/15/30 3,311,986
1,465,000 Berkshire Hathaway Finance Corp..................................... 4.20% 08/15/48 1,892,037
See Notes to Financial Statements Page 25
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
INSURANCE (CONTINUED)
$ 700,000 Farmers Exchange Capital III (e) (f)................................ 5.45% 10/15/54 $ 846,637
600,000 Farmers Insurance Exchange (e)...................................... 8.63% 05/01/24 707,490
3,495,000 Farmers Insurance Exchange (e) (f).................................. 4.75% 11/01/57 3,606,298
1,800,000 Massachusetts Mutual Life Insurance Co. (e)......................... 3.38% 04/15/50 1,871,231
525,000 Nationwide Mutual Insurance Co., 3 Mo. LIBOR + 2.29% (b) (e)........ 2.60% 12/15/24 524,672
5,785,000 New York Life Insurance Co. (e)..................................... 3.75% 05/15/50 6,605,144
3,000,000 Teachers Insurance & Annuity Association of America (e)............. 4.27% 05/15/47 3,572,133
3,770,000 Teachers Insurance & Annuity Association of America (e)............. 3.30% 05/15/50 3,920,682
240,000 Teachers Insurance & Annuity Association of America (e) (f)......... 4.38% 09/15/54 255,857
2,055,000 Willis North America, Inc........................................... 2.95% 09/15/29 2,231,723
--------------
29,345,890
--------------
MEDIA -- 0.9%
633,000 CCO Holdings LLC / CCO Holdings Capital Corp. (e)................... 5.38% 06/01/29 695,439
1,003,000 CCO Holdings LLC / CCO Holdings Capital Corp. (e)................... 4.50% 08/15/30 1,065,692
3,322,000 CCO Holdings LLC / CCO Holdings Capital Corp. (e)................... 4.25% 02/01/31 3,479,312
2,475,000 Charter Communications Operating LLC / Charter Communications
Operating Capital................................................ 4.91% 07/23/25 2,881,960
1,471,000 Charter Communications Operating LLC / Charter Communications
Operating Capital................................................ 5.38% 04/01/38 1,797,060
100,000 Comcast Corp........................................................ 3.97% 11/01/47 120,364
345,000 CSC Holdings LLC (e)................................................ 5.38% 02/01/28 368,936
2,929,000 CSC Holdings LLC (e)................................................ 6.50% 02/01/29 3,300,617
1,650,000 Time Warner Cable LLC............................................... 5.88% 11/15/40 2,105,609
2,450,000 Time Warner Cable LLC............................................... 5.50% 09/01/41 3,019,348
300,000 ViacomCBS, Inc...................................................... 3.70% 08/15/24 329,336
200,000 ViacomCBS, Inc...................................................... 3.70% 06/01/28 221,847
4,000,000 ViacomCBS, Inc...................................................... 4.95% 01/15/31 4,788,363
2,040,000 Walt Disney (The) Co................................................ 2.65% 01/13/31 2,214,585
5,770,000 Walt Disney (The) Co................................................ 3.60% 01/13/51 6,606,810
--------------
32,995,278
--------------
MISCELLANEOUS MANUFACTURING -- 0.2%
1,000,000 General Electric Co., Global Medium-Term Note....................... 6.88% 01/10/39 1,275,828
1,000,000 General Electric Co., Medium-Term Note, 3 Mo. LIBOR +
0.38% (b)........................................................ 0.63% 05/05/26 925,706
2,775,000 General Electric Co., Medium-Term Note.............................. 6.75% 03/15/32 3,479,662
1,395,000 General Electric Co., Medium-Term Note.............................. 5.88% 01/14/38 1,612,709
--------------
7,293,905
--------------
OIL & GAS -- 0.5%
273,000 Antero Resources Corp............................................... 5.13% 12/01/22 235,387
3,644,000 Antero Resources Corp............................................... 5.63% 06/01/23 2,911,738
665,000 Antero Resources Corp............................................... 5.00% 03/01/25 457,261
2,435,000 BP Capital Markets America, Inc..................................... 3.63% 04/06/30 2,806,625
3,000,000 Chevron Corp........................................................ 2.24% 05/11/30 3,207,690
33,000 Endeavor Energy Resources L.P. / EER Finance, Inc. (e).............. 5.75% 01/30/28 33,819
1,770,000 EQT Corp............................................................ 3.90% 10/01/27 1,716,334
1,450,000 Exxon Mobil Corp.................................................... 2.61% 10/15/30 1,579,988
635,000 Exxon Mobil Corp.................................................... 4.23% 03/19/40 787,420
Page 26 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL & GAS (CONTINUED)
$ 3,180,000 Exxon Mobil Corp.................................................... 4.33% 03/19/50 $ 4,091,978
7,000 Gulfport Energy Corp................................................ 6.38% 05/15/25 4,156
400,000 Hess Corp........................................................... 5.60% 02/15/41 461,304
--------------
18,293,700
--------------
OIL & GAS SERVICES -- 0.1%
1,510,000 USA Compression Partners L.P. / USA Compression Finance
Corp............................................................. 6.88% 04/01/26 1,558,682
350,000 USA Compression Partners L.P. / USA Compression Finance
Corp............................................................. 6.88% 09/01/27 362,842
--------------
1,921,524
--------------
PACKAGING & CONTAINERS -- 0.4%
650,000 Amcor Finance USA, Inc.............................................. 4.50% 05/15/28 763,914
5,000,000 Bemis Co., Inc...................................................... 2.63% 06/19/30 5,382,694
50,000 Graphic Packaging International LLC................................. 4.88% 11/15/22 52,551
3,150,000 Graphic Packaging International LLC (e)............................. 4.75% 07/15/27 3,491,366
240,000 Matthews International Corp. (e).................................... 5.25% 12/01/25 227,675
140,000 Mauser Packaging Solutions Holding Co. (e).......................... 5.50% 04/15/24 142,304
1,840,000 Sealed Air Corp. (e)................................................ 4.00% 12/01/27 1,964,200
355,000 WRKCo, Inc.......................................................... 4.90% 03/15/29 437,666
3,670,000 WRKCo, Inc.......................................................... 3.00% 06/15/33 3,984,070
--------------
16,446,440
--------------
PHARMACEUTICALS -- 1.6%
1,550,000 AbbVie, Inc. (e).................................................... 3.80% 03/15/25 1,734,818
4,450,000 AbbVie, Inc. (e).................................................... 3.20% 11/21/29 4,947,828
690,000 AbbVie, Inc. (e).................................................... 4.05% 11/21/39 808,801
4,150,000 AbbVie, Inc......................................................... 4.40% 11/06/42 5,023,978
1,870,000 AbbVie, Inc......................................................... 4.45% 05/14/46 2,272,199
450,000 AbbVie, Inc......................................................... 4.88% 11/14/48 582,556
25,000 AbbVie, Inc. (e).................................................... 4.25% 11/21/49 30,284
1,895,000 Bayer US Finance II LLC (e)......................................... 3.88% 12/15/23 2,080,079
1,045,000 Bayer US Finance II LLC (e)......................................... 3.38% 07/15/24 1,136,214
2,085,000 Bayer US Finance II LLC (e)......................................... 4.25% 12/15/25 2,400,537
3,160,000 Bayer US Finance II LLC (e)......................................... 4.38% 12/15/28 3,711,094
815,000 Bayer US Finance II LLC (e)......................................... 4.63% 06/25/38 975,541
425,000 Bayer US Finance II LLC (e)......................................... 4.40% 07/15/44 483,075
2,540,000 Bayer US Finance II LLC (e)......................................... 4.88% 06/25/48 3,152,516
460,000 Bayer US Finance LLC (e)............................................ 3.38% 10/08/24 504,211
88,000 Becton Dickinson and Co............................................. 3.25% 11/12/20 88,430
1,000,000 Becton Dickinson and Co............................................. 2.89% 06/06/22 1,038,477
3,385,000 Becton Dickinson and Co............................................. 3.36% 06/06/24 3,686,454
1,000,000 Becton Dickinson and Co............................................. 6.70% 08/01/28 1,265,628
2,000,000 Cigna Corp.......................................................... 3.40% 03/01/27 2,242,861
75,000 Cigna Corp.......................................................... 3.05% 10/15/27 83,257
4,204,000 Cigna Corp.......................................................... 2.40% 03/15/30 4,422,543
1,030,000 Cigna Corp.......................................................... 3.88% 10/15/47 1,180,813
2,129,000 Cigna Corp.......................................................... 4.90% 12/15/48 2,856,747
150,000 CVS Health Corp..................................................... 3.88% 07/20/25 170,056
1,850,000 CVS Health Corp..................................................... 5.13% 07/20/45 2,399,109
See Notes to Financial Statements Page 27
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
PHARMACEUTICALS (CONTINUED)
$ 4,775,000 CVS Health Corp..................................................... 5.05% 03/25/48 $ 6,236,797
535,000 Elanco Animal Health, Inc........................................... 5.27% 08/28/23 586,828
2,443,000 Elanco Animal Health, Inc........................................... 5.90% 08/28/28 2,899,572
75,000 Johnson & Johnson................................................... 3.63% 03/03/37 91,728
--------------
59,093,031
--------------
PIPELINES -- 1.2%
140,000 Cheniere Energy Partners L.P........................................ 5.25% 10/01/25 141,890
145,000 Energy Transfer Operating L.P....................................... 5.20% 02/01/22 151,144
198,000 Energy Transfer Operating L.P....................................... 5.50% 06/01/27 221,438
2,030,000 Energy Transfer Operating L.P....................................... 4.95% 06/15/28 2,177,869
315,000 Energy Transfer Operating L.P....................................... 3.75% 05/15/30 313,273
3,200,000 Energy Transfer Operating L.P....................................... 4.90% 03/15/35 3,190,911
260,000 Energy Transfer Operating L.P....................................... 5.15% 03/15/45 243,837
2,600,000 Energy Transfer Operating L.P....................................... 6.13% 12/15/45 2,663,897
2,000,000 Energy Transfer Operating L.P....................................... 6.25% 04/15/49 2,104,525
1,015,000 Energy Transfer Operating L.P....................................... 5.00% 05/15/50 972,718
1,270,000 Kinder Morgan Energy Partners L.P................................... 5.80% 03/15/35 1,577,059
650,000 Kinder Morgan, Inc.................................................. 5.30% 12/01/34 780,630
922,000 NGPL PipeCo LLC (e)................................................. 4.38% 08/15/22 956,534
3,640,000 NGPL PipeCo LLC (e)................................................. 4.88% 08/15/27 3,990,973
273,390 Pipeline Funding Co. LLC (e)........................................ 7.50% 01/15/30 376,946
150,000 Plains All American Pipeline L.P. / PAA Finance Corp................ 2.85% 01/31/23 153,643
200,000 Plains All American Pipeline L.P. / PAA Finance Corp................ 3.85% 10/15/23 211,027
50,000 Plains All American Pipeline L.P. / PAA Finance Corp................ 4.65% 10/15/25 54,424
885,000 Plains All American Pipeline L.P. / PAA Finance Corp................ 4.50% 12/15/26 963,544
425,000 Plains All American Pipeline L.P. / PAA Finance Corp................ 3.55% 12/15/29 424,378
716,000 Rockies Express Pipeline LLC (e).................................... 4.95% 07/15/29 721,370
1,500,000 Rockies Express Pipeline LLC (e).................................... 4.80% 05/15/30 1,491,562
1,360,000 Rockies Express Pipeline LLC (e).................................... 6.88% 04/15/40 1,407,600
390,682 Ruby Pipeline LLC (e)............................................... 7.00% 04/01/22 348,771
325,000 Sabine Pass Liquefaction LLC........................................ 5.63% 03/01/25 378,554
1,000,000 Sabine Pass Liquefaction LLC........................................ 5.00% 03/15/27 1,138,329
2,000,000 Sabine Pass Liquefaction LLC........................................ 4.20% 03/15/28 2,200,873
3,000,000 Sabine Pass Liquefaction LLC (e).................................... 4.50% 05/15/30 3,437,831
400,000 Sunoco Logistics Partners Operations L.P............................ 3.90% 07/15/26 419,959
1,135,000 Sunoco Logistics Partners Operations L.P............................ 5.30% 04/01/44 1,080,203
1,606,000 Sunoco Logistics Partners Operations L.P............................ 5.40% 10/01/47 1,596,932
145,000 TC PipeLines L.P.................................................... 4.65% 06/15/21 148,133
1,000,000 TC PipeLines L.P.................................................... 4.38% 03/13/25 1,083,378
1,250,000 TC PipeLines L.P.................................................... 3.90% 05/25/27 1,350,638
1,775,000 TransMontaigne Partners L.P. / TLP Finance Corp..................... 6.13% 02/15/26 1,813,056
400,000 Williams Cos (The), Inc............................................. 4.50% 11/15/23 442,471
600,000 Williams Cos (The), Inc............................................. 4.30% 03/04/24 659,554
500,000 Williams Cos (The), Inc............................................. 5.10% 09/15/45 586,514
--------------
41,976,388
--------------
REAL ESTATE INVESTMENT TRUSTS -- 1.8%
250,000 Alexandria Real Estate Equities, Inc................................ 4.30% 01/15/26 290,722
1,107,000 Alexandria Real Estate Equities, Inc................................ 3.80% 04/15/26 1,267,708
612,000 Alexandria Real Estate Equities, Inc................................ 4.50% 07/30/29 749,912
Page 28 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
$ 4,320,000 American Campus Communities Operating Partnership L.P............... 3.75% 04/15/23 $ 4,533,208
800,000 American Campus Communities Operating Partnership L.P............... 4.13% 07/01/24 866,118
4,545,000 American Campus Communities Operating Partnership L.P............... 3.30% 07/15/26 4,874,448
250,000 American Campus Communities Operating Partnership L.P............... 3.63% 11/15/27 264,030
215,000 American Tower Corp................................................. 3.00% 06/15/23 229,008
785,000 Boston Properties L.P............................................... 3.20% 01/15/25 854,442
1,945,000 Boston Properties L.P............................................... 3.25% 01/30/31 2,125,949
625,000 CC Holdings GS V LLC / Crown Castle GS III Corp..................... 3.85% 04/15/23 675,161
750,000 CubeSmart L.P....................................................... 4.38% 02/15/29 879,508
3,425,000 CyrusOne L.P. / CyrusOne Finance Corp............................... 2.90% 11/15/24 3,666,617
2,710,000 GLP Capital L.P. / GLP Financing II, Inc............................ 3.35% 09/01/24 2,750,365
1,000,000 GLP Capital L.P. / GLP Financing II, Inc............................ 5.25% 06/01/25 1,084,790
1,750,000 GLP Capital L.P. / GLP Financing II, Inc............................ 5.38% 04/15/26 1,945,335
1,210,000 GLP Capital L.P. / GLP Financing II, Inc............................ 5.30% 01/15/29 1,341,751
475,000 GLP Capital L.P. / GLP Financing II, Inc............................ 4.00% 01/15/30 493,751
7,005,000 GLP Capital L.P. / GLP Financing II, Inc............................ 4.00% 01/15/31 7,273,292
1,175,000 Healthcare Realty Trust, Inc........................................ 3.75% 04/15/23 1,236,224
914,000 Healthcare Realty Trust, Inc........................................ 3.63% 01/15/28 982,660
2,000,000 Healthcare Trust of America Holdings L.P............................ 3.10% 02/15/30 2,117,559
20,000 Healthpeak Properties, Inc.......................................... 4.25% 11/15/23 21,914
475,000 Healthpeak Properties, Inc.......................................... 3.88% 08/15/24 530,018
1,430,000 Healthpeak Properties, Inc.......................................... 3.00% 01/15/30 1,557,593
3,335,000 Hudson Pacific Properties L.P....................................... 3.95% 11/01/27 3,613,829
1,000,000 Hudson Pacific Properties L.P....................................... 4.65% 04/01/29 1,129,828
1,000,000 Kilroy Realty L.P................................................... 3.45% 12/15/24 1,063,285
860,000 Kilroy Realty L.P................................................... 2.50% 11/15/32 845,425
1,300,000 Kimco Realty Corp................................................... 3.40% 11/01/22 1,368,016
1,605,000 Lexington Realty Trust.............................................. 2.70% 09/15/30 1,629,166
200,000 Life Storage L.P.................................................... 3.88% 12/15/27 222,623
40,000 MGM Growth Properties Operating Partnership L.P. / MGP Finance
Co.-Issuer, Inc.................................................. 5.63% 05/01/24 43,304
1,714,000 MGM Growth Properties Operating Partnership L.P. / MGP Finance
Co.-Issuer, Inc. (e)............................................. 4.63% 06/15/25 1,801,414
80,000 MGM Growth Properties Operating Partnership L.P. / MGP Finance
Co.-Issuer, Inc.................................................. 4.50% 01/15/28 82,485
176,000 National Retail Properties, Inc..................................... 3.30% 04/15/23 185,110
350,000 Piedmont Operating Partnership L.P.................................. 3.40% 06/01/23 360,877
670,000 Piedmont Operating Partnership L.P.................................. 3.15% 08/15/30 659,662
22,000 SBA Communications Corp............................................. 4.88% 09/01/24 22,626
6,580,000 SL Green Operating Partnership L.P., 3 Mo. LIBOR + 0.98% (b)........ 1.26% 08/16/21 6,526,708
300,000 SL Green Operating Partnership L.P.................................. 3.25% 10/15/22 306,547
550,000 SL Green Realty Corp................................................ 4.50% 12/01/22 573,891
1,000,000 Ventas Realty L.P................................................... 2.65% 01/15/25 1,045,237
400,000 Ventas Realty L.P................................................... 3.85% 04/01/27 432,266
550,000 WEA Finance LLC (e)................................................. 3.15% 04/05/22 559,690
75,000 Welltower, Inc...................................................... 4.50% 01/15/24 82,314
1,125,000 Welltower, Inc...................................................... 4.00% 06/01/25 1,268,232
--------------
66,434,618
--------------
See Notes to Financial Statements Page 29
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
RETAIL -- 0.1%
$ 770,000 McDonald's Corp., Medium-Term Note.................................. 3.63% 09/01/49 $ 872,682
390,000 Rite Aid Corp. (e).................................................. 8.00% 11/15/26 396,825
1,760,000 Starbucks Corp...................................................... 2.25% 03/12/30 1,824,088
500,000 Walgreens Boots Alliance, Inc....................................... 3.30% 11/18/21 514,761
150,000 Walgreens Boots Alliance, Inc....................................... 3.80% 11/18/24 165,850
--------------
3,774,206
--------------
SEMICONDUCTORS -- 0.3%
2,880,000 Broadcom Corp. / Broadcom Cayman Finance Ltd........................ 3.63% 01/15/24 3,112,895
935,000 Broadcom, Inc....................................................... 3.63% 10/15/24 1,025,490
5,400,000 Intel Corp.......................................................... 4.75% 03/25/50 7,505,808
--------------
11,644,193
--------------
SOFTWARE -- 0.1%
140,000 Change Healthcare Holdings LLC / Change Healthcare Finance,
Inc. (e)......................................................... 5.75% 03/01/25 142,275
1,400,000 Fiserv, Inc......................................................... 2.25% 06/01/27 1,487,729
510,000 Fiserv, Inc......................................................... 2.65% 06/01/30 549,293
2,372,000 SS&C Technologies, Inc. (e)......................................... 5.50% 09/30/27 2,543,614
--------------
4,722,911
--------------
TELECOMMUNICATIONS -- 1.6%
1,025,000 AT&T, Inc........................................................... 4.30% 02/15/30 1,225,644
3,175,000 AT&T, Inc........................................................... 4.50% 05/15/35 3,808,372
1,000,000 AT&T, Inc........................................................... 5.25% 03/01/37 1,265,160
1,640,000 AT&T, Inc........................................................... 4.30% 12/15/42 1,871,617
1,947,000 AT&T, Inc........................................................... 4.80% 06/15/44 2,352,951
8,270,000 AT&T, Inc........................................................... 4.75% 05/15/46 9,959,095
500,000 AT&T, Inc........................................................... 5.15% 11/15/46 629,435
4,000,000 AT&T, Inc........................................................... 4.50% 03/09/48 4,720,727
3,875,000 AT&T, Inc........................................................... 3.30% 02/01/52 3,858,165
1,422,000 CenturyLink, Inc. (e)............................................... 4.00% 02/15/27 1,445,975
215,000 Level 3 Financing, Inc.............................................. 5.38% 01/15/24 218,202
140,000 Level 3 Financing, Inc. (e)......................................... 4.63% 09/15/27 146,901
1,150,000 Level 3 Financing, Inc. (e)......................................... 3.88% 11/15/29 1,252,068
185,000 Qwest Corp.......................................................... 7.25% 09/15/25 214,870
1,000,000 SES GLOBAL Americas Holdings G.P. (e)............................... 5.30% 03/25/44 1,047,681
3,249,000 Sprint Corp......................................................... 7.88% 09/15/23 3,783,054
1,014,063 Sprint Spectrum Co. LLC / Sprint Spectrum Co. II LLC / Sprint
Spectrum Co. III LLC (e)......................................... 3.36% 09/20/21 1,027,514
2,835,000 Sprint Spectrum Co. LLC / Sprint Spectrum Co. II LLC / Sprint
Spectrum Co. III LLC (e)......................................... 4.74% 03/20/25 3,085,203
4,030,000 Sprint Spectrum Co. LLC / Sprint Spectrum Co. II LLC / Sprint
Spectrum Co. III LLC (e)......................................... 5.15% 03/20/28 4,752,015
1,423,000 T-Mobile USA, Inc. (e).............................................. 3.88% 04/15/30 1,632,864
4,540,000 T-Mobile USA, Inc. (e).............................................. 2.55% 02/15/31 4,752,881
2,845,000 T-Mobile USA, Inc. (e).............................................. 4.38% 04/15/40 3,407,798
1,150,000 Verizon Communications, Inc......................................... 4.13% 03/16/27 1,361,778
1,150,000 Verizon Communications, Inc......................................... 3.15% 03/22/30 1,303,519
--------------
59,123,489
--------------
TOTAL CORPORATE BONDS AND NOTES................................................................ 699,282,118
(Cost $656,840,936) --------------
Page 30 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
ASSET-BACKED SECURITIES -- 6.5%
ACE Securities Corp. Home Equity Loan Trust
$ 18,247,887 Series 2007-HE1, Class A1, 1 Mo. LIBOR + 0.15% (b)............... 0.33% 01/25/37 $ 12,419,497
15,558,752 Series 2007-WM2, Class A1, 1 Mo. LIBOR + 0.21% (b)............... 0.39% 02/25/37 8,891,726
Ajax Mortgage Loan Trust
5,171,752 Series 2019-F, Class A1, steps up to 3.86% on 11/25/26 (e) (g)... 2.86% 07/25/59 5,313,352
Ammc CLO 19 Ltd.
4,675,000 Series 2016-19A, Class AR, 3 Mo. LIBOR + 1.14% (b) (e)........... 1.42% 10/16/28 4,646,950
Argent Securities, Inc.
255,000 Series 2005-W2, Class M1, 1 Mo. LIBOR + 0.49% (b)................ 0.67% 10/25/35 251,002
Asset Backed Funding Certificates Trust
10,740,902 Series 2006-HE1, Class A2B, 1 Mo. LIBOR + 0.11% (b).............. 0.29% 01/25/37 7,610,309
87,975 Series 2006-OPT1, Class A2, 1 Mo. LIBOR + 0.14% (b).............. 0.32% 09/25/36 86,978
Barings CLO Ltd.
374,709 Series 2013-IA, Class AR, 3 Mo. LIBOR + 0.80% (b) (e)............ 1.07% 01/20/28 371,300
767,000 Series 2016-2A, Class AR, 3 Mo. LIBOR + 1.08% (b) (e)............ 1.35% 07/20/28 766,737
BlueMountain CLO Ltd.
545,802 Series 2013-2A, Class A1R, 3 Mo. LIBOR + 1.18% (b) (e)........... 1.44% 10/22/30 541,612
Brazos Higher Education Authority, Inc.
270,000 Series 2011-1, Class A3, 3 Mo. LIBOR + 1.05% (b)................. 1.30% 11/25/33 266,159
300,000 Series 2011-2, Class A3, 3 Mo. LIBOR + 1.00% (b)................. 1.24% 10/27/36 298,246
Carrington Mortgage Loan Trust
1,470,000 Series 2006-OPT1, Class M1, 1 Mo. LIBOR + 0.35% (b).............. 0.53% 02/25/36 1,445,616
Citigroup Mortgage Loan Trust
1,600,000 Series 2006-HE2, Class M1, 1 Mo. LIBOR + 0.29% (b)............... 0.47% 08/25/36 1,573,834
Dryden Senior Loan Fund
900,000 Series 2013-26A, Class AR, 3 Mo. LIBOR + 0.90% (b) (e)........... 1.18% 04/15/29 893,868
572,000 Series 2013-28A, Class A1LR, 3 Mo. LIBOR + 1.20% (b) (e)......... 1.48% 08/15/30 570,666
ECMC Group Student Loan Trust
1,711,534 Series 2017-2A, Class A, 1 Mo. LIBOR + 1.05% (b) (e)............. 1.23% 05/25/67 1,693,703
EFS Volunteer No 3 LLC
151,239 Series 2012-1, Class A3, 1 Mo. LIBOR + 1.00% (b) (e)............. 1.18% 04/25/33 149,816
First Franklin Mortgage Loan Trust
263,908 Series 2006-FF13, Class A2C, 1 Mo. LIBOR + 0.16% (b)............. 0.34% 10/25/36 203,827
15,849,027 Series 2007-FF2, Class A1, 1 Mo. LIBOR + 0.14% (b)............... 0.32% 03/25/37 10,900,205
GE-WMC Mortgage Securities LLC
960,597 Series 2005-1, Class M1, 1 Mo. LIBOR + 0.66% (b)................. 0.84% 10/25/35 949,277
Goal Capital Funding Trust
5,100,000 Series 2007-1, Class A5, 3 Mo. LIBOR + 0.16% (b)................. 0.46% 03/25/42 4,509,833
GoldenTree Loan Management US CLO Ltd.
4,227,000 Series 2017-1A, Class AR, 3 Mo. LIBOR + 0.95% (b) (e)............ 1.22% 04/20/29 4,199,335
5,000,000 Series 2020-8A, Class A, 3 Mo. LIBOR + 1.55% (b) (e)............. 1.75% 07/20/31 4,998,001
GSAA Home Equity Trust
1,700,000 Series 2005-6, Class M1, 1 Mo. LIBOR + 0.43% (b)................. 0.61% 06/25/35 1,689,551
JP Morgan Mortgage Acquisition Trust
161,918 Series 2006-ACC1, Class M1, 1 Mo. LIBOR + 0.27% (b).............. 0.45% 05/25/36 161,065
2,602,383 Series 2006-WF1, Class A6, steps up to 6.50% after Redemption
Date (g)...................................................... 6.00% 07/25/36 1,230,897
16,819,891 Series 2006-WMC2, Class A4, 1 Mo. LIBOR + 0.15% (b).............. 0.33% 07/25/36 10,469,371
8,581,577 Series 2006-WMC2, Class A5, 1 Mo. LIBOR + 0.25% (b).............. 0.43% 07/25/36 5,469,686
See Notes to Financial Statements Page 31
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
ASSET-BACKED SECURITIES (CONTINUED)
JP Morgan Mortgage Acquisition Trust (Continued)
$ 405,000 Series 2007-CH2, Class MV1, 1 Mo. LIBOR + 0.28% (b).............. 0.46% 01/25/37 $ 389,603
Legacy Mortgage Asset Trust
3,847,516 Series 2019-GS1, Class A1 (b) (e)................................ 4.00% 01/25/59 3,949,124
2,183,337 Series 2019-GS4, Class A1 (b) (e)................................ 3.44% 05/25/59 2,205,974
Lehman XS Trust
4,482,362 Series 2006-9, Class A1C, 1 Mo. LIBOR + 0.26% (b)................ 0.44% 05/25/46 4,094,176
Long Beach Mortgage Loan Trust
826,218 Series 2006-1, Class 1A, 1 Mo. LIBOR + 0.22% (b)................. 0.40% 02/25/36 802,093
Magnetite CLO Ltd.
800,000 Series 2019-21A, Class A, 3 Mo. LIBOR + 1.28% (b) (e)............ 1.55% 04/20/30 798,185
Magnetite VII Ltd.
4,691,000 Series 2012-7A, Class A1R2, 3 Mo. LIBOR + 0.80% (b) (e).......... 1.08% 01/15/28 4,644,090
Magnetite XXVII Ltd.
2,500,000 Series 2020-27A, Class A1, 3 Mo. LIBOR + 1.55% (b) (e)........... 1.82% 07/20/33 2,499,834
Mastr Asset Backed Securities Trust
8,407,286 Series 2006-WMC3, Class A2, 1 Mo. LIBOR + 0.05% (b).............. 0.23% 08/25/36 3,789,087
Merrill Lynch First Franklin Mortgage Loan Trust
371,114 Series 2007-3, Class A2B, 1 Mo. LIBOR + 0.13% (b)................ 0.31% 06/25/37 278,487
Mid-State Trust
186,853 Series 2003-11, Class A1......................................... 4.86% 07/15/38 200,606
Morgan Stanley ABS Capital I, Inc. Trust
11,026,108 Series 2006-HE4, Class A3, 1 Mo. LIBOR + 0.30% (b)............... 0.48% 06/25/36 7,281,131
6,676,902 Series 2006-HE8, Class A2B, 1 Mo. LIBOR + 0.10% (b).............. 0.28% 10/25/36 4,028,783
974,715 Series 2006-NC1, Class M1, 1 Mo. LIBOR + 0.38% (b)............... 0.56% 12/25/35 962,779
7,416,526 Series 2007-HE1, Class A2D, 1 Mo. LIBOR + 0.23% (b).............. 0.41% 11/25/36 5,250,433
23,542,244 Series 2007-HE2, Class A2D, 1 Mo. LIBOR + 0.21% (b).............. 0.39% 01/25/37 14,598,654
Navient Student Loan Trust
283,660 Series 2014-1, Class A3, 1 Mo. LIBOR + 0.51% (b)................. 0.69% 06/25/31 274,254
234,900 Series 2014-3, Class A, 1 Mo. LIBOR + 0.62% (b).................. 0.80% 03/25/83 225,568
73,353 Series 2014-5, Class A, 1 Mo. LIBOR + 0.62% (b).................. 0.80% 03/25/83 70,688
194,718 Series 2015-1, Class A2, 1 Mo. LIBOR + 0.60% (b)................. 0.78% 04/25/40 190,331
1,750,000 Series 2016-2A, Class A3, 1 Mo. LIBOR + 1.50% (b) (e)............ 1.68% 06/25/65 1,755,076
4,000,442 Series 2016-5A, Class A, 1 Mo. LIBOR + 1.25% (b) (e)............. 1.43% 06/25/65 4,008,977
300,000 Series 2017-3A, Class A3, 1 Mo. LIBOR + 1.05% (b) (e)............ 1.23% 07/26/66 299,123
3,596,921 Series 2017-5A, Class A, 1 Mo. LIBOR + 0.80% (b) (e)............. 0.98% 07/26/66 3,500,000
New Century Home Equity Loan Trust
2,600,000 Series 2005-4, Class M3, 1 Mo. LIBOR + 0.55% (b)................. 0.73% 09/25/35 2,554,128
OCP CLO Ltd.
6,200,000 Series 2020-19A, Class A1, 3 Mo. LIBOR + 1.75% (b) (e)........... 2.07% 07/20/31 6,218,909
Palmer Square Loan Funding Ltd.
208,823 Series 2019-1A, Class A1, 3 Mo. LIBOR + 1.05% (b) (e)............ 1.32% 04/20/27 207,665
1,870,687 Series 2019-4A, Class A1, 3 Mo. LIBOR + 0.90% (b) (e)............ 1.16% 10/24/27 1,850,965
Residential Asset Mortgage Products, Inc.
155,968 Series 2006-RZ1, Class M2, 1 Mo. LIBOR + 0.42% (b)............... 0.60% 03/25/36 155,845
2,000,000 Series 2006-RZ1, Class M3, 1 Mo. LIBOR + 0.45% (b)............... 0.63% 03/25/36 1,977,021
Residential Asset Securities Corp.
247,036 Series 2006-EMX3, Class A3, 1 Mo. LIBOR + 0.28% (b).............. 0.46% 04/25/36 241,976
1,445,000 Series 2006-KS3, Class M1, 1 Mo. LIBOR + 0.33% (b)............... 0.51% 04/25/36 1,393,058
971 Series 2006-KS4, Class A4, 1 Mo. LIBOR + 0.24% (b)............... 0.42% 06/25/36 973
Page 32 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
ASSET-BACKED SECURITIES (CONTINUED)
Saxon Asset Securities Trust
$ 730,915 Series 2007-2, Class A2C, 1 Mo. LIBOR + 0.24% (b)................ 0.42% 05/25/47 $ 612,921
Securitized Asset-Backed Receivables LLC Trust
184,596 Series 2006-OP1, Class M2, 1 Mo. LIBOR + 0.39% (b)............... 0.57% 10/25/35 182,809
27,504,507 Series 2006-WM4, Class A1, 1 Mo. LIBOR + 0.19% (b) (e)........... 0.37% 11/25/36 16,269,067
SLC Student Loan Trust
400,000 Series 2005-2, Class A4, 3 Mo. LIBOR + 0.16% (b)................. 0.47% 12/15/39 375,195
5,054,000 Series 2006-1, Class A6, 3 Mo. LIBOR + 0.16% (b)................. 0.47% 03/15/55 4,735,877
130,000 Series 2006-2, Class A6, 3 Mo. LIBOR + 0.16% (b)................. 0.47% 09/15/39 123,269
1,965,180 Series 2008-1, Class A4A, 3 Mo. LIBOR + 1.60% (b)................ 1.91% 12/15/32 1,960,339
SLM Student Loan Trust
127,643 Series 2003-10A, Class A3, 3 Mo. LIBOR + 0.47% (b) (e)........... 0.78% 12/15/27 127,249
250,000 Series 2005-5, Class A5, 3 Mo. LIBOR + 0.75% (b)................. 0.99% 10/25/40 245,379
596,976 Series 2005-9, Class A7A, 3 Mo. LIBOR + 0.60% (b)................ 0.84% 01/25/41 578,877
203,266 Series 2006-2, Class A6, 3 Mo. LIBOR + 0.17% (b)................. 0.41% 01/25/41 192,708
47,247 Series 2007-6, Class A4, 3 Mo. LIBOR + 0.38% (b)................. 0.62% 10/25/24 47,133
80,000 Series 2007-7, Class B, 3 Mo. LIBOR + 0.75% (b).................. 0.99% 10/27/70 63,614
908,708 Series 2008-1, Class A4, 3 Mo. LIBOR + 0.65% (b)................. 0.89% 01/25/22 859,190
5,340,218 Series 2008-2, Class A3, 3 Mo. LIBOR + 0.75% (b)................. 0.99% 04/25/23 5,024,993
130,000 Series 2008-2, Class B, 3 Mo. LIBOR + 1.20% (b).................. 1.44% 01/25/83 103,557
700,000 Series 2008-3, Class B, 3 Mo. LIBOR + 1.20% (b).................. 1.44% 04/26/83 571,269
5,471,796 Series 2008-6, Class A4, 3 Mo. LIBOR + 1.10% (b)................. 1.34% 07/25/23 5,206,537
320,000 Series 2008-7, Class B, 3 Mo. LIBOR + 1.85% (b).................. 2.09% 07/26/83 282,906
2,628,000 Series 2008-8, Class A4, 3 Mo. LIBOR + 1.50% (b)................. 1.74% 04/25/23 2,606,026
337,585 Series 2011-1, Class A2, 1 Mo. LIBOR + 1.15% (b)................. 1.33% 10/25/34 336,511
4,150,000 Series 2011-2, Class A2, 1 Mo. LIBOR + 1.20% (b)................. 1.38% 10/25/34 4,147,223
763,216 Series 2012-2, Class A, 1 Mo. LIBOR + 0.70% (b).................. 0.88% 01/25/29 718,459
748,517 Series 2012-3, Class A, 1 Mo. LIBOR + 0.65% (b).................. 0.83% 12/27/38 737,405
281,845 Series 2012-6, Class A3, 1 Mo. LIBOR + 0.75% (b)................. 0.93% 05/26/26 271,009
4,019,049 Series 2012-7, Class A3, 1 Mo. LIBOR + 0.65% (b)................. 0.83% 05/26/26 3,781,050
555,000 Series 2012-7, Class B, 1 Mo. LIBOR + 1.80% (b).................. 1.98% 09/25/43 524,742
143,089 Series 2013-2, Class A, 1 Mo. LIBOR + 0.45% (b).................. 0.63% 06/25/43 138,059
Soundview Home Loan Trust
38,821 Series 2006-2, Class M1, 1 Mo. LIBOR + 0.33% (b)................. 0.51% 03/25/36 38,725
Structured Asset Investment Loan Trust
946,974 Series 2004-6, Class A3, 1 Mo. LIBOR + 0.80% (b)................. 0.98% 07/25/34 925,829
257,499 Series 2005-2, Class M2, 1 Mo. LIBOR + 0.74% (b)................. 0.91% 03/25/35 256,838
Structured Asset Securities Corp. Mortgage Loan Trust
1,350,000 Series 2005-NC2, Class M5, 1 Mo. LIBOR + 0.93% (b)............... 1.11% 05/25/35 1,299,778
TCI-Flatiron CLO Ltd.
700,000 Series 2016-1A, Class AR, 3 Mo. LIBOR + 1.22% (b) (e)............ 1.49% 07/17/28 696,443
Towd Point Mortgage Trust
381,061 Series 2015-2, Class 1A13 (b) (e)................................ 2.50% 11/25/60 384,693
Treman Park CLO Ltd.
850,000 Series 2015-1A, Class ARR, 3 Mo. LIBOR + 1.07% (b) (e)........... 1.34% 10/20/28 845,748
Voya CLO Ltd.
112,432 Series 2014-3A, Class A1R, 3 Mo. LIBOR + 0.72% (b) (e)........... 0.96% 07/25/26 112,014
Wachovia Student Loan Trust
1,026,288 Series 2006-1, Class A6, 3 Mo. LIBOR + 0.17% (b) (e)............. 0.41% 04/25/40 981,860
WaMu Asset-Backed Certificates WaMu Trust
1,254,911 Series 2007-HE2, Class 2A1, 1 Mo. LIBOR + 0.11% (b).............. 0.29% 04/25/37 615,889
See Notes to Financial Statements Page 33
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
ASSET-BACKED SECURITIES (CONTINUED)
WaMu Asset-Backed Certificates WaMu Trust (Continued)
$ 4,354,755 Series 2007-HE2, Class 2A2, 1 Mo. LIBOR + 0.19% (b).............. 0.37% 04/25/37 $ 2,176,523
6,221,079 Series 2007-HE2, Class 2A3, 1 Mo. LIBOR + 0.25% (b).............. 0.43% 04/25/37 3,151,407
--------------
TOTAL ASSET-BACKED SECURITIES............................................................... 235,579,135
(Cost $230,802,807) --------------
MORTGAGE-BACKED SECURITIES -- 6.0%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 5.3%
Alternative Loan Trust
6,928,293 Series 2005-16, Class A4, 1 Mo. LIBOR + 0.48% (b)................ 0.66% 06/25/35 6,286,454
980,454 Series 2005-56, Class 1A1, 1 Mo. LIBOR + 0.73% (b)............... 0.91% 11/25/35 962,038
9,679,194 Series 2005-67CB, Class A1....................................... 5.50% 01/25/36 9,127,555
3,431,447 Series 2007-13, Class A1......................................... 6.00% 06/25/47 2,637,459
American Home Mortgage Investment Trust
2,385,206 Series 2005-4, Class 1A1, 1 Mo. LIBOR + 0.58% (b)................ 0.76% 11/25/45 2,198,645
Banc of America Funding Trust
715,000 Series 2014-R6, Class 2A13 (e) (h)............................... 0.43% 07/26/36 689,269
BCAP LLC Trust
241,657 Series 2015-RR5, Class 1A3 (e) (h)............................... 2.65% 08/26/36 239,523
Bear Stearns ALT-A Trust
18,227 Series 2004-6, Class 1A, 1 Mo. LIBOR + 0.64% (b)................. 0.82% 07/25/34 18,327
Bear Stearns Mortgage Funding Trust
147,537 Series 2006-AR1, Class 1A1, 1 Mo. LIBOR + 0.21% (b).............. 0.39% 07/25/36 134,014
3,602,905 Series 2006-AR3, Class 1A1, 1 Mo. LIBOR + 0.18% (b).............. 0.36% 10/25/36 3,060,686
4,797,556 Series 2006-AR5, Class 2A1, 1 Mo. LIBOR + 0.19% (b).............. 0.37% 01/25/37 4,228,642
261,454 Series 2007-AR5, Class 1A1G, 1 Mo. LIBOR + 0.16% (b)............. 0.34% 06/25/47 234,806
CIM Trust
3,245,066 Series 2017-3, Class A1, 1 Mo. LIBOR + 2.00% (b) (e)............. 2.16% 01/25/57 3,258,690
2,504,937 Series 2017-6, Class A1 (e)...................................... 3.02% 06/25/57 2,543,466
12,162,358 Series 2018-R6, Class A1, 1 Mo. LIBOR + 1.08% (b) (e)............ 1.23% 09/25/58 11,994,597
4,520,841 Series 2019-R1, Class A (e)...................................... 3.25% 10/25/58 4,204,605
5,876,609 Series 2019-R4, Class A1 (e)..................................... 3.00% 10/25/59 5,493,661
10,037,202 Series 2020-R3, Class A1A (e).................................... 4.00% 01/26/60 10,088,534
11,768,820 Series 2020-R4, Class A1A (a) (e)................................ 3.30% 06/25/60 11,989,912
CitiMortgage Alternative Loan Trust
3,162,337 Series 2006-A4, Class 1A8........................................ 6.00% 09/25/36 3,080,272
Credit Suisse Mortgage Trust
248,127 Series 2010-7R, Class 1A12 (e)................................... 4.00% 01/26/37 250,452
236,141 Series 2010-8R, Class 4A5 (e) (h)................................ 3.48% 12/26/35 238,125
414,352 Series 2010-8R, Class 10A5 (e) (h)............................... 3.71% 04/26/47 411,667
27,621 Series 2011-5R, Class 2A1 (e) (h)................................ 3.52% 08/27/46 27,743
121,384 Series 2014-2R, Class 19A1 (e) (h)............................... 3.00% 05/27/36 121,159
1,485 Series 2015-8R, Class 3A1, 6 Mo. LIBOR + 1.50% (b) (e)........... 1.87% 11/25/37 1,486
12,762,914 Series 2019-RPL8, Class A1 (e)................................... 3.32% 10/25/58 12,872,850
GMACM Mortgage Loan Trust
1,951,796 Series 2006-AR1, Class 1A1 (h)................................... 3.69% 04/19/36 1,693,086
2,210,023 Series 2006-J1, Class A4......................................... 5.75% 04/25/36 2,202,995
GreenPoint Mortgage Funding Trust
166,349 Series 2006-AR1, Class A1A, 1 Mo. LIBOR + 0.58% (b).............. 0.76% 02/25/36 161,745
Page 34 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
GSR Mortgage Loan Trust
$ 28,390,475 Series 2006-OA1, Class 2A2, 1 Mo. LIBOR + 0.26% (b).............. 0.44% 08/25/46 $ 16,657,285
HarborView Mortgage Loan Trust
555,135 Series 2005-10, Class 2A1A, 1 Mo. LIBOR + 0.31% (b).............. 0.47% 11/19/35 505,639
1,647,820 Series 2007-7, Class 1A1, 1 Mo. LIBOR + 1.00% (b)................ 1.18% 10/25/37 1,466,531
HomeBanc Mortgage Trust
1,189,891 Series 2004-2, Class A1, 1 Mo. LIBOR + 0.74% (b)................. 0.92% 12/25/34 1,202,821
Impac CMB Trust
306,999 Series 2005-2, Class 1A1, 1 Mo. LIBOR + 0.52% (b)................ 0.70% 04/25/35 296,428
1,040,756 Series 2005-4, Class 1A1A, 1 Mo. LIBOR + 0.54% (b)............... 0.72% 05/25/35 1,030,308
IndyMac INDX Mortgage Loan Trust
1,997,065 Series 2005-AR14, Class 2A1A, 1 Mo. LIBOR + 0.30% (b)............ 0.48% 07/25/35 1,847,172
4,811,582 Series 2006-AR6, Class 2A1A, 1 Mo. LIBOR + 0.20% (b)............. 0.38% 06/25/46 4,172,941
6,033,591 Series 2007-FLX4, Class 2A2, 1 Mo. LIBOR + 0.25% (b)............. 0.43% 07/25/37 5,532,721
JP Morgan Mortgage Trust
2,420,579 Series 2006-A4, Class 1A1 (h).................................... 3.65% 06/25/36 2,101,288
Lehman XS Trust
335,847 Series 2006-16N, Class A4A, 1 Mo. LIBOR + 0.19% (b).............. 0.37% 11/25/46 302,854
6,978,256 Series 2007-16N, Class 1A1, 1 Mo. LIBOR + 0.47% (b).............. 0.65% 09/25/47 6,417,495
3,805,265 Series 2007-16N, Class 2A1, 1 Mo. LIBOR + 0.40% (b).............. 0.58% 09/25/47 3,500,268
Merrill Lynch Alternative Note Asset Trust
5,207,906 Series 2007-OAR3, Class A1, 1 Mo. LIBOR + 0.19% (b).............. 0.36% 07/25/47 4,694,027
Morgan Stanley Mortgage Loan Trust
801,310 Series 2004-6AR, Class 1M1, 1 Mo. LIBOR + 0.98% (b).............. 1.15% 07/25/34 796,080
64,467 Series 2005-2AR, Class A, 1 Mo. LIBOR + 0.26% (b)................ 0.44% 04/25/35 62,931
Morgan Stanley Resecuritization Trust
82,938 Series 2015-R2, Class 1A1, 12 Mo. Treasury Average +
0.71% (b) (e)................................................. 2.03% 12/27/46 86,579
MortgageIT Trust
112,532 Series 2005-5, Class A1, 1 Mo. LIBOR + 0.52% (b)................. 0.70% 12/25/35 109,284
Nomura Resecuritization Trust
3,393,813 Series 2015-5R, Class 1A1 (e).................................... 4.00% 08/26/37 3,486,808
Opteum Mortgage Acceptance Corp.
1,486,131 Series 2005-5, Class 1A1D, 1 Mo. LIBOR + 0.38% (b)............... 0.56% 12/25/35 1,420,211
484,498 Series 2006-1, Class 1APT, 1 Mo. LIBOR + 0.21% (b)............... 0.39% 04/25/36 461,604
RALI Trust
10,347,633 Series 2007-QS7, Class 1A1....................................... 6.00% 05/25/37 10,122,435
4,840,039 Series 2007-QS9, Class A33....................................... 6.50% 07/25/37 4,710,863
Stanwich Mortgage Loan Co. LLC
4,625,605 Series 2019-RPL1, Class A, steps up to 4.72% on
12/15/22 (e) (g).............................................. 3.72% 03/15/49 4,689,165
Structured Adjustable Rate Mortgage Loan Trust
39,733 Series 2004-12, Class 3A1 (h).................................... 3.26% 09/25/34 39,870
Structured Asset Mortgage Investments II Trust
3,072,707 Series 2006-AR1, Class 3A1, 1 Mo. LIBOR + 0.23% (b).............. 0.41% 02/25/36 2,813,343
9,400,976 Series 2006-AR7, Class A1A, 1 Mo. LIBOR + 0.21% (b).............. 0.39% 08/25/36 8,905,958
4,664,183 Series 2007-AR6, Class A1, 12 Mo. Treasury Average +
1.50% (b)..................................................... 2.67% 08/25/47 4,362,042
WaMu Mortgage Pass-Through Certificates Trust
125,146 Series 2005-AR1, Class A2A1, 1 Mo. LIBOR + 0.68% (b)............. 0.86% 01/25/45 122,234
229,482 Series 2005-AR15, Class A1A1, 1 Mo. LIBOR + 0.26% (b)............ 0.44% 11/25/45 221,666
See Notes to Financial Statements Page 35
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
WaMu Mortgage Pass-Through Certificates Trust (Continued)
$ 322,292 Series 2006-AR3, Class A1A, 12 Mo. Treasury Average +
1.00% (b)..................................................... 2.17% 02/25/46 $ 313,202
491,489 Series 2006-AR4, Class 1A1A, 12 Mo. Treasury Average +
0.94% (b)..................................................... 2.26% 05/25/46 473,503
--------------
193,378,019
--------------
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 0.7%
Banc of America Merrill Lynch Large Loan Commercial Mortgage
Securities Trust
285,000 Series 2015-200P, Class A (e).................................... 3.22% 04/14/33 307,850
1,265,000 Series 2018-PARK, Class A (e) (h)................................ 4.23% 08/10/38 1,497,326
BX Trust
580,000 Series 2019-OC11, Class A (e).................................... 3.20% 12/09/41 617,925
CALI Mortgage Trust
1,125,000 Series 2019-101C, Class A (e).................................... 3.96% 03/10/39 1,298,522
Century Plaza Towers
840,000 Series 2019-CPT, Class A (e)..................................... 2.87% 11/13/39 925,601
COMM Mortgage Trust
206,646 Series 2012-CR5, Class A3........................................ 2.54% 12/10/45 212,061
315,000 Series 2012-CR5, Class A4........................................ 2.77% 12/10/45 325,625
DBJPM Mortgage Trust
2,050,000 Series 2016-SFC, Class A (e)..................................... 2.83% 08/10/36 2,002,292
DC Office Trust
900,000 Series 2019-MTC, Class A (e)..................................... 2.97% 09/15/45 996,436
Eleven Madison Mortgage Trust
305,000 Series 2015-11MD, Class A (e) (h)................................ 3.67% 09/10/35 334,166
Hudson Yards Mortgage Trust
1,190,000 Series 2019-30HY, Class A (e).................................... 3.23% 07/10/39 1,341,946
1,200,000 Series 2019-55HY, Class A (e) (h)................................ 3.04% 12/10/41 1,331,078
JPMorgan Chase Commercial Mortgage Securities Trust
1,110,000 Series 2019-OSB, Class A (e)..................................... 3.40% 06/05/39 1,266,693
Manhattan West
3,855,000 Series 2020-1MW, Class A (e)..................................... 2.13% 09/10/39 4,013,886
MKT Mortgage Trust
1,730,000 Series 2020-525M, Class A (e).................................... 2.69% 02/12/40 1,881,193
Natixis Commercial Mortgage Securities Trust
1,490,000 Series 2020-2PAC, Class A (e).................................... 2.97% 12/15/38 1,560,433
One Bryant Park Trust
985,000 Series 2019-OBP, Class A (e)..................................... 2.52% 09/15/54 1,057,450
RBS Commercial Funding, Inc. Trust
50,000 Series 2013-GSP, Class A (e) (h)................................. 3.96% 01/15/32 50,907
SFAVE Commercial Mortgage Securities Trust
150,000 Series 2015-5AVE, Class A1 (e) (h)............................... 3.87% 01/05/43 160,627
125,000 Series 2015-5AVE, Class A2B (e) (h).............................. 4.14% 01/05/43 118,053
UBS-Barclays Commercial Mortgage Trust
249,678 Series 2013-C6, Class A3......................................... 2.97% 04/10/46 259,307
Worldwide Plaza Trust
1,880,000 Series 2017-WWP, Class A (e)..................................... 3.53% 11/10/36 2,087,891
--------------
23,647,268
--------------
TOTAL MORTGAGE-BACKED SECURITIES.............................................................. 217,025,287
(Cost $217,976,621) --------------
Page 36 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL
VALUE
(LOCAL STATED STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (U.S. DOLLAR)
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
FOREIGN CORPORATE BONDS AND NOTES -- 2.9%
AIRLINES -- 0.0%
673,200 Air Canada Pass-Through Trust, Series 2017-1, Class AA
(USD) (e)........................................................ 3.30% 01/15/30 $ 629,341
--------------
BANKS -- 0.4%
800,000 Banco Nacional de Comercio Exterior SNC (USD) (e) (f)............... 3.80% 08/11/26 802,856
400,000 Global Bank Corp. (USD) (f) (i)..................................... 5.25% 04/16/29 420,600
3,000,000 HSBC Holdings PLC (USD) (f)......................................... 2.36% 08/18/31 3,042,705
1,195,000 Lloyds Banking Group PLC (USD) (f).................................. 2.86% 03/17/23 1,235,404
1,870,000 Lloyds Banking Group PLC (USD)...................................... 3.90% 03/12/24 2,057,630
3,125,000 Lloyds Banking Group PLC (USD) (f).................................. 3.87% 07/09/25 3,440,138
500,000 Santander UK Group Holdings PLC (USD) (f)........................... 3.37% 01/05/24 526,551
1,900,000 Santander UK Group Holdings PLC (USD) (f)........................... 4.80% 11/15/24 2,117,130
--------------
13,643,014
--------------
BEVERAGES -- 0.1%
245,000 Bacardi Ltd. (USD) (e).............................................. 4.70% 05/15/28 285,942
385,000 Bacardi Ltd. (USD) (e).............................................. 5.30% 05/15/48 499,791
1,800,000 Diageo Capital PLC (USD)............................................ 2.13% 04/29/32 1,875,275
--------------
2,661,008
--------------
COMMERCIAL SERVICES -- 0.2%
1,400,000 DP World Crescent Ltd. (USD) (e).................................... 4.85% 09/26/28 1,578,500
1,689,000 IHS Markit Ltd. (USD) (e)........................................... 5.00% 11/01/22 1,820,196
2,500,000 IHS Markit Ltd. (USD)............................................... 3.63% 05/01/24 2,711,113
795,000 IHS Markit Ltd. (USD) (e)........................................... 4.75% 02/15/25 906,769
370,000 IHS Markit Ltd. (USD) (e)........................................... 4.00% 03/01/26 418,128
250,000 IHS Markit Ltd. (USD)............................................... 4.75% 08/01/28 300,179
--------------
7,734,885
--------------
DIVERSIFIED FINANCIAL SERVICES -- 0.7%
375,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust
(USD)............................................................ 4.50% 05/15/21 381,429
800,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust
(USD)............................................................ 5.00% 10/01/21 823,992
1,500,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust
(USD)............................................................ 3.95% 02/01/22 1,519,597
1,100,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust
(USD)............................................................ 3.50% 05/26/22 1,105,665
1,000,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust
(USD)............................................................ 4.13% 07/03/23 1,011,404
1,000,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust
(USD)............................................................ 4.88% 01/16/24 1,030,207
3,380,000 Avolon Holdings Funding Ltd. (USD) (e).............................. 5.13% 10/01/23 3,290,614
135,000 Avolon Holdings Funding Ltd. (USD) (e).............................. 5.25% 05/15/24 131,058
885,000 Avolon Holdings Funding Ltd. (USD) (e).............................. 2.88% 02/15/25 788,288
840,000 Fondo Mivivienda S.A. (USD) (i)..................................... 3.50% 01/31/23 874,570
9,840,000 GE Capital International Funding Co. Unlimited Co. (USD)............ 4.42% 11/15/35 10,176,850
1,240,000 Park Aerospace Holdings Ltd. (USD) (e).............................. 5.25% 08/15/22 1,231,689
850,000 Park Aerospace Holdings Ltd. (USD) (e).............................. 4.50% 03/15/23 811,710
1,670,000 Park Aerospace Holdings Ltd. (USD) (e).............................. 5.50% 02/15/24 1,648,045
--------------
24,825,118
--------------
See Notes to Financial Statements Page 37
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
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) (e)..................................... 5.63% 08/10/37 $ 423,718
250,000 Mong Duong Finance Holdings B.V. (USD) (i).......................... 5.13% 05/07/29 253,597
--------------
677,315
--------------
ENVIRONMENTAL CONTROL -- 0.1%
2,151,000 GFL Environmental, Inc. (USD) (e)................................... 3.75% 08/01/25 2,169,832
890,000 GFL Environmental, Inc. (USD) (e)................................... 5.13% 12/15/26 940,897
--------------
3,110,729
--------------
FOOD -- 0.1%
1,595,000 JBS USA LUX S.A. / JBS USA Food Co. / JBS USA Finance, Inc.
(USD) (e)........................................................ 6.50% 04/15/29 1,814,344
150,000 JBS USA LUX S.A. / JBS USA Food Co. / JBS USA Finance, Inc.
(USD) (e)........................................................ 5.50% 01/15/30 166,863
--------------
1,981,207
--------------
MEDIA -- 0.1%
400,000 Virgin Media Secured Finance PLC (USD) (e).......................... 5.50% 08/15/26 422,500
345,000 Virgin Media Secured Finance PLC (USD) (e).......................... 5.50% 05/15/29 373,580
2,744,000 Virgin Media Secured Finance PLC (USD) (e).......................... 4.50% 08/15/30 2,883,944
--------------
3,680,024
--------------
MINING -- 0.1%
64,000 Corp. Nacional del Cobre de Chile (USD) (i)......................... 4.50% 09/16/25 72,146
900,000 Corp. Nacional del Cobre de Chile (USD) (i)......................... 3.63% 08/01/27 985,445
955,000 Corp. Nacional del Cobre de Chile (USD) (i)......................... 3.15% 01/14/30 1,012,544
1,660,000 Indonesia Asahan Aluminium Persero PT (USD) (e)..................... 6.53% 11/15/28 2,062,550
--------------
4,132,685
--------------
OIL & GAS -- 0.4%
20,000 Canadian Natural Resources Ltd. (USD)............................... 3.85% 06/01/27 21,648
200,000 Ecopetrol S.A. (USD)................................................ 5.88% 05/28/45 227,335
1,491,000 KazMunayGas National Co. JSC (USD) (i).............................. 5.75% 04/19/47 1,872,000
2,104,000 Pertamina Persero PT (USD) (e)...................................... 3.10% 08/27/30 2,182,900
1,587,000 Petrobras Global Finance B.V. (USD) (e)............................. 5.09% 01/15/30 1,656,431
200,000 Petroleos del Peru S.A. (USD) (i)................................... 4.75% 06/19/32 225,000
1,590,000 Petroleos Mexicanos (USD) (e)....................................... 5.95% 01/28/31 1,438,393
215,000 Petroleos Mexicanos (USD)........................................... 6.63% 06/15/35 190,275
2,430,000 Petroleos Mexicanos (USD)........................................... 6.75% 09/21/47 2,033,132
2,035,000 Petroleos Mexicanos (USD) (e)....................................... 7.69% 01/23/50 1,829,465
1,705,000 Petroleos Mexicanos (USD) (e)....................................... 6.95% 01/28/60 1,421,331
513,000 Petronas Capital Ltd. (USD) (e)..................................... 3.50% 04/21/30 582,527
200,000 Saudi Arabian Oil Co. (USD) (i)..................................... 4.25% 04/16/39 233,709
184,860 Transocean Pontus Ltd. (USD) (e).................................... 6.13% 08/01/25 166,319
517,000 Transocean Poseidon Ltd. (USD) (e).................................. 6.88% 02/01/27 429,110
--------------
14,509,575
--------------
OIL & GAS SERVICES -- 0.1%
2,105,350 Transocean Phoenix 2 Ltd. (USD) (e)................................. 7.75% 10/15/24 1,936,922
16,250 Transocean Proteus Ltd. (USD) (e)................................... 6.25% 12/01/24 14,544
--------------
1,951,466
--------------
Page 38 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL
VALUE
(LOCAL STATED STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (U.S. DOLLAR)
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
FOREIGN CORPORATE BONDS AND NOTES (CONTINUED)
PACKAGING & CONTAINERS -- 0.1%
1,363,000 Ardagh Packaging Finance PLC / Ardagh Holdings USA, Inc.
(USD) (e)........................................................ 5.25% 04/30/25 $ 1,447,847
400,000 Ardagh Packaging Finance PLC / Ardagh Holdings USA, Inc.
(USD) (e)........................................................ 4.13% 08/15/26 417,780
51,000 OI European Group B.V. (USD) (e).................................... 4.00% 03/15/23 51,707
1,562,000 Trivium Packaging Finance B.V. (USD) (e)............................ 5.50% 08/15/26 1,651,221
--------------
3,568,555
--------------
PHARMACEUTICALS -- 0.0%
300,000 AstraZeneca PLC (USD)............................................... 3.50% 08/17/23 325,540
550,000 Bausch Health Cos., Inc. (USD) (e).................................. 7.00% 03/15/24 571,450
--------------
896,990
--------------
PIPELINES -- 0.0%
800,000 Southern Gas Corridor CJSC (USD) (i)................................ 6.88% 03/24/26 958,064
--------------
RETAIL -- 0.1%
100,000 Alimentation Couche-Tard, Inc. (USD) (e)............................ 3.55% 07/26/27 110,664
4,230,000 Alimentation Couche-Tard, Inc. (USD) (e)............................ 3.80% 01/25/50 4,594,919
--------------
4,705,583
--------------
SAVINGS & LOANS -- 0.2%
4,895,000 Nationwide Building Society (USD) (e) (f)........................... 3.62% 04/26/23 5,121,277
360,000 Nationwide Building Society (USD) (e) (f)........................... 3.77% 03/08/24 384,000
300,000 Nationwide Building Society (USD) (e) (f)........................... 4.36% 08/01/24 328,752
--------------
5,834,029
--------------
SEMICONDUCTORS -- 0.0%
1,205,000 NXP B.V. / NXP Funding LLC (USD) (e)................................ 4.13% 06/01/21 1,236,154
--------------
TELECOMMUNICATIONS -- 0.2%
200,000 C&W Senior Financing DAC (USD) (e).................................. 6.88% 09/15/27 209,935
1,970,000 Intelsat Jackson Holdings S.A. (USD) (e) (j)........................ 8.50% 10/15/24 1,344,328
390,000 Intelsat Jackson Holdings S.A. (USD) (e) (j)........................ 9.75% 07/15/25 269,724
725,000 Koninklijke KPN N.V. (USD).......................................... 8.38% 10/01/30 1,066,337
500,000 SES S.A. (USD) (e).................................................. 3.60% 04/04/23 516,594
330,000 Vodafone Group PLC (USD)............................................ 3.75% 01/16/24 362,183
2,777,000 Vodafone Group PLC (USD)............................................ 4.88% 06/19/49 3,490,426
1,375,000 Vodafone Group PLC (USD)............................................ 4.25% 09/17/50 1,610,435
--------------
8,869,962
--------------
TRANSPORTATION -- 0.0%
526,000 Empresa de Transporte de Pasajeros Metro S.A. (USD) (e)............. 3.65% 05/07/30 586,161
--------------
TOTAL FOREIGN CORPORATE BONDS AND NOTES........................................................ 106,191,865
(Cost $104,751,826) --------------
FOREIGN SOVEREIGN BONDS AND NOTES -- 0.9%
COLOMBIA -- 0.1%
684,000 Colombia Government International Bond (USD)........................ 4.50% 01/28/26 761,193
437,000 Colombia Government International Bond (USD)........................ 3.88% 04/25/27 477,453
See Notes to Financial Statements Page 39
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL
VALUE
(LOCAL STATED STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (U.S. DOLLAR)
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
FOREIGN SOVEREIGN BONDS AND NOTES (CONTINUED)
COLOMBIA (CONTINUED)
700,000 Colombia Government International Bond (USD)........................ 3.00% 01/30/30 $ 722,313
1,233,000 Colombia Government International Bond (USD)........................ 5.20% 05/15/49 1,532,366
--------------
3,493,325
--------------
DOMINICAN REPUBLIC -- 0.1%
1,857,000 Dominican Republic International Bond (USD) (i)..................... 6.00% 07/19/28 2,006,600
330,000 Dominican Republic International Bond (USD) (e)..................... 4.50% 01/30/30 328,350
--------------
2,334,950
--------------
EGYPT -- 0.0%
800,000 Egypt Government International Bond (USD) (e)....................... 5.58% 02/21/23 828,576
400,000 Egypt Government International Bond (USD) (e)....................... 7.60% 03/01/29 421,808
--------------
1,250,384
--------------
INDONESIA -- 0.0%
757,000 Indonesia Government International Bond (USD)....................... 2.85% 02/14/30 800,384
--------------
MEXICO -- 0.1%
292,000 Mexico Government International Bond (USD).......................... 3.75% 01/11/28 315,823
3,332,000 Mexico Government International Bond (USD).......................... 3.25% 04/16/30 3,460,082
--------------
3,775,905
--------------
PANAMA -- 0.1%
1,783,000 Panama Government International Bond (USD).......................... 3.16% 01/23/30 1,945,476
--------------
PARAGUAY -- 0.0%
600,000 Paraguay Government International Bond (USD) (i).................... 4.63% 01/25/23 638,100
--------------
PERU -- 0.1%
1,175,000 Peruvian Government International Bond (USD)........................ 4.13% 08/25/27 1,373,058
1,675,000 Peruvian Government International Bond (USD)........................ 2.84% 06/20/30 1,845,950
--------------
3,219,008
--------------
QATAR -- 0.1%
2,324,000 Qatar Government International Bond (USD) (i)....................... 4.50% 04/23/28 2,793,334
353,000 Qatar Government International Bond (USD) (i)....................... 4.63% 06/02/46 471,497
--------------
3,264,831
--------------
RUSSIA -- 0.0%
1,600,000 Russian Foreign Bond - Eurobond (USD) (i)........................... 4.38% 03/21/29 1,842,741
--------------
SAUDI ARABIA -- 0.1%
3,040,000 Saudi Government International Bond (USD) (i)....................... 3.63% 03/04/28 3,376,951
320,000 Saudi Government International Bond (USD) (e)....................... 2.75% 02/03/32 333,183
200,000 Saudi Government International Bond (USD) (i)....................... 4.50% 10/26/46 242,696
200,000 Saudi Government International Bond (USD) (e)....................... 3.75% 01/21/55 217,900
--------------
4,170,730
--------------
SOUTH AFRICA -- 0.1%
1,264,000 Republic of South Africa Government International Bond (USD)........ 4.30% 10/12/28 1,216,196
1,260,000 Republic of South Africa Government International Bond (USD)........ 4.85% 09/30/29 1,234,409
--------------
2,450,605
--------------
Page 40 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL
VALUE
(LOCAL STATED STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (U.S. DOLLAR)
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
FOREIGN SOVEREIGN BONDS AND NOTES (CONTINUED)
TURKEY -- 0.0%
400,000 Turkey Government International Bond (USD).......................... 3.25% 03/23/23 $ 381,120
--------------
UNITED ARAB EMIRATES -- 0.1%
1,837,000 Abu Dhabi Government International Bond (USD) (i)................... 2.50% 09/30/29 1,974,701
--------------
URUGUAY -- 0.0%
173,486 Uruguay Government International Bond (USD)......................... 4.38% 10/27/27 202,469
960,000 Uruguay Government International Bond (USD)......................... 4.38% 01/23/31 1,152,312
--------------
1,354,781
--------------
TOTAL FOREIGN SOVEREIGN BONDS AND NOTES........................................................ 32,897,041
(Cost $31,577,199) --------------
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
MUNICIPAL BONDS -- 0.7%
CALIFORNIA -- 0.3%
$ 32 CA St Build America Bonds........................................... 7.95% 03/01/36 29
2,585,000 Los Angeles CA Unif School District................................. 5.75% 07/01/34 3,628,177
1,195,000 Regents of the Univ of CA Medical Center Pooled Rev................. 3.01% 05/15/50 1,269,126
4,715,000 Regents of the Univ of CA Medical Center Pooled Rev................. 3.26% 05/15/60 5,227,520
--------------
10,124,852
--------------
MASSACHUSETTS -- 0.1%
2,695,000 Commonwealth of MA.................................................. 3.00% 03/01/49 2,897,933
--------------
MISSOURI -- 0.0%
735,000 Hlth & Eductnl Facs Auth of the State of MO......................... 3.65% 08/15/57 908,923
--------------
NEW JERSEY -- 0.0%
500,000 NJ St Turnpike Auth Rev............................................. 3.73% 01/01/36 596,405
--------------
NEW YORK -- 0.3%
1,225,000 Metro Transprtn Auth................................................ 5.18% 11/15/49 1,425,790
970,000 New York City NY Transitional Fin Auth Rev, Ser A-3................. 3.96% 08/01/32 1,119,545
6,940,000 New York City NY Transitional Fin Auth Rev, Ser B-3................. 1.85% 08/01/32 6,935,420
400,000 New York City NY Transitional Fin Auth Rev Qualified Sch Constr,
Ser BD G-3....................................................... 5.27% 05/01/27 490,464
--------------
9,971,219
--------------
NORTH CAROLINA -- 0.0%
2,250,000 Univ of NC at Chapel Hill........................................... 3.33% 12/01/36 2,613,330
--------------
TOTAL MUNICIPAL BONDS.......................................................................... 27,112,662
(Cost $25,224,198) --------------
See Notes to Financial Statements Page 41
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL STATED
VALUE DESCRIPTION RATE (k) MATURITY (l) VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
SENIOR FLOATING-RATE LOAN INTERESTS -- 0.1%
ENVIRONMENTAL -- 0.0%
$ 500,000 GFL Environmental, Inc., Term Loan B, 3 Mo. Libor + 3.00%,
1.00% Floor...................................................... 4.00% 05/31/25 $ 496,875
--------------
FOOD AND BEVERAGE -- 0.0%
175,056 Hostess Brands LLC, Term Loan B, 1 Mo. LIBOR + 2.25%,
0.75% Floor...................................................... 3.00% 08/03/25 171,746
1,629 Hostess Brands LLC, Term Loan B, 2 Mo. LIBOR + 2.25%,
0.75% Floor...................................................... 3.00% 08/03/25 1,598
470,057 Hostess Brands LLC, Term Loan B, 3 Mo. LIBOR + 2.25%,
0.75% Floor...................................................... 3.00% 08/03/25 461,168
--------------
634,512
--------------
GAMING -- 0.0%
250,000 VICI Properties, Inc., Term Loan B, 1 Mo. Libor + 1.75%,
0.00% Floor...................................................... 1.93% 12/22/24 240,313
--------------
HEALTHCARE -- 0.0%
248,750 Grifols Worldwide Operations Ltd., Term Loan B, 1 Mo. Libor +
2.00%, 0.00% Floor............................................... 2.11% 11/15/27 243,499
250,000 MPH Acquisition Holdings LLC, Term Loan B, 3 Mo. Libor +
2.75%, 1.00% Floor............................................... 3.75% 06/07/23 247,187
--------------
490,686
--------------
PHARMACEUTICALS -- 0.0%
768,391 Bausch Health Cos., Inc., Term Loan B, 1 Mo. Libor + 3.00%,
0.00% Floor...................................................... 3.18% 06/01/25 755,267
100,000 Elanco Animal Health, Inc., Term Loan B, 1 Mo. Libor + 1.75%,
0.00% Floor...................................................... 1.92% 02/04/27 97,958
--------------
853,225
--------------
WIRELINES -- 0.1%
248,750 CenturyLink, Inc., Term Loan B, 1 Mo. Libor + 2.25%, 0.00%
Floor............................................................ 2.41% 03/15/27 239,991
648,375 Front Range Bidco, Inc., Term Loan B, 1 Mo. Libor + 3.00%,
0.00% Floor...................................................... 3.16% 03/09/27 628,801
750,000 Level 3 Parent LLC, Term Loan B, 1 Mo. Libor + 1.75%,
0.00% Floor...................................................... 1.91% 03/01/27 725,782
1,345,000 T-Mobile USA, Inc., Term Loan B, 1 Mo. LIBOR + 3.00%,
0.00% Floor...................................................... 3.16% 04/01/27 1,347,865
--------------
2,942,439
--------------
TOTAL SENIOR FLOATING-RATE LOAN INTERESTS...................................................... 5,658,050
(Cost $5,349,883) --------------
Page 42 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
CAPITAL PREFERRED SECURITIES -- 0.0%
ELECTRIC -- 0.0%
$ 300,000 Alabama Power Capital Trust V, 3 Mo. LIBOR + 3.10% (b).............. 3.40% 10/01/42 $ 300,162
--------------
TOTAL CAPITAL PREFERRED SECURITIES............................................................. 300,162
(Cost $290,250) --------------
U.S. TREASURY BILLS -- 20.0%
12,370,000 U.S. Cash Management Bill........................................... (n) 01/26/21 12,364,191
3,231,000 U.S. Treasury Bill (m).............................................. (n) 09/10/20 3,230,936
105,280,000 U.S. Treasury Bill.................................................. (n) 10/27/20 105,264,032
7,185,000 U.S. Treasury Bill.................................................. (n) 11/03/20 7,183,994
133,940,000 U.S. Treasury Bill.................................................. (n) 11/05/20 133,917,631
80,000,000 U.S. Treasury Bill.................................................. (n) 11/12/20 79,984,800
99,395,000 U.S. Treasury Bill.................................................. (n) 11/19/20 99,373,734
75,780,000 U.S. Treasury Bill.................................................. (n) 12/03/20 75,758,466
23,650,000 U.S. Treasury Bill.................................................. (n) 12/10/20 23,643,266
47,130,000 U.S. Treasury Bill.................................................. (n) 01/07/21 47,110,729
13,880,000 U.S. Treasury Bill.................................................. (n) 01/14/21 13,874,014
115,830,000 U.S. Treasury Bill.................................................. (n) 01/21/21 115,782,027
11,500,000 U.S. Treasury Bill.................................................. (n) 02/11/21 11,494,533
--------------
TOTAL U.S. TREASURY BILLS...................................................................... 728,982,353
(Cost $728,913,748) --------------
SHARES DESCRIPTION VALUE
-------------- ----------------------------------------------------------------------------------------------- --------------
MONEY MARKET FUNDS -- 2.1%
75,681,591 JPMorgan 100% U.S. Treasury Securities Money Market - Fund
Institutional Class - 0.01% (o)............................................................. 75,681,591
(Cost $75,681,591) --------------
TOTAL INVESTMENTS -- 119.8%.................................................................... 4,361,719,803
(Cost $4,294,824,052) (p)
NET OTHER ASSETS AND LIABILITIES -- (19.8)%.................................................... (721,214,924)
--------------
NET ASSETS -- 100.0%........................................................................... $3,640,504,879
==============
FUTURES CONTRACTS AT AUGUST 31, 2020 (See Note 2C - Futures Contracts in the
Notes to Financial Statements):
UNREALIZED
APPRECIATION
NUMBER OF (DEPRECIATION)/
FUTURES CONTRACTS POSITION CONTRACTS EXPIRATION DATE NOTIONAL VALUE VALUE
--------------------------------- ------------ --------------- --------------- -------------- ---------------
U.S. 5-Year Treasury Notes Long 721 Dec-2020 $ 90,868,531 $ 55,674
U.S. Treasury Ultra Bond Futures Long 33 Dec-2020 7,289,906 (77,008)
U.S. 10-Year Ultra Treasury Notes Short 44 Dec-2020 (7,015,250) 13,394
-------------- --------
$ 91,143,187 $ (7,940)
============== ========
-----------------------------
(a) 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.
(b) Floating or variable rate security.
(c) 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).
(d) 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.
See Notes to Financial Statements Page 43
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
(e) 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 August 31, 2020, securities noted as such
amounted to $400,524,051 or 11.0% of net assets.
(f) Fixed-to-floating security. The interest rate shown reflects the fixed
rate in effect at August 31, 2020. At a predetermined date, the fixed rate
will change to a floating rate.
(g) Step-up security. A security where the coupon increases or steps up at a
predetermined date.
(h) Collateral Strip Rate security. Coupon is based on the weighted net
interest rate of the investment's underlying collateral. The interest rate
resets periodically.
(i) This security may be resold to qualified foreign investors and foreign
institutional buyers under Regulation S of the 1933 Act.
(j) This issuer is in default and interest is not being accrued by the Fund
nor paid by the issuer.
(k) Senior Floating-Rate Loan Interests ("Senior Loans") in which the Fund
invests generally pay interest at rates which are periodically
predetermined by reference to a base lending rate plus a premium. These
base lending rates are generally(j) the lending rate offered by one or
more major European banks, such as the LIBOR, (ii) the prime rate offered
by one or more United States banks or (iii) the certificate of deposit
rate. Certain Senior Loans are subject to a LIBOR floor that establishes a
minimum LIBOR rate. When a range of rates is disclosed, the Fund holds
more than one contract within the same tranche with identical LIBOR
period, spread and floor, but different LIBOR reset dates.
(l) Senior Loans generally are subject to mandatory and/or optional
prepayment. As a result, the actual remaining maturity of Senior Loans may
be substantially less than the stated maturities shown.
(m) All or a portion of this security is segregated as collateral for open
futures contracts.
(n) Zero coupon security.
(o) Rate shown reflects yield as of August 31, 2020.
(p) Aggregate cost for federal income tax purposes is $4,300,892,189. As of
August 31, 2020, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$77,014,216 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$16,194,542. The net unrealized appreciation was $60,819,674. 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 Finance Rates
TBA - To-Be-Announced Security
Currency Abbreviations:
USD United States Dollar
Page 44 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of August 31,
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
8/31/2020 PRICES INPUTS INPUTS
-------------- ------------- -------------- --------------
U.S. Government Agency Mortgage-Backed
Securities................................... $1,156,976,774 $ -- $1,156,976,774 $ --
U.S. Government Bonds and Notes................. 1,076,032,765 -- 1,076,032,765 --
Corporate Bonds and Notes*...................... 699,282,118 -- 699,282,118 --
Asset-Backed Securities......................... 235,579,135 -- 235,579,135 --
Mortgage-Backed Securities...................... 217,025,287 -- 217,025,287 --
Foreign Corporate Bonds and Notes*.............. 106,191,865 -- 106,191,865 --
Foreign Sovereign Bonds and Notes**............. 32,897,041 -- 32,897,041 --
Municipal Bonds***.............................. 27,112,662 -- 27,112,662 --
Senior Floating-Rate Loan Interests*............ 5,658,050 -- 5,658,050 --
Capital Preferred Securities*................... 300,162 -- 300,162 --
U.S. Treasury Bills............................. 728,982,353 -- 728,982,353 --
Money Market Funds.............................. 75,681,591 75,681,591 -- --
-------------- ------------- -------------- --------------
Total Investments............................... 4,361,719,803 75,681,591 4,286,038,212 --
Futures Contracts****........................... 69,068 69,068 -- --
-------------- ------------- -------------- --------------
Total........................................... $4,361,788,871 $ 75,750,659 $4,286,038,212 $ --
============== ============= ============== ==============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
8/31/2020 PRICES INPUTS INPUTS
-------------- ------------- -------------- --------------
Futures Contracts****........................... $ (77,008) $ (77,008) $ -- $ --
============== ============= ============== ==============
* 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 45
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
CORPORATE BONDS AND NOTES -- 36.1%
AGRICULTURE -- 0.5%
$ 250,000 BAT Capital Corp.................................................... 4.54% 08/15/47 $ 272,370
645,000 Reynolds American, Inc.............................................. 5.85% 08/15/45 802,418
--------------
1,074,788
--------------
AIRLINES -- 1.1%
350,786 American Airlines Pass-Through Trust, Series 2014-1, Class A........ 3.70% 10/01/26 294,199
303,569 Continental Airlines Pass-Through Trust, Series 2007-1, Class A..... 5.98% 04/19/22 289,137
318,073 Delta Air Lines Pass-Through Trust, Series 2002-1, Class G1......... 6.72% 01/02/23 305,667
600,000 JetBlue Pass-Through Trust, Series 2020-1A.......................... 4.00% 11/15/32 619,959
527,104 United Airlines Pass-Through Trust, Series 2013-1, Class A.......... 4.30% 08/15/25 492,605
45,698 US Airways Pass-Through Trust, Series 2001-011G..................... 7.08% 03/20/21 43,458
137,832 US Airways Pass-Through Trust, Series 2012-1, Class A............... 5.90% 10/01/24 129,327
--------------
2,174,352
--------------
AUTO MANUFACTURERS -- 1.6%
310,000 Daimler Finance North America LLC (a)............................... 2.20% 10/30/21 315,483
520,000 Daimler Finance North America LLC, 3 Mo. LIBOR +
0.90% (a) (b).................................................... 1.18% 02/15/22 521,416
350,000 Ford Motor Credit Co. LLC........................................... 3.20% 01/15/21 350,875
30,000 Ford Motor Credit Co. LLC........................................... 5.75% 02/01/21 30,412
125,000 Ford Motor Credit Co. LLC, 3 Mo. LIBOR + 0.81% (b).................. 1.11% 04/05/21 123,139
300,000 Ford Motor Credit Co. LLC, 3 Mo. LIBOR + 0.88% (b).................. 1.15% 10/12/21 289,492
96,000 Ford Motor Credit Co. LLC........................................... 3.22% 01/09/22 95,869
300,000 Ford Motor Credit Co. LLC........................................... 3.34% 03/28/22 301,815
250,000 General Motors Financial Co., Inc................................... 4.20% 03/01/21 253,386
475,000 General Motors Financial Co., Inc................................... 3.55% 04/09/21 483,040
405,000 General Motors Financial Co., Inc................................... 3.20% 07/06/21 411,515
115,000 General Motors Financial Co., Inc................................... 4.38% 09/25/21 118,963
80,000 General Motors Financial Co., Inc................................... 3.45% 04/10/22 82,368
--------------
3,377,773
--------------
BANKS -- 5.4%
5,000 Bank of America Corp., Medium-Term Note (c)......................... 4.27% 07/23/29 5,918
465,000 Bank of America Corp., Medium-Term Note (c)......................... 3.97% 02/07/30 543,751
165,000 Bank of America Corp., Medium-Term Note (c)......................... 2.88% 10/22/30 179,713
55,000 Bank of America Corp., Medium-Term Note (c)......................... 4.08% 03/20/51 69,128
100,000 Citigroup, Inc. (c)................................................. 2.88% 07/24/23 104,261
500,000 Citigroup, Inc. (c)................................................. 3.35% 04/24/25 544,337
525,000 Citigroup, Inc. (c)................................................. 4.08% 04/23/29 611,574
390,000 Citigroup, Inc. (c)................................................. 2.57% 06/03/31 413,328
135,000 Comerica, Inc. (c).................................................. 5.63% (d) 147,489
220,000 Goldman Sachs Group, (The), Inc. (c)................................ 3.81% 04/23/29 252,472
735,000 Goldman Sachs Group, (The), Inc..................................... 2.60% 02/07/30 784,889
355,000 JPMorgan Chase & Co. (c)............................................ 2.18% 06/01/28 372,016
200,000 JPMorgan Chase & Co. (c)............................................ 4.01% 04/23/29 233,226
1,460,000 JPMorgan Chase & Co. (c)............................................ 4.20% 07/23/29 1,727,045
250,000 Morgan Stanley, 3 Mo. LIBOR + 0.93% (b)............................. 1.19% 07/22/22 251,643
1,710,000 Morgan Stanley, Global Medium-Term Note............................. 3.70% 10/23/24 1,910,662
270,000 Wells Fargo & Co. (c)............................................... 3.07% 04/30/41 286,776
510,000 Wells Fargo & Co., Medium-Term Note (c)............................. 3.58% 05/22/28 572,734
230,000 Wells Fargo & Co., Medium-Term Note (c)............................. 2.39% 06/02/28 240,520
250,000 Wells Fargo & Co., Medium-Term Note................................. 4.15% 01/24/29 295,311
Page 46 See Notes to Financial Statements
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$ 265,000 Wells Fargo & Co., Medium-Term Note (c)............................. 2.88% 10/30/30 $ 285,462
360,000 Wells Fargo & Co., Medium-Term Note (c)............................. 2.57% 02/11/31 380,502
635,000 Wells Fargo & Co., Medium-Term Note (c)............................. 5.01% 04/04/51 869,851
--------------
11,082,608
--------------
BEVERAGES -- 0.5%
235,000 Anheuser-Busch Cos. LLC / Anheuser-Busch InBev Worldwide,
Inc.............................................................. 4.90% 02/01/46 291,090
215,000 Anheuser-Busch InBev Worldwide, Inc................................. 4.60% 04/15/48 256,730
390,000 Constellation Brands, Inc........................................... 4.25% 05/01/23 427,159
--------------
974,979
--------------
CHEMICALS -- 0.2%
400,000 International Flavors & Fragrances, Inc............................. 4.45% 09/26/28 462,923
--------------
COMMERCIAL SERVICES -- 0.4%
190,000 Emory University, Series 2020....................................... 2.14% 09/01/30 200,339
500,000 Global Payments, Inc................................................ 3.80% 04/01/21 508,478
61,000 Service Corp. International......................................... 4.63% 12/15/27 66,210
--------------
775,027
--------------
COMPUTERS -- 0.1%
116,000 Dell International LLC / EMC Corp. (a).............................. 4.42% 06/15/21 119,012
--------------
DIVERSIFIED FINANCIAL SERVICES -- 0.6%
570,000 Air Lease Corp...................................................... 3.88% 07/03/23 593,202
615,000 Raymond James Financial, Inc........................................ 3.63% 09/15/26 703,992
--------------
1,297,194
--------------
ELECTRIC -- 1.6%
75,000 Alliant Energy Finance LLC (a)...................................... 3.75% 06/15/23 80,767
600,000 Duquesne Light Holdings, Inc. (a)................................... 5.90% 12/01/21 633,019
100,000 Evergy Metro, Inc................................................... 4.20% 06/15/47 126,188
75,000 Florida Power & Light Co............................................ 3.95% 03/01/48 96,596
100,000 Metropolitan Edison Co. (a)......................................... 3.50% 03/15/23 104,898
500,000 Pennsylvania Electric Co. (a)....................................... 4.15% 04/15/25 551,672
900,000 PNM Resources, Inc.................................................. 3.25% 03/09/21 911,974
100,000 Puget Sound Energy, Inc............................................. 4.22% 06/15/48 127,712
450,000 Southwestern Electric Power Co., Series M........................... 4.10% 09/15/28 526,598
75,000 Tucson Electric Power Co............................................ 5.15% 11/15/21 78,045
--------------
3,237,469
--------------
ENGINEERING & CONSTRUCTION -- 0.2%
300,000 PowerTeam Services LLC (a).......................................... 9.03% 12/04/25 319,688
--------------
ENTERTAINMENT -- 0.5%
189,000 Caesars Entertainment, Inc. (a)..................................... 6.25% 07/01/25 200,575
515,000 Churchill Downs, Inc. (a)........................................... 5.50% 04/01/27 541,942
95,000 Churchill Downs, Inc. (a)........................................... 4.75% 01/15/28 97,120
117,000 Live Nation Entertainment, Inc. (a)................................. 4.75% 10/15/27 110,675
--------------
950,312
--------------
See Notes to Financial Statements Page 47
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
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 $ 210,162
370,000 Waste Pro USA, Inc. (a)............................................. 5.50% 02/15/26 382,175
--------------
592,337
--------------
FOOD -- 1.5%
250,000 Campbell Soup Co., 3 Mo. LIBOR + 0.63% (b).......................... 0.94% 03/15/21 250,495
250,000 Conagra Brands, Inc., 3 Mo. LIBOR + 0.50% (b)....................... 0.77% 10/09/20 250,047
250,000 Conagra Brands, Inc................................................. 4.60% 11/01/25 290,956
100,000 Kraft Heinz Foods Co. (a)........................................... 7.13% 08/01/39 138,151
55,000 Kraft Heinz Foods Co................................................ 5.00% 06/04/42 60,986
730,000 Kraft Heinz Foods Co................................................ 4.38% 06/01/46 750,004
480,000 Kraft Heinz Foods Co. (a)........................................... 4.88% 10/01/49 530,193
290,000 Kroger (The) Co..................................................... 4.45% 02/01/47 357,857
20,000 Pilgrim's Pride Corp. (a)........................................... 5.88% 09/30/27 21,275
387,000 Smithfield Foods, Inc. (a).......................................... 5.20% 04/01/29 428,860
--------------
3,078,824
--------------
FOREST PRODUCTS & PAPER -- 0.3%
540,000 Georgia-Pacific LLC (a)............................................. 5.40% 11/01/20 544,540
--------------
GAS -- 0.3%
500,000 Southern Co. Gas Capital Corp....................................... 5.88% 03/15/41 694,084
--------------
HEALTHCARE-PRODUCTS -- 0.2%
150,000 Fresenius US Finance II, Inc. (a)................................... 4.25% 02/01/21 152,206
208,000 Hologic, Inc. (a)................................................... 4.63% 02/01/28 221,578
--------------
373,784
--------------
HEALTHCARE-SERVICES -- 1.6%
635,000 Barnabas Health, Inc., Series 2012.................................. 4.00% 07/01/28 713,250
99,000 Centene Corp. (a)................................................... 5.25% 04/01/25 102,836
250,000 Centene Corp........................................................ 4.63% 12/15/29 274,631
260,000 HCA, Inc............................................................ 5.00% 03/15/24 294,031
90,000 HCA, Inc............................................................ 5.25% 04/15/25 105,017
640,000 HCA, Inc............................................................ 5.25% 06/15/49 806,248
100,000 Humana, Inc......................................................... 3.15% 12/01/22 105,268
105,000 Humana, Inc......................................................... 3.13% 08/15/29 116,296
235,000 Partners Healthcare System, Inc., Series 2020....................... 3.34% 07/01/60 258,653
340,000 Quest Diagnostics, Inc.............................................. 4.20% 06/30/29 406,347
150,000 Tenet Healthcare Corp............................................... 4.63% 07/15/24 153,600
--------------
3,336,177
--------------
HOUSEHOLD PRODUCTS/WARES -- 0.0%
60,000 Spectrum Brands, Inc................................................ 6.13% 12/15/24 62,019
--------------
INSURANCE -- 1.2%
205,000 Berkshire Hathaway Finance Corp..................................... 4.20% 08/15/48 264,756
295,000 Berkshire Hathaway Finance Corp..................................... 4.25% 01/15/49 384,267
465,000 Farmers Insurance Exchange (a) (c).................................. 4.75% 11/01/57 479,808
750,000 MassMutual Global Funding II (a).................................... 3.40% 03/08/26 855,143
175,000 Teachers Insurance & Annuity Association of America (a) (c)......... 4.38% 09/15/54 186,562
325,000 Willis North America, Inc........................................... 2.95% 09/15/29 352,949
--------------
2,523,485
--------------
Page 48 See Notes to Financial Statements
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
MEDIA -- 1.4%
$ 609,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)................... 4.50% 08/15/30 $ 647,065
600,000 Charter Communications Operating LLC / Charter Communications
Operating Capital................................................ 5.75% 04/01/48 753,954
20,000 CSC Holdings LLC (a)................................................ 5.38% 02/01/28 21,388
287,000 CSC Holdings LLC (a)................................................ 6.50% 02/01/29 323,413
100,000 NBCUniversal Media LLC.............................................. 2.88% 01/15/23 105,928
150,000 Sirius XM Radio, Inc. (a)........................................... 3.88% 08/01/22 151,500
390,000 Walt Disney (The) Co................................................ 4.00% 10/01/23 429,564
190,000 Walt Disney (The) Co................................................ 2.65% 01/13/31 206,260
140,000 Walt Disney (The) Co................................................ 3.60% 01/13/51 160,304
--------------
2,799,376
--------------
MISCELLANEOUS MANUFACTURING -- 0.3%
205,000 General Electric Co., Medium-Term Note.............................. 5.88% 01/14/38 236,993
300,000 Ingersoll-Rand Co................................................... 9.00% 08/15/21 322,531
--------------
559,524
--------------
OIL & GAS -- 0.9%
88,000 Antero Resources Corp............................................... 5.13% 12/01/22 75,876
100,000 Antero Resources Corp............................................... 5.63% 06/01/23 79,905
236,000 Antero Resources Corp............................................... 5.00% 03/01/25 162,276
175,000 BP Capital Markets America, Inc..................................... 3.63% 04/06/30 201,708
170,000 EQT Corp............................................................ 3.90% 10/01/27 164,845
275,000 Exxon Mobil Corp.................................................... 2.61% 10/15/30 299,653
515,000 Exxon Mobil Corp.................................................... 4.33% 03/19/50 662,695
120,000 Range Resources Corp................................................ 4.88% 05/15/25 112,263
--------------
1,759,221
--------------
OIL & GAS SERVICES -- 0.2%
340,000 USA Compression Partners L.P. / USA Compression Finance
Corp............................................................. 6.88% 04/01/26 350,962
--------------
PACKAGING & CONTAINERS -- 0.7%
490,000 Amcor Finance USA, Inc.............................................. 4.50% 05/15/28 575,874
58,000 Ball Corp........................................................... 4.00% 11/15/23 61,770
58,000 Graphic Packaging International LLC................................. 4.88% 11/15/22 60,959
75,000 Matthews International Corp. (a).................................... 5.25% 12/01/25 71,148
20,000 Mauser Packaging Solutions Holding Co. (a).......................... 5.50% 04/15/24 20,329
60,000 Sealed Air Corp. (a)................................................ 5.50% 09/15/25 67,419
20,000 Sealed Air Corp. (a)................................................ 4.00% 12/01/27 21,350
405,000 WRKCo, Inc.......................................................... 4.65% 03/15/26 477,225
--------------
1,356,074
--------------
PHARMACEUTICALS -- 2.6%
390,000 AbbVie, Inc. (a).................................................... 4.55% 03/15/35 488,964
105,000 AbbVie, Inc. (a).................................................... 4.05% 11/21/39 123,078
200,000 AbbVie, Inc......................................................... 4.45% 05/14/46 243,016
20,000 AbbVie, Inc. (a).................................................... 4.25% 11/21/49 24,227
100,000 Bayer US Finance II LLC (a)......................................... 3.50% 06/25/21 102,183
180,000 Bayer US Finance II LLC (a)......................................... 4.25% 12/15/25 207,241
880,000 Bayer US Finance II LLC (a)......................................... 4.38% 12/15/28 1,033,469
265,000 Bayer US Finance II LLC (a)......................................... 4.63% 06/25/38 317,201
See Notes to Financial Statements Page 49
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
PHARMACEUTICALS (CONTINUED)
$ 100,000 Bayer US Finance II LLC (a)......................................... 4.40% 07/15/44 $ 113,665
130,000 Bayer US Finance II LLC (a)......................................... 4.88% 06/25/48 161,349
114,000 Becton Dickinson and Co............................................. 3.25% 11/12/20 114,557
375,000 Becton Dickinson and Co., 3 Mo. LIBOR + 0.88% (b)................... 1.18% 12/29/20 375,160
795,000 Cigna Corp.......................................................... 4.38% 10/15/28 952,945
670,000 CVS Health Corp..................................................... 5.05% 03/25/48 875,111
182,000 Elanco Animal Health, Inc........................................... 5.27% 08/28/23 199,631
--------------
5,331,797
--------------
PIPELINES -- 1.6%
90,000 Cheniere Energy Partners L.P........................................ 5.25% 10/01/25 91,215
70,000 Energy Transfer Operating L.P....................................... 5.00% 05/15/50 67,084
135,000 Energy Transfer Operating L.P., Series B (c)........................ 6.63% (d) 102,027
370,000 Kinder Morgan, Inc.................................................. 5.55% 06/01/45 459,047
91,130 Pipeline Funding Co. LLC (a)........................................ 7.50% 01/15/30 125,648
145,000 Plains All American Pipeline L.P. / PAA Finance Corp................ 4.65% 10/15/25 157,830
350,000 Rockies Express Pipeline LLC (a).................................... 4.95% 07/15/29 352,625
100,000 Rockies Express Pipeline LLC (a).................................... 6.88% 04/15/40 103,500
61,364 Ruby Pipeline LLC (a)............................................... 7.00% 04/01/22 54,781
100,000 Sabine Pass Liquefaction LLC........................................ 5.63% 03/01/25 116,478
50,000 Sunoco Logistics Partners Operations L.P............................ 4.00% 10/01/27 51,443
930,000 Sunoco Logistics Partners Operations L.P............................ 5.40% 10/01/47 924,749
75,000 TC PipeLines L.P.................................................... 3.90% 05/25/27 81,038
54,000 TransMontaigne Partners L.P. / TLP Finance Corp..................... 6.13% 02/15/26 55,158
510,000 Williams Cos., (The), Inc........................................... 3.75% 06/15/27 563,802
--------------
3,306,425
--------------
REAL ESTATE INVESTMENT TRUSTS -- 6.4%
450,000 Alexandria Real Estate Equities, Inc................................ 3.80% 04/15/26 515,329
75,000 Alexandria Real Estate Equities, Inc., Class E...................... 3.45% 04/30/25 83,564
75,000 American Campus Communities Operating Partnership L.P............... 3.75% 04/15/23 78,702
500,000 American Campus Communities Operating Partnership L.P............... 4.13% 07/01/24 541,324
300,000 Boston Properties L.P............................................... 4.13% 05/15/21 304,948
250,000 Boston Properties L.P............................................... 2.75% 10/01/26 270,441
200,000 Boston Properties L.P............................................... 3.40% 06/21/29 219,529
550,000 Camden Property Trust............................................... 2.95% 12/15/22 575,416
500,000 CubeSmart L.P....................................................... 4.38% 02/15/29 586,339
515,000 CyrusOne L.P. / CyrusOne Finance Corp............................... 2.90% 11/15/24 551,331
665,000 CyrusOne L.P. / CyrusOne Finance Corp............................... 3.45% 11/15/29 727,327
325,000 Essex Portfolio L.P................................................. 3.63% 08/15/22 342,442
200,000 GLP Capital L.P. / GLP Financing II, Inc............................ 5.38% 11/01/23 214,913
250,000 GLP Capital L.P. / GLP Financing II, Inc............................ 5.38% 04/15/26 277,905
175,000 GLP Capital L.P. / GLP Financing II, Inc............................ 5.75% 06/01/28 199,546
185,000 GLP Capital L.P. / GLP Financing II, Inc............................ 5.30% 01/15/29 205,144
115,000 GLP Capital L.P. / GLP Financing II, Inc............................ 4.00% 01/15/30 119,540
575,000 Healthcare Realty Trust, Inc........................................ 3.75% 04/15/23 604,961
575,000 Healthcare Trust of America Holdings L.P............................ 3.70% 04/15/23 607,013
3,000 Healthpeak Properties, Inc.......................................... 4.25% 11/15/23 3,287
75,000 Healthpeak Properties, Inc.......................................... 4.00% 06/01/25 84,624
500,000 Hudson Pacific Properties L.P....................................... 3.95% 11/01/27 541,803
175,000 Hudson Pacific Properties L.P....................................... 4.65% 04/01/29 197,720
Page 50 See Notes to Financial Statements
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
$ 400,000 Kilroy Realty L.P................................................... 3.45% 12/15/24 $ 425,314
400,000 Kilroy Realty L.P................................................... 4.38% 10/01/25 443,146
500,000 Kimco Realty Corp................................................... 3.40% 11/01/22 526,160
505,000 Lexington Realty Trust.............................................. 2.70% 09/15/30 512,604
117,000 MGM Growth Properties Operating Partnership L.P. / MGP Finance
Co.-Issuer, Inc.................................................. 5.63% 05/01/24 126,665
250,000 National Retail Properties, Inc..................................... 3.90% 06/15/24 272,352
40,000 SBA Communications Corp............................................. 4.88% 09/01/24 41,138
380,000 SL Green Operating Partnership L.P., 3 Mo. LIBOR + 0.98% (b)........ 1.26% 08/16/21 376,922
325,000 SL Green Operating Partnership L.P.................................. 3.25% 10/15/22 332,092
300,000 Ventas Realty L.P................................................... 3.75% 05/01/24 321,656
250,000 Ventas Realty L.P................................................... 2.65% 01/15/25 261,309
75,000 Ventas Realty L.P................................................... 4.00% 03/01/28 81,265
250,000 VEREIT Operating Partnership L.P.................................... 4.63% 11/01/25 277,374
1,000,000 WEA Finance LLC (a)................................................. 3.15% 04/05/22 1,017,618
250,000 Welltower, Inc...................................................... 3.75% 03/15/23 264,705
--------------
13,133,468
--------------
RETAIL -- 0.7%
100,000 Family Dollar Stores, Inc........................................... 5.00% 02/01/21 101,735
100,000 FirstCash, Inc. (a)................................................. 4.63% 09/01/28 102,956
138,000 Rite Aid Corp. (a).................................................. 8.00% 11/15/26 140,415
75,000 Starbucks Corp...................................................... 3.80% 08/15/25 85,359
160,000 Starbucks Corp...................................................... 2.25% 03/12/30 165,826
100,000 Walgreen Co......................................................... 3.10% 09/15/22 105,087
300,000 Walgreens Boots Alliance, Inc....................................... 3.30% 11/18/21 308,857
435,000 Walgreens Boots Alliance, Inc....................................... 4.80% 11/18/44 480,242
--------------
1,490,477
--------------
SEMICONDUCTORS -- 0.5%
205,000 Broadcom, Inc....................................................... 3.63% 10/15/24 224,840
615,000 Intel Corp.......................................................... 3.73% 12/08/47 734,603
--------------
959,443
--------------
TELECOMMUNICATIONS -- 2.5%
150,000 AT&T, Inc........................................................... 4.50% 05/15/35 179,923
594,000 AT&T, Inc........................................................... 4.85% 03/01/39 721,672
25,000 AT&T, Inc........................................................... 4.80% 06/15/44 30,213
755,000 AT&T, Inc........................................................... 4.75% 05/15/46 909,204
289,000 Level 3 Financing, Inc.............................................. 5.38% 01/15/24 293,305
54,000 Qwest Corp.......................................................... 6.75% 12/01/21 57,247
125,000 Qwest Corp.......................................................... 7.25% 09/15/25 145,182
335,000 SES GLOBAL Americas Holdings G.P. (a)............................... 5.30% 03/25/44 350,973
320,000 Sprint Corp......................................................... 7.88% 09/15/23 372,600
1,005,000 Sprint Spectrum Co. LLC / Sprint Spectrum Co. II LLC / Sprint
Spectrum Co. III LLC (a)......................................... 4.74% 03/20/25 1,093,696
90,000 T-Mobile USA, Inc................................................... 6.00% 03/01/23 90,225
238,000 T-Mobile USA, Inc................................................... 6.00% 04/15/24 242,970
74,000 T-Mobile USA, Inc................................................... 4.75% 02/01/28 79,828
125,000 T-Mobile USA, Inc. (a).............................................. 3.88% 04/15/30 143,435
35,000 T-Mobile USA, Inc. (a).............................................. 2.55% 02/15/31 36,641
See Notes to Financial Statements Page 51
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
CORPORATE BONDS AND NOTES (CONTINUED)
TELECOMMUNICATIONS (CONTINUED)
$ 250,000 T-Mobile USA, Inc. (a).............................................. 4.38% 04/15/40 $ 299,455
--------------
5,046,569
--------------
TRUCKING & LEASING -- 0.2%
500,000 Aviation Capital Group LLC, 3 Mo. LIBOR + 0.95% (a) (b)............. 1.20% 06/01/21 487,166
--------------
TOTAL CORPORATE BONDS AND NOTES................................................................ 73,631,877
(Cost $67,265,598) --------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 14.5%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.0%
Federal National Mortgage Association
2,451,925 Series 2011-116, Class SA, IO, 1 Mo. LIBOR (x) -1 + 6.00% (e).... 5.82% 11/25/41 428,044
532,547 Series 2011-130, Class NW, 1 Mo. LIBOR + 1.20% (b)............... 1.36% 12/25/41 548,224
491,186 Series 2012-128, Class UA........................................ 2.50% 06/25/42 518,590
2,245,364 Series 2013-18, Class MI, IO..................................... 3.00% 02/25/33 156,536
Government National Mortgage Association
1,556,788 Series 2003-110, Class S, IO, 1 Mo. LIBOR (x) -1 + 6.60% (e)..... 6.41% 10/20/33 251,816
2,050,491 Series 2018-63, Class IO, IO..................................... 4.00% 09/20/47 259,049
--------------
2,162,259
--------------
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 4.3%
Federal National Mortgage Association
5,476,662 Series 2012-M4, Class X1, IO (f) (g)............................. 0.53% 04/25/22 31,826
1,651,122 Series 2014-M6, Class X2, IO (f) (h)............................. 0.40% 05/25/21 962
28,277,746 Series 2015-M4, Class X2, IO (f)................................. 0.48% 07/25/22 149,669
605,504 Series 2016-M2, Class AL......................................... 3.47% 04/25/36 623,539
252,807 Series 2016-M2, Class X3, IO (f) (h)............................. 2.06% 04/25/36 4,609
3,007,388 Series 2016-M4, Class X2, IO (f)................................. 2.70% 01/25/39 198,134
352,388 Series 2016-M11, Class X2, IO (f)................................ 2.83% 07/25/39 9,877
6,100,000 Series 2019-M29, Class X4, IO (b)................................ 0.70% 03/25/29 278,265
Freddie Mac Multifamily PC REMIC Trust
4,095,000 Series 2019-P002, Class X, IO (g)................................ 1.01% 07/25/33 472,624
Freddie Mac Multifamily Structured Pass Through Certificates
2,000,000 Series 2011-K010, Class X3, IO (f)............................... 4.72% 11/25/44 13,815
3,000,000 Series 2011-K011, Class X3, IO (f)............................... 2.66% 12/25/43 18,259
5,413,749 Series 2011-K012, Class X3, IO (f)............................... 2.33% 01/25/41 8,874
550,000 Series 2011-KAIV, Class X2, IO (f)............................... 3.61% 06/25/41 9,780
8,139,000 Series 2012-K021, Class X3, IO (f)............................... 2.03% 07/25/40 252,598
2,500,000 Series 2012-K022, Class X3, IO (f)............................... 1.87% 08/25/40 74,099
11,075,000 Series 2013-K025, Class X3, IO (f)............................... 1.81% 11/25/40 365,724
76,405,261 Series 2013-K031, Class X1, IO (f)............................... 0.32% 04/25/23 378,840
17,827,558 Series 2013-K035, Class X1, IO (f)............................... 0.50% 08/25/23 170,562
4,000,000 Series 2013-K035, Class X3, IO (f)............................... 1.85% 12/25/41 185,646
2,500,000 Series 2014-K037, Class X3, IO (f)............................... 2.28% 01/25/42 163,480
2,145,000 Series 2014-K039, Class X3, IO (f)............................... 2.18% 08/25/42 174,419
37,598,715 Series 2014-K714, Class X3, IO (f)............................... 2.04% 01/25/42 376
11,000,000 Series 2014-K715, Class X3, IO (f)............................... 2.08% 02/25/41 120,615
30,235,000 Series 2014-K716, Class X3, IO (f)............................... 1.85% 08/25/42 452,739
9,545,414 Series 2015-K042, Class X1, IO (f)............................... 1.17% 12/25/24 369,528
14,385,506 Series 2015-K044, Class X1, IO (f)............................... 0.86% 01/25/25 377,538
Page 52 See Notes to Financial Statements
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
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)
$ 8,662,737 Series 2015-K045, Class X1, IO (f)............................... 0.57% 01/25/25 $ 142,297
492,196 Series 2015-K719, Class X1, IO (f)............................... 0.82% 06/25/22 336
1,388,559 Series 2015-K720, Class X1, IO (f)............................... 0.64% 08/25/22 9,261
4,915,532 Series 2016-K057, Class X1, IO (f)............................... 1.32% 07/25/26 291,603
1,900,000 Series 2016-K060, Class X3, IO (f)............................... 1.96% 12/25/44 192,403
5,093,326 Series 2016-KIR1, Class X, IO (f)................................ 1.20% 03/25/26 254,462
9,971,869 Series 2016-KS05, Class X, IO (f)................................ 0.76% 01/25/23 130,776
3,755,847 Series 2016-KS06, Class X, IO (f)................................ 1.20% 08/25/26 172,211
5,000,000 Series 2016-KS07, Class X, IO (f)................................ 0.78% 09/25/25 145,933
6,770,045 Series 2016-KW01, Class X1, IO (f)............................... 1.17% 01/25/26 285,147
11,898,606 Series 2017-K726, Class X1, IO (f)............................... 1.02% 04/25/24 298,505
2,230,000 Series 2017-K728, Class X3, IO (f)............................... 2.02% 11/25/45 159,243
670,406 Series 2017-Q006, Class APT1 (b)................................. 2.67% 07/25/26 672,806
125,000 Series 2018-K155, Class A3....................................... 3.75% 04/25/33 155,886
125,000 Series 2018-W5FX, Class AFX (f).................................. 3.34% 04/25/28 142,095
1,364,897 Series 2019-KC04, Class X1, IO (f)............................... 1.41% 12/25/26 77,037
7,190,422 Series 2019-KC05, Class X1, IO (f)............................... 1.20% 06/25/27 431,955
1,800,000 Series 2019-KS11, Class XFX, IO (f).............................. 1.76% 06/25/29 195,831
Government National Mortgage Association
679,991 Series 2013-125, Class IO, IO (g)................................ 0.53% 10/16/54 15,051
2,276,435 Series 2014-125, Class IO, IO (g)................................ 0.92% 11/16/54 112,443
--------------
8,791,678
--------------
PASS-THROUGH SECURITIES -- 9.2%
Federal Home Loan Mortgage Corporation
440,094 Pool WA3208...................................................... 3.98% 04/01/34 524,866
294,631 Pool WA3303...................................................... 3.83% 05/01/35 352,599
576,751 Pool WN0006...................................................... 3.42% 07/01/30 670,812
Federal National Mortgage Association
405,220 Pool 464398...................................................... 5.97% 01/01/40 460,798
307,114 Pool 464400...................................................... 5.97% 01/01/40 349,236
485,316 Pool AM2974...................................................... 4.10% 04/01/43 563,387
326,000 Pool BL1882...................................................... 3.60% 03/01/34 392,718
645,017 Pool BL5962...................................................... 2.38% 03/01/30 708,652
6,650,000 Pool TBA (i)..................................................... 2.00% 09/15/50 6,858,332
7,475,000 Pool TBA (i)..................................................... 2.50% 09/15/50 7,867,437
--------------
18,748,837
--------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES........................................ 29,702,774
(Cost $30,024,480) --------------
MORTGAGE-BACKED SECURITIES -- 12.3%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 12.2%
Adjustable Rate Mortgage Trust
127,082 Series 2005-8, Class 3A21 (f).................................... 3.08% 11/25/35 109,478
Alternative Loan Trust
320,601 Series 2005-16, Class A3, 1 Mo. LIBOR + 0.50% (b)................ 0.68% 06/25/35 291,326
See Notes to Financial Statements Page 53
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Alternative Loan Trust (Continued)
$ 100,701 Series 2005-76, Class 1A1, 12 Mo. Treasury Average +
1.48% (b)..................................................... 2.65% 01/25/36 $ 94,722
364,721 Series 2006-33CB, Class 2A1...................................... 6.00% 11/25/36 294,213
320,637 Series 2007-OA6, Class A1B, 1 Mo. LIBOR + 0.20% (b).............. 0.38% 06/25/37 288,226
American Home Mortgage Assets Trust
940,671 Series 2007-1, Class A1, 12 Mo. Treasury Average + 0.70% (b)..... 1.87% 02/25/47 516,937
American Home Mortgage Investment Trust
802,297 Series 2005-4, Class 1A1, 1 Mo. LIBOR + 0.58% (b)................ 0.76% 11/25/45 739,544
BCAP LLC Trust
377,285 Series 2007-AA3, Class 1A1A, 1 Mo. LIBOR + 0.21% (b)............. 0.39% 04/25/37 318,326
1,000,000 Series 2015-RR2, Class 25A3 (a) (f).............................. 0.38% 10/28/36 907,148
Bear Stearns ALT-A Trust
969,935 Series 2004-8, Class M1, 1 Mo. LIBOR + 0.92% (b)................. 1.09% 09/25/34 950,869
Bear Stearns Mortgage Funding Trust
815,335 Series 2006-AR1, Class 1A1, 1 Mo. LIBOR + 0.21% (b).............. 0.39% 07/25/36 740,603
723,959 Series 2006-AR3, Class 1A1, 1 Mo. LIBOR + 0.18% (b).............. 0.36% 10/25/36 615,007
272,157 Series 2007-AR1, Class 1A1, 1 Mo. LIBOR + 0.16% (b).............. 0.34% 01/25/37 244,393
235,235 Series 2007-AR3, Class 1A1, 1 Mo. LIBOR + 0.14% (b).............. 0.32% 03/25/37 210,788
CIM Trust
796,450 Series 2017-8, Class A1 (a) (b).................................. 3.00% 12/25/65 798,356
270,275 Series 2018-R6, Class A1, 1 Mo. LIBOR + 1.08% (a) (b)............ 1.23% 09/25/58 266,547
Credit Suisse Mortgage Trust
201,604 Series 2010-7R, Class 1A12 (a)................................... 4.00% 01/26/37 203,493
88,534 Series 2014-2R, Class 28A1 (a) (f)............................... 3.00% 06/27/37 89,157
DSLA Mortgage Loan Trust
86,427 Series 2004-AR4, Class 2A1A, 1 Mo. LIBOR + 0.36% (b)............. 0.52% 01/19/45 75,144
First Horizon Alternative Mortgage Securities Trust
60,367 Series 2004-AA4, Class A1 (f).................................... 3.53% 10/25/34 60,011
GreenPoint Mortgage Funding Trust
91,779 Series 2006-AR1, Class A1A, 1 Mo. LIBOR + 0.58% (b).............. 0.76% 02/25/36 89,239
527,602 Series 2007-AR1, Class 2A1A, 1 Mo. LIBOR + 0.20% (b)............. 0.38% 03/25/47 506,837
GreenPoint MTA Trust
520,225 Series 2005-AR3, Class 1A1, 1 Mo. LIBOR + 0.24% (b).............. 0.42% 08/25/45 474,199
HarborView Mortgage Loan Trust
231,172 Series 2005-9, Class 2A1A, 1 Mo. LIBOR + 0.34% (b)............... 0.50% 06/20/35 225,889
637,006 Series 2005-9, Class 2A1C, 1 Mo. LIBOR + 0.45% (b)............... 0.61% 06/20/35 608,561
732,365 Series 2007-7, Class 1A1, 1 Mo. LIBOR + 1.00% (b)................ 1.18% 10/25/37 651,792
HomeBanc Mortgage Trust
275,906 Series 2005-4, Class A1, 1 Mo. LIBOR + 0.27% (b)................. 0.45% 10/25/35 275,200
Impac CMB Trust
91,070 Series 2005-1, Class 1A1, 1 Mo. LIBOR + 0.52% (b)................ 0.70% 04/25/35 88,596
IndyMac INDX Mortgage Loan Trust
502,675 Series 2005-16IP, Class A1, 1 Mo. LIBOR + 0.64% (b).............. 0.82% 07/25/45 444,930
712,681 Series 2006-AR4, Class A1A, 1 Mo. LIBOR + 0.21% (b).............. 0.39% 05/25/46 664,788
301,808 Series 2006-AR21, Class A1, 1 Mo. LIBOR + 0.12% (b).............. 0.30% 08/25/36 271,945
201,175 Series 2007-FLX2, Class A1C, 1 Mo. LIBOR + 0.19% (b)............. 0.37% 04/25/37 183,063
JP Morgan Alternative Loan Trust
100,867 Series 2007-S1, Class A2, 1 Mo. LIBOR + 0.34% (b)................ 0.52% 04/25/47 93,832
Page 54 See Notes to Financial Statements
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Lehman Mortgage Trust
$ 1,019,451 Series 2006-1, Class 1A5......................................... 5.50% 02/25/36 $ 816,213
Lehman XS Trust
369,419 Series 2005-5N, Class 3A1A, 1 Mo. LIBOR + 0.30% (b).............. 0.48% 11/25/35 361,229
MASTR Adjustable Rate Mortgages Trust
820,000 Series 2004-14, Class B1, 1 Mo. LIBOR + 2.15% (b)................ 2.33% 01/25/35 834,954
541,485 Series 2007-2, Class A1, 1 Mo. LIBOR + 0.15% (b)................. 0.33% 03/25/47 506,228
Merrill Lynch Mortgage Investors Trust
210,379 Series 2003-D, Class A, 1 Mo. LIBOR + 0.62% (b).................. 0.80% 08/25/28 203,796
340,200 Series 2004-E, Class A2B, 6 Mo. LIBOR + 0.72% (b)................ 1.69% 11/25/29 339,913
Morgan Stanley Resecuritization Trust
84,677 Series 2014-R8, Class 3B1, 12 Mo. Treasury Average +
0.75% (a) (b)................................................. 2.07% 06/26/47 80,937
Opteum Mortgage Acceptance Corp Trust
682,874 Series 2006-1, Class 1AC1, 1 Mo. LIBOR + 0.30% (b)............... 0.48% 04/25/36 647,492
Structured Adjustable Rate Mortgage Loan Trust
60,437 Series 2005-12, Class 3A1 (f).................................... 3.31% 06/25/35 58,896
594,447 Series 2006-11, Class 1A1, 1 Mo. LIBOR + 0.16% (b)............... 0.34% 12/25/36 557,244
811,859 Series 2007-4, Class 1A2, 1 Mo. LIBOR + 0.22% (b)................ 0.40% 05/25/37 757,682
Structured Asset Mortgage Investments II Trust
418,589 Series 2005-AR2, Class 2A1, 1 Mo. LIBOR + 0.46% (b).............. 0.64% 05/25/45 403,207
579,975 Series 2006-AR1, Class 3A1, 1 Mo. LIBOR + 0.23% (b).............. 0.41% 02/25/36 531,020
449,060 Series 2006-AR3, Class 12A1, 1 Mo. LIBOR + 0.22% (b)............. 0.40% 05/25/36 376,984
525,717 Series 2006-AR4, Class 3A1, 1 Mo. LIBOR + 0.19% (b).............. 0.37% 06/25/36 470,981
78,376 Series 2006-AR5, Class 1A1, 1 Mo. LIBOR + 0.21% (b).............. 0.39% 05/25/36 72,112
1,006,250 Series 2006-AR8, Class A1A, 1 Mo. LIBOR + 0.20% (b).............. 0.38% 10/25/36 937,387
575,901 Series 2007-AR1, Class 1A1, 1 Mo. LIBOR + 0.16% (b).............. 0.34% 01/25/37 495,980
243,943 Series 2007-AR1, Class 2A1, 1 Mo. LIBOR + 0.18% (b).............. 0.36% 01/25/37 210,618
842,925 Series 2007-AR6, Class A1, 12 Mo. Treasury Average +
1.50% (b)..................................................... 2.67% 08/25/47 788,321
Structured Asset Mortgage Investments Trust
197,906 Series 2003-AR3, Class A1, 1 Mo. LIBOR + 0.68% (b)............... 0.84% 11/19/33 192,746
TBW Mortgage-Backed Trust
782,746 Series 2006-4, Class A4 (j)...................................... 6.16% 09/25/36 765,476
WaMu Mortgage Pass-Through Certificates Trust
186,081 Series 2004-AR12, Class A2A, 1 Mo. LIBOR + 0.78% (b)............. 0.96% 10/25/44 182,851
454,378 Series 2006-AR3, Class A1A, 12 Mo. Treasury Average +
1.00% (b)..................................................... 2.17% 02/25/46 441,564
69,752 Series 2006-AR11, Class 1A, 12 Mo. Treasury Average +
0.96% (b)..................................................... 2.13% 09/25/46 62,514
1,112,971 Series 2007-OA5, Class 1A, 12 Mo. Treasury Average +
0.75% (b)..................................................... 1.92% 06/25/47 1,021,835
Wells Fargo Mortgage Backed Securities Trust
390,454 Series 2007-AR5, Class A1 (f).................................... 4.12% 10/25/37 375,969
--------------
24,887,308
--------------
COMMERCIAL MORTGAGE-BACKED OBLIGATIONS -- 0.1%
COMM Mortgage Trust
1,541,788 Series 2012-CR4, Class XA, IO (f)................................ 1.84% 10/15/45 46,793
5,600,000 Series 2020-CBM, Class XCP, IO (a) (f)........................... 0.59% 02/10/37 117,628
See Notes to Financial Statements Page 55
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
MORTGAGE-BACKED SECURITIES (CONTINUED)
COMMERCIAL MORTGAGE-BACKED OBLIGATIONS (CONTINUED)
GS Mortgage Securities Corp Trust
$ 2,600,000 Series 2020-UPTN, Class XA, IO (a) (f)........................... 0.35% 02/10/37 $ 40,339
--------------
204,760
--------------
TOTAL MORTGAGE-BACKED SECURITIES............................................................... 25,092,068
(Cost $25,864,555) --------------
ASSET-BACKED SECURITIES -- 10.8%
321 Henderson Receivables LLC
320,792 Series 2013-2A, Class A (a)...................................... 4.21% 03/15/62 373,414
ABFC Trust
103,622 Series 2007-NC1, Class A2, 1 Mo. LIBOR + 0.30% (a) (b)........... 0.48% 05/25/37 98,640
ACE Securities Corp. Home Equity Loan Trust
1,044,130 Series 2006-HE3, Class A2C, 1 Mo. LIBOR + 0.15% (b).............. 0.33% 06/25/36 871,117
Ameriquest Mortgage Securities, Inc. Asset Backed Pass-Through Ctfs
921,440 Series 2002-AR1, Class M1, 1 Mo. LIBOR + 1.07% (b)............... 1.24% 09/25/32 928,227
Argent Securities, Inc.
160,000 Series 2005-W3, Class M1, 1 Mo. LIBOR + 0.44% (b)................ 0.62% 11/25/35 153,596
BCMSC Trust
2,369,065 Series 2000-A, Class A5 (b)...................................... 8.32% 06/15/30 787,733
Carrington Mortgage Loan Trust
56,922 Series 2005-NC5, Class M1, 1 Mo. LIBOR + 0.48% (b)............... 0.66% 10/25/35 56,864
Citigroup Mortgage Loan Trust
1,235,463 Series 2006-HE3, Class A2B, 1 Mo. LIBOR + 0.10% (b).............. 0.28% 12/25/36 1,016,546
Citigroup Mortgage Loan Trust, Inc.
22,734 Series 2005-HE4, Class M1, 1 Mo. LIBOR + 0.41% (b)............... 0.59% 10/25/35 23,271
425,000 Series 2007-WFH3, Class M1, 1 Mo. LIBOR + 0.26% (b).............. 0.44% 06/25/37 405,875
Conseco Finance Corp.
39,693 Series 1996-7, Class M1 (b)...................................... 7.70% 09/15/26 40,974
1,518,950 Series 1999-3, Class A8 (b)...................................... 7.06% 02/01/31 1,515,801
Corevest American Finance Trust
405,000 Series 2020-1, Class A2 (a)...................................... 2.30% 03/15/50 421,133
1,639,851 Series 2020-1, Class XA, IO (a) (f).............................. 2.86% 03/15/50 187,673
Countrywide Asset-Backed Certificates
208,486 Series 2006-6, Class 1A1, 1 Mo. LIBOR + 0.17% (b)................ 0.35% 09/25/36 206,066
Credit-Based Asset Servicing & Securitization LLC
957,000 Series 2006-MH1, Class B1 (a) (j)................................ 6.25% 10/25/36 997,742
EquiFirst Mortgage Loan Trust
104,274 Series 2005-1, Class M3, 1 Mo. LIBOR + 0.72% (b)................. 0.90% 04/25/35 103,926
First Franklin Mortgage Loan Trust
127,354 Series 2006-FF11, Class 2A3, 1 Mo. LIBOR + 0.15% (b)............. 0.33% 08/25/36 111,526
Fremont Home Loan Trust
79,881 Series 2005-D, Class 2A4, 1 Mo. LIBOR + 0.34% (b)................ 0.52% 11/25/35 79,181
GSAA Home Equity Trust
805,705 Series 2007-8, Class A3, 1 Mo. LIBOR + 0.45% (b)................. 0.63% 08/25/37 794,002
GSAMP Trust
1,300,000 Series 2006-HE4, Class A2D, 1 Mo. LIBOR + 0.26% (b).............. 0.44% 06/25/36 1,238,467
JP Morgan Mortgage Acquisition Trust
931,971 Series 2006-CH2, Class AF6 (j)................................... 5.54% 10/25/36 760,186
Page 56 See Notes to Financial Statements
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
ASSET-BACKED SECURITIES (CONTINUED)
JP Morgan Mortgage Acquisition Trust (Continued)
$ 701,193 Series 2006-WF1, Class A5, steps up to 6.91% after Redemption
Date (k)...................................................... 6.41% 07/25/36 $ 331,417
1,269,537 Series 2007-CH2, Class AF6 (j)................................... 4.60% 01/25/37 948,081
Long Beach Mortgage Loan Trust
2,601,835 Series 2006-8, Class 2A3, 1 Mo. LIBOR + 0.16% (b)................ 0.34% 09/25/36 1,100,756
Mastr Asset Backed Securities Trust
150,896 Series 2006-HE5, Class A3, 1 Mo. LIBOR + 0.16% (b)............... 0.34% 11/25/36 110,325
Mid-State Capital Trust
20,722 Series 2010-1, Class A (a)....................................... 3.50% 12/15/45 21,170
Morgan Stanley ABS Capital I, Inc. Trust
2,251,364 Series 2006-HE8, Class A2B, 1 Mo. LIBOR + 0.10% (b).............. 0.28% 10/25/36 1,358,453
1,443,308 Series 2007-HE4, Class A2B, 1 Mo. LIBOR + 0.18% (b).............. 0.36% 02/25/37 618,120
Navient Student Loan Trust
31,134 Series 2014-1, Class A3, 1 Mo. LIBOR + 0.51% (b)................. 0.69% 06/25/31 30,101
NovaStar Mortgage Funding Trust
1,060,246 Series 2007-2, Class A1A, 1 Mo. LIBOR + 0.20% (b)................ 0.38% 09/25/37 1,012,342
Residential Asset Mortgage Products, Inc.
155,905 Series 2005-RZ3, Class M3, 1 Mo. LIBOR + 0.55% (b)............... 0.73% 09/25/35 155,430
900,000 Series 2006-RZ1, Class M3, 1 Mo. LIBOR + 0.45% (b)............... 0.63% 03/25/36 889,659
Residential Asset Securities Corp.
150,000 Series 2005-KS11, Class M2, 1 Mo. LIBOR + 0.42% (b).............. 0.60% 12/25/35 146,846
150,000 Series 2006-KS3, Class M1, 1 Mo. LIBOR + 0.33% (b)............... 0.51% 04/25/36 144,608
SLM Student Loan Trust
905,000 Series 2007-7, Class B, 3 Mo. LIBOR + 0.75% (b).................. 0.99% 10/27/70 719,635
300,000 Series 2008-2, Class B, 3 Mo. LIBOR + 1.20% (b).................. 1.44% 01/25/83 238,977
300,000 Series 2008-3, Class B, 3 Mo. LIBOR + 1.20% (b).................. 1.44% 04/26/83 244,830
650,000 Series 2008-5, Class B, 3 Mo. LIBOR + 1.85% (b).................. 2.09% 07/25/73 592,233
300,000 Series 2008-6, Class B, 3 Mo. LIBOR + 1.85% (b).................. 2.09% 07/26/83 252,045
220,000 Series 2008-8, Class B, 3 Mo. LIBOR + 2.25% (b).................. 2.49% 10/25/75 213,734
800,000 Series 2008-9, Class B, 3 Mo. LIBOR + 2.25% (b).................. 2.49% 10/25/83 765,391
100,000 Series 2012-7, Class B, 1 Mo. LIBOR + 1.80% (b).................. 1.98% 09/25/43 94,548
Soundview Home Loan Trust
279,776 Series 2007-OPT2, Class 2A4, 1 Mo. LIBOR + 0.25% (b)............. 0.43% 07/25/37 224,657
Structured Receivables Finance LLC
137,177 Series 2010-B, Class A (a)....................................... 3.73% 08/15/36 139,890
Washington Mutural Asset-Backed Certificates WMABS Trust
590,180 Series 2006-HE5, Class 1A, 1 Mo. LIBOR + 0.16% (b)............... 0.33% 10/25/36 483,646
--------------
TOTAL ASSET-BACKED SECURITIES.................................................................. 22,008,854
(Cost $22,459,519) --------------
PRINCIPAL
VALUE
(LOCAL STATED STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (U.S. DOLLAR)
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
FOREIGN CORPORATE BONDS AND NOTES -- 8.9%
BANKS -- 1.1%
200,000 Global Bank Corp. (USD) (c)(l)...................................... 5.25% 04/16/29 210,300
125,000 Lloyds Bank PLC (USD)............................................... 3.30% 05/07/21 127,464
200,000 Lloyds Banking Group PLC (USD)...................................... 3.90% 03/12/24 220,067
See Notes to Financial Statements Page 57
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL
VALUE
(LOCAL STATED STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (U.S. DOLLAR)
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
FOREIGN CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
665,000 Lloyds Banking Group PLC (USD) (c).................................. 3.87% 07/09/25 $ 732,061
250,000 Santander UK Group Holdings PLC (USD) (c)........................... 4.80% 11/15/24 278,570
650,000 Santander UK PLC (USD).............................................. 3.40% 06/01/21 665,262
--------------
2,233,724
--------------
BEVERAGES -- 0.2%
170,000 Bacardi Ltd. (USD) (a).............................................. 4.70% 05/15/28 198,409
15,000 Bacardi Ltd. (USD) (a).............................................. 5.30% 05/15/48 19,472
125,000 Pernod Ricard S.A. (USD) (a)........................................ 4.45% 01/15/22 131,729
--------------
349,610
--------------
COMMERCIAL SERVICES -- 0.7%
200,000 DP World Crescent Ltd. (USD) (a).................................... 4.85% 09/26/28 225,500
580,000 IHS Markit Ltd. (USD) (a)........................................... 4.75% 02/15/25 661,542
465,000 IHS Markit Ltd. (USD)............................................... 4.75% 08/01/28 558,333
--------------
1,445,375
--------------
DIVERSIFIED FINANCIAL SERVICES -- 1.9%
600,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust
(USD)............................................................ 4.50% 05/15/21 610,287
20,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust
(USD)............................................................ 3.95% 02/01/22 20,261
110,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust
(USD)............................................................ 3.50% 05/26/22 110,567
55,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust
(USD)............................................................ 4.13% 07/03/23 55,627
115,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust
(USD)............................................................ 3.88% 01/23/28 106,101
74,000 Avolon Holdings Funding Ltd. (USD) (a).............................. 5.13% 10/01/23 72,043
20,000 Avolon Holdings Funding Ltd. (USD) (a).............................. 5.25% 05/15/24 19,416
100,000 Avolon Holdings Funding Ltd. (USD) (a).............................. 3.95% 07/01/24 92,486
185,000 Avolon Holdings Funding Ltd. (USD) (a).............................. 2.88% 02/15/25 164,783
1,690,000 GE Capital International Funding Co. Unlimited Co. (USD)............ 4.42% 11/15/35 1,747,853
250,000 Park Aerospace Holdings Ltd. (USD) (a).............................. 3.63% 03/15/21 245,590
165,000 Park Aerospace Holdings Ltd. (USD) (a).............................. 5.25% 08/15/22 163,894
90,000 Park Aerospace Holdings Ltd. (USD) (a).............................. 4.50% 03/15/23 85,946
290,000 Park Aerospace Holdings Ltd. (USD) (a).............................. 5.50% 02/15/24 286,187
--------------
3,781,041
--------------
ELECTRIC -- 0.1%
250,000 Mong Duong Finance Holdings B.V. (USD) (l).......................... 5.13% 05/07/29 253,597
--------------
ENVIRONMENTAL CONTROL -- 0.3%
600,000 Waste Connections, Inc. (USD)....................................... 2.60% 02/01/30 645,252
--------------
FOOD -- 0.0%
20,000 JBS USA LUX S.A. / JBS USA Food Co. / JBS USA Finance, Inc.
(USD) (a)........................................................ 5.50% 01/15/30 22,248
--------------
Page 58 See Notes to Financial Statements
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL
VALUE
(LOCAL STATED STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (U.S. DOLLAR)
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
FOREIGN CORPORATE BONDS AND NOTES (CONTINUED)
MACHINERY-DIVERSIFIED -- 0.1%
110,000 Titan Acquisition Ltd. / Titan Co.-Borrower LLC (USD) (a)........... 7.75% 04/15/26 $ 111,145
--------------
MEDIA -- 0.2%
200,000 Virgin Media Secured Finance PLC (USD) (a).......................... 5.50% 08/15/26 211,250
270,000 Virgin Media Secured Finance PLC (USD) (a).......................... 5.50% 05/15/29 292,367
--------------
503,617
--------------
MINING -- 0.5%
250,000 Corp. Nacional del Cobre de Chile (USD) (l)......................... 3.63% 08/01/27 273,735
200,000 Corp. Nacional del Cobre de Chile (USD) (l)......................... 3.15% 01/14/30 212,051
500,000 Indonesia Asahan Aluminium Persero PT (USD) (a)..................... 6.53% 11/15/28 621,250
--------------
1,107,036
--------------
MISCELLANEOUS MANUFACTURING -- 0.0%
40,000 Ingersoll-Rand Luxembourg Finance S.A. (USD)........................ 3.55% 11/01/24 44,323
--------------
OIL & GAS -- 1.5%
218,000 KazMunayGas National Co. JSC (USD) (l).............................. 5.75% 04/19/47 273,706
400,000 Pertamina Persero PT (USD) (a)...................................... 3.10% 08/27/30 415,000
333,000 Petrobras Global Finance B.V. (USD) (a)............................. 5.09% 01/15/30 347,569
400,000 Petroleos del Peru S.A. (USD) (l)................................... 4.75% 06/19/32 450,000
270,000 Petroleos Mexicanos (USD) (a)....................................... 5.95% 01/28/31 244,255
370,000 Petroleos Mexicanos (USD)........................................... 6.63% 06/15/35 327,450
105,000 Petroleos Mexicanos (USD)........................................... 6.75% 09/21/47 87,851
110,000 Petroleos Mexicanos (USD) (a)....................................... 6.95% 01/28/60 91,699
200,000 Petronas Capital Ltd. (USD) (a)..................................... 3.50% 04/21/30 227,106
200,000 Saudi Arabian Oil Co. (USD) (l)..................................... 4.25% 04/16/39 233,709
104,520 Transocean Pontus Ltd. (USD) (a).................................... 6.13% 08/01/25 94,037
293,000 Transocean Poseidon Ltd. (USD) (a).................................. 6.88% 02/01/27 243,190
--------------
3,035,572
--------------
PACKAGING & CONTAINERS -- 0.0%
18,000 OI European Group B.V. (USD) (a).................................... 4.00% 03/15/23 18,249
--------------
PHARMACEUTICALS -- 0.0%
61,000 Shire Acquisitions Investments Ireland DAC (USD).................... 2.40% 09/23/21 62,238
--------------
PIPELINES -- 0.2%
400,000 Southern Gas Corridor CJSC (USD) (l)................................ 6.88% 03/24/26 479,032
--------------
RETAIL -- 0.3%
510,000 Alimentation Couche-Tard, Inc. (USD) (a)............................ 3.55% 07/26/27 564,385
--------------
SAVINGS & LOANS -- 0.6%
630,000 Nationwide Building Society (USD) (a) (c)........................... 3.62% 04/26/23 659,122
135,000 Nationwide Building Society (USD) (a) (c)........................... 3.77% 03/08/24 144,000
325,000 Nationwide Building Society (USD) (a) (c)........................... 4.36% 08/01/24 356,149
--------------
1,159,271
--------------
SEMICONDUCTORS -- 0.3%
670,000 NXP B.V. / NXP Funding LLC (USD) (a)................................ 4.13% 06/01/21 687,322
--------------
See Notes to Financial Statements Page 59
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL
VALUE
(LOCAL STATED STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (U.S. DOLLAR)
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
FOREIGN CORPORATE BONDS AND NOTES (CONTINUED)
TELECOMMUNICATIONS -- 0.8%
200,000 C&W Senior Financing DAC (USD) (a).................................. 6.88% 09/15/27 $ 209,935
625,000 Intelsat Jackson Holdings S.A. (USD) (a) (m)........................ 8.50% 10/15/24 426,500
18,000 Intelsat Jackson Holdings S.A. (USD) (a) (m)........................ 9.75% 07/15/25 12,449
200,000 SES S.A. (USD) (a).................................................. 3.60% 04/04/23 206,638
100,000 Vodafone Group PLC (USD)............................................ 3.75% 01/16/24 109,752
250,000 Vodafone Group PLC (USD)............................................ 5.25% 05/30/48 328,566
113,000 Vodafone Group PLC (USD)............................................ 4.88% 06/19/49 142,030
80,000 Vodafone Group PLC (USD)............................................ 4.25% 09/17/50 93,698
--------------
1,529,568
--------------
TRANSPORTATION -- 0.1%
200,000 Empresa de Transporte de Pasajeros Metro S.A. (USD) (a)............. 3.65% 05/07/30 222,875
--------------
TOTAL FOREIGN CORPORATE BONDS AND NOTES........................................................ 18,255,480
(Cost $17,628,342) --------------
FOREIGN SOVEREIGN BONDS AND NOTES -- 3.3%
COLOMBIA -- 0.7%
600,000 Colombia Government International Bond (USD)........................ 3.88% 04/25/27 655,542
400,000 Colombia Government International Bond (USD)........................ 3.00% 01/30/30 412,750
200,000 Colombia Government International Bond (USD)........................ 5.20% 05/15/49 248,559
--------------
1,316,851
--------------
DOMINICAN REPUBLIC -- 0.2%
450,000 Dominican Republic International Bond (USD) (l)..................... 6.00% 07/19/28 486,252
--------------
EGYPT -- 0.1%
200,000 Egypt Government International Bond (USD) (a)....................... 5.58% 02/21/23 207,144
--------------
INDONESIA -- 0.1%
200,000 Indonesia Government International Bond (USD)....................... 2.85% 02/14/30 211,462
--------------
MEXICO -- 0.5%
996,000 Mexico Government International Bond (USD).......................... 3.25% 04/16/30 1,034,286
--------------
PANAMA -- 0.2%
400,000 Panama Government International Bond (USD).......................... 3.16% 01/23/30 436,450
--------------
PARAGUAY -- 0.1%
200,000 Paraguay Government International Bond (USD) (a).................... 4.95% 04/28/31 232,500
--------------
PERU -- 0.3%
453,000 Peruvian Government International Bond (USD)........................ 2.84% 06/20/30 499,233
--------------
QATAR -- 0.3%
302,000 Qatar Government International Bond (USD) (l)....................... 4.50% 04/23/28 362,989
200,000 Qatar Government International Bond (USD) (l)....................... 4.63% 06/02/46 267,137
--------------
630,126
--------------
RUSSIA -- 0.1%
200,000 Russian Foreign Bond - Eurobond (USD) (l)........................... 4.38% 03/21/29 230,343
--------------
SAUDI ARABIA -- 0.2%
200,000 Saudi Government International Bond (USD) (l)....................... 4.50% 10/26/46 242,696
200,000 Saudi Government International Bond (USD) (a)....................... 3.75% 01/21/55 217,900
--------------
460,596
--------------
Page 60 See Notes to Financial Statements
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL
VALUE
(LOCAL STATED STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (U.S. DOLLAR)
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
FOREIGN SOVEREIGN BONDS AND NOTES (CONTINUED)
SOUTH AFRICA -- 0.2%
458,000 Republic of South Africa Government International Bond (USD)........ 4.30% 10/12/28 $ 440,679
--------------
UNITED ARAB EMIRATES -- 0.1%
200,000 Abu Dhabi Government International Bond (USD) (l)................... 2.50% 09/30/29 214,992
--------------
URUGUAY -- 0.2%
130,143 Uruguay Government International Bond (USD)......................... 4.38% 10/27/27 151,885
200,000 Uruguay Government International Bond (USD)......................... 4.38% 01/23/31 240,065
--------------
391,950
--------------
TOTAL FOREIGN SOVEREIGN BONDS.................................................................. 6,792,864
(Cost $6,432,956) --------------
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
MUNICIPAL BONDS -- 1.9%
CALIFORNIA -- 1.3%
$ 500,000 Los Angeles CA Unif School District................................. 5.75% 07/01/34 701,775
500,000 Los Angeles Department of Water..................................... 6.01% 07/01/39 693,050
510,000 Regents of the University of California Medical Center Pooled
Revenue.......................................................... 3.26% 05/15/60 565,437
430,000 San Francisco City & County Airport Comm-San Francisco
International Airport............................................ 5.00% 05/01/49 519,070
75,000 Univ of CA Rev TXBL Gen Ref, Ser AJ................................. 4.60% 05/15/31 92,017
--------------
2,571,349
--------------
MASSACHUSETTS -- 0.1%
255,000 Commonwealth of Massachusetts....................................... 3.00% 03/01/48 274,329
--------------
NEW YORK -- 0.5%
280,000 Metropolitan Transportation Authority............................... 5.18% 11/15/49 325,895
330,000 New York City Transitional Finance Authority Future Tax Secured
Revenue.......................................................... 4.00% 08/01/38 373,656
365,000 New York City Water & Sewer System.................................. 3.00% 06/15/50 381,772
--------------
1,081,323
--------------
TOTAL MUNICIPAL BONDS.......................................................................... 3,927,001
(Cost $3,568,772) --------------
ANNUALIZED
YIELD
PRINCIPAL ON DATE OF STATED
VALUE DESCRIPTION PURCHASE MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
COMMERCIAL PAPER -- 0.3%
AUTO MANUFACTURERS -- 0.3%
310,000 Ford Motor Credit Co. LLC........................................... 3.25% 10/08/20 309,349
295,000 Ford Motor Credit Co. LLC........................................... 2.88% 01/08/21 291,731
--------------
TOTAL COMMERCIAL PAPER......................................................................... 601,080
(Cost $601,024) --------------
See Notes to Financial Statements Page 61
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
U.S. TREASURY BILLS -- 16.7%
$ 5,845,000 U.S. Cash Management Bill........................................... (o) 01/12/21 $ 5,842,841
1,220,000 U.S. Cash Management Bill........................................... (o) 01/19/21 1,219,502
1,735,000 U.S. Treasury Bill (n).............................................. (o) 09/10/20 1,734,966
2,550,000 U.S. Treasury Bill.................................................. (o) 11/12/20 2,549,515
800,000 U.S. Treasury Bill.................................................. (o) 11/27/20 799,804
1,575,000 U.S. Treasury Bill.................................................. (o) 01/07/21 1,574,356
1,450,000 U.S. Treasury Bill.................................................. (o) 01/14/21 1,449,375
6,585,000 U.S. Treasury Bill.................................................. (o) 01/21/21 6,582,273
6,625,000 U.S. Treasury Bill.................................................. (o) 01/28/21 6,622,258
3,755,000 U.S. Treasury Bill.................................................. (o) 02/04/21 3,753,251
1,970,000 U.S. Treasury Bill.................................................. (o) 02/11/21 1,969,063
--------------
TOTAL U.S. TREASURY BILLS...................................................................... 34,097,204
(Cost $34,095,752) --------------
SHARES DESCRIPTION VALUE
-------------- ----------------------------------------------------------------------------------------------- --------------
MONEY MARKET FUNDS -- 2.0%
4,168,664 JPMorgan 100% U.S. Treasury Securities Money Market - Fund Institutional Class - 0.01% (p)..... 4,168,664
(Cost $4,168,664) --------------
TOTAL INVESTMENTS -- 106.8%.................................................................... 218,277,866
(Cost $212,109,662) (q)
NET OTHER ASSETS AND LIABILITIES -- (6.8)%..................................................... (13,982,857)
--------------
NET ASSETS -- 100.0%........................................................................... $ 204,295,009
==============
FUTURES CONTRACTS AT AUGUST 31, 2020 (See Note 2C - Futures Contracts in the
Notes to Financial Statements):
UNREALIZED
APPRECIATION
NUMBER OF (DEPRECIATION)/
FUTURES CONTRACTS POSITION CONTRACTS EXPIRATION DATE NOTIONAL VALUE VALUE
--------------------------------- ---------------- --------------- --------------- -------------- ---------------
U.S. 5-Year Treasury Notes Long 35 Dec-2020 $ 4,411,094 $ 2,699
U.S. 10-Year Ultra Treasury Notes Short 162 Dec-2020 (25,828,875) 49,087
Ultra U.S. Treasury Bond Futures Short 63 Dec-2020 (13,917,094) 232,992
-------------- --------
$ (35,334,875) $284,778
============== ========
-----------------------------
(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 August 31, 2020, securities noted as
such amounted to $30,250,202 or 14.8% of net assets.
(b) Floating or variable rate security.
(c) Fixed-to-floating security. The interest rate shown reflects the fixed
rate in effect at August 31, 2020. At a predetermined date, the fixed rate
will change to a floating rate.
(d) Perpetual maturity.
(e) Inverse floating rate security.
(f) Collateral Strip Rate security. Coupon is based on the weighted net
interest rate of the investment's underlying collateral. The interest rate
resets periodically.
(g) 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.
(h) Pursuant to procedures adopted by the Trust's Board of Trustees, this
security has been determined to be illiquid by Advisors.
Page 62 See Notes to Financial Statements
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
(i) 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).
(j) Step security. The coupon rate is determined based on the underlying
investments. The coupon rate resets periodically.
(k) Step-up security. A security where the coupon increases or steps up at a
predetermined date.
(l) This security may be resold to qualified foreign investors and foreign
institutional buyers under Regulation S of the 1933 Act.
(m) This issuer is in default and interest is not being accrued by the Fund
nor paid by the issuer.
(n) All or a portion of this security is segregated as collateral for open
futures contracts.
(o) Zero coupon security.
(p) Rate shown reflects yield as of August 31, 2020.
(q) Aggregate cost for federal income tax purposes is $213,189,503. As of
August 31, 2020, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$9,306,931 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$3,933,790. The net unrealized appreciation was $5,373,141. 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
TBA - To-Be-Announced Security
Currency Abbreviations:
JPY Japanese Yen
USD United States Dollar
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of August 31,
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
8/31/2020 PRICES INPUTS INPUTS
-------------- ------------- -------------- --------------
Corporate Bonds and Notes*...................... $ 73,631,877 $ -- $ 73,631,877 $ --
U.S. Government Agency Mortgage-Backed
Securities................................... 29,702,774 -- 29,702,774 --
Mortgage-Backed Securities...................... 25,092,068 -- 25,092,068 --
Asset-Backed Securities......................... 22,008,854 -- 22,008,854 --
Foreign Corporate Bonds and Notes*.............. 18,255,480 -- 18,255,480 --
Foreign Sovereign Bonds and Notes**............. 6,792,864 -- 6,792,864 --
Municipal Bonds***.............................. 3,927,001 -- 3,927,001 --
Commercial Paper*............................... 601,080 -- 601,080 --
U.S. Treasury Bills............................. 34,097,204 -- 34,097,204 --
Money Market Funds.............................. 4,168,664 4,168,664 -- --
-------------- ------------- -------------- --------------
Total Investments............................... 218,277,866 4,168,664 214,109,202 --
Futures Contracts****........................... 284,778 284,778 -- --
-------------- ------------- -------------- --------------
Total........................................... $ 218,562,644 $ 4,453,442 $ 214,109,202 $ --
============== ============= ============== ==============
* 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 63
FIRST TRUST TCW SECURITIZED PLUS ETF (DEED)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 53.2%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 6.6%
Federal Home Loan Mortgage Corporation
$ 87,005 Series 2005-3071, Class TF, 1 Mo. LIBOR + 0.30% (a).............. 0.46% 04/15/35 $ 87,101
140,057 Series 2010-3778, Class L........................................ 3.50% 12/15/25 147,482
224,817 Series 2017-360, Class 250....................................... 2.50% 11/15/47 233,526
129,365 Series 2020-4993, Class OP, PO................................... (b) 10/25/58 123,449
Federal National Mortgage Association
205,804 Series 2006-56, Class FE, 1 Mo. LIBOR + 0.43% (a)................ 0.61% 07/25/36 206,897
162,747 Series 2011-47, Class GF, 1 Mo. LIBOR + 0.57% (a)................ 0.75% 06/25/41 164,410
384,351 Series 2018-50, Class BA......................................... 3.00% 07/25/48 399,284
28,957 Series 2018-86, Class JA......................................... 4.00% 05/25/47 30,352
152,430 Series 2019-67, Class FE, 1 Mo. LIBOR + 0.45% (a)................ 0.63% 11/25/49 153,145
NCUA Guaranteed Notes Trust
153,512 Series 2010-R3, Class 2A, 1 Mo. LIBOR + 0.56% (a)................ 0.71% 12/08/20 153,520
--------------
1,699,166
--------------
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 6.0%
Freddie Mac Multifamily Structured Pass-Through Certificates
298,864 Series 2014-K037, Class A1....................................... 2.59% 04/25/23 307,204
282,730 Series 2014-K038, Class A1....................................... 2.60% 10/25/23 289,573
178,999 Series 2016-KF18, Class A, 1 Mo. LIBOR + 0.52% (a)............... 0.67% 05/25/26 178,831
350,297 Series 2017-Q004, Class A4H (c).................................. 2.79% 08/25/46 355,541
368,723 Series 2017-Q006, Class APT1 (a)................................. 2.67% 07/25/26 370,043
35,000 Series 2018-K158, Class A3....................................... 3.90% 10/25/33 44,263
--------------
1,545,455
--------------
PASS-THROUGH SECURITIES -- 40.6%
Federal Home Loan Mortgage Corporation
146,527 Pool G08681...................................................... 3.50% 12/01/45 156,375
87,668 Pool G08792...................................................... 3.50% 12/01/47 92,836
211,176 Pool G60659...................................................... 3.50% 08/01/46 230,796
159,182 Pool G61096...................................................... 3.50% 02/01/47 173,886
234,563 Pool G61748...................................................... 3.50% 11/01/48 257,663
269,456 Pool G67706...................................................... 3.50% 12/01/47 294,595
459,928 Pool G67710...................................................... 3.50% 03/01/48 495,748
113,208 Pool RB5054...................................................... 2.50% 06/01/40 119,250
160,419 Pool SD7502...................................................... 3.50% 07/01/49 171,606
273,190 Pool SD7511...................................................... 3.50% 01/01/50 296,152
142,115 Pool SD7513...................................................... 3.50% 04/01/50 154,986
178,638 Pool V83233...................................................... 4.00% 06/01/47 195,109
Federal National Mortgage Association
215,666 Pool AM0762...................................................... 3.29% 09/01/32 253,997
275,000 Pool AM7516...................................................... 3.55% 02/01/30 317,911
237,790 Pool AN7345...................................................... 3.21% 11/01/37 280,125
242,667 Pool AN9802...................................................... 3.83% 07/01/33 280,160
98,771 Pool AZ4750...................................................... 3.50% 10/01/45 106,697
98,818 Pool BE3619...................................................... 4.00% 05/01/47 105,940
275,000 Pool BL0469...................................................... 3.88% 11/01/30 329,675
97,010 Pool CA0995...................................................... 3.50% 01/01/48 106,321
120,397 Pool FM2870...................................................... 3.00% 03/01/50 128,561
175,023 Pool MA4016...................................................... 2.50% 05/01/40 184,272
99,609 Pool MA4093...................................................... 2.00% 08/01/40 103,870
Page 64 See Notes to Financial Statements
FIRST TRUST TCW SECURITIZED PLUS ETF (DEED)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
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)
$ 130,000 Pool MA4152...................................................... 2.00% 10/01/40 $ 134,489
75,000 Pool TBA (d)..................................................... 1.50% 09/15/35 76,774
300,000 Pool TBA (d)..................................................... 2.00% 09/15/35 312,170
125,000 Pool TBA (d)..................................................... 2.50% 09/15/35 131,140
1,125,000 Pool TBA (d)..................................................... 2.00% 09/15/50 1,160,244
1,275,000 Pool TBA (d)..................................................... 2.50% 09/15/50 1,341,937
295,000 Pool TBA (d)..................................................... 3.00% 09/15/50 310,995
125,000 Pool TBA (d)..................................................... 3.00% 10/15/50 131,511
Government National Mortgage Association
210,956 Pool MA3873...................................................... 3.00% 08/20/46 223,412
173,653 Pool MA4382...................................................... 3.50% 04/20/47 185,143
140,403 Pool MA4778...................................................... 3.50% 10/20/47 149,814
97,132 Pool MA4779...................................................... 4.00% 10/20/47 104,380
125,000 Pool TBA (d)..................................................... 2.00% 09/15/50 129,521
500,000 Pool TBA (d)..................................................... 2.50% 09/15/50 526,875
725,000 Pool TBA (d)..................................................... 3.00% 09/15/50 763,459
--------------
10,518,395
--------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES..................................... 13,763,016
(Cost $13,620,045) --------------
ASSET-BACKED SECURITIES -- 24.6%
Accredited Mortgage Loan Trust
94,179 Series 2005-1, Class M1, 1 Mo. LIBOR + 0.71% (a)................. 0.88% 04/25/35 94,103
173,207 Series 2005-1, Class M2, 1 Mo. LIBOR + 1.04% (a)................. 1.21% 04/25/35 171,020
ACE Securities Corp. Home Equity Loan Trust
312,135 Series 2006-HE1, Class A2D, 1 Mo. LIBOR + 0.30% (a).............. 0.48% 02/25/36 305,008
125,813 Series 2006-OP2, Class A1, 1 Mo. LIBOR + 0.16% (a)............... 0.33% 08/25/36 121,500
Ameriquest Mortgage Securities, Inc., Asset Backed Pass-Through Ctfs
290,000 Series 2005-R11, Class M3, 1 Mo. LIBOR + 0.50% (a)............... 0.68% 01/25/36 277,420
Ammc CLO 19 Ltd.
250,000 Series 2016-19A, Class AR, 3 Mo. LIBOR + 1.14% (a) (e)........... 1.42% 10/16/28 248,500
Bear Stearns Asset Backed Securities I Trust
311,536 Series 2005-HE11, Class M2, 1 Mo. LIBOR + 0.68% (a).............. 0.85% 11/25/35 310,677
Credit-Based Asset Servicing and Securitization LLC
152,506 Series 2007-CB6, Class A1, 1 Mo. LIBOR + 0.12% (a) (e)........... 0.30% 07/25/37 117,821
CWABS Asset-Backed Certificates Trust
215,000 Series 2005-1, Class MV6, 1 Mo. LIBOR + 0.73% (a)................ 0.91% 07/25/35 211,878
123,027 Series 2005-16, Class MV1, 1 Mo. LIBOR + 0.46% (a)............... 0.64% 05/25/36 122,405
Fremont Home Loan Trust
110,981 Series 2005-A, Class M3, 1 Mo. LIBOR + 0.74% (a)................. 0.91% 01/25/35 109,428
141,881 Series 2005-B, Class M4, 1 Mo. LIBOR + 0.71% (a)................. 0.88% 04/25/35 141,697
GoldenTree Loan Opportunities Ltd.
400,000 Series 2014-9A, Class AR2, 3 Mo. LIBOR + 1.11% (a) (e)........... 1.38% 10/29/29 397,812
GSAMP Trust
200,000 Series 2005-HE6, Class M2, 1 Mo. LIBOR + 0.45% (a)............... 0.63% 11/25/35 194,693
JP Morgan Mortgage Acquisition Trust
275,000 Series 2005-WMC1, Class M3, 1 Mo. LIBOR + 0.71% (a).............. 0.88% 09/25/35 264,147
252,110 Series 2006-CH1, Class M1, 1 Mo. LIBOR + 0.22% (a)............... 0.40% 07/25/36 251,419
270,000 Series 2006-FRE1, Class M1, 1 Mo. LIBOR + 0.39% (a).............. 0.57% 05/25/35 266,682
See Notes to Financial Statements Page 65
FIRST TRUST TCW SECURITIZED PLUS ETF (DEED)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
ASSET-BACKED SECURITIES (CONTINUED)
Long Beach Mortgage Loan Trust
$ 176,761 Series 2005-WL2, Class M2, 1 Mo. LIBOR + 0.74% (a)............... 0.91% 08/25/35 $ 176,324
337,811 Series 2006-10, Class 2A3, 1 Mo. LIBOR + 0.16% (a)............... 0.34% 11/25/36 162,128
Morgan Stanley Capital I, Inc., Trust
260,572 Series 2006-HE1, Class A4, 1 Mo. LIBOR + 0.29% (a)............... 0.47% 01/25/36 254,347
41,800 Series 2006-NC2, Class A2D, 1 Mo. LIBOR + 0.29% (a).............. 0.47% 02/25/36 40,932
Navient Student Loan Trust
320,000 Series 2015-3, Class B, 1 Mo. LIBOR + 1.50% (a).................. 1.68% 10/25/58 274,828
Nelnet Student Loan Trust
215,000 Series 2014-4A, Class A2, 1 Mo. LIBOR + 0.95% (a) (e)............ 1.13% 11/25/48 208,171
Nomura Home Equity Loan, Inc., Home Equity Loan Trust
115,870 Series 2006-HE1, Class M1, 1 Mo. LIBOR + 0.41% (a)............... 0.59% 02/25/36 115,119
Palmer Square CLO Ltd.
400,000 Series 2018-1A, Class A1, 3 Mo. LIBOR + 1.03% (a) (e)............ 1.30% 04/18/31 394,813
RASC Trust
219,583 Series 2006-EMX1, Class M1, 1 Mo. LIBOR + 0.41% (a).............. 0.59% 01/25/36 219,312
Securitized Asset Backed Receivables LLC Trust
126,421 Series 2006-NC2, Class A3, 1 Mo. LIBOR + 0.24% (a)............... 0.42% 03/25/36 123,230
SLM Student Loan Trust
65,000 Series 2008-5, Class B, 3 Mo. LIBOR + 1.85% (a).................. 2.09% 07/25/73 59,223
Soundview Home Loan Trust
140,000 Series 2006-2, Class M2, 1 Mo. LIBOR + 0.35% (a)................. 0.53% 03/25/36 135,711
259,233 Series 2007-OPT3, Class 1A1, 1 Mo. LIBOR + 0.17% (a)............. 0.35% 08/25/37 232,583
Structured Asset Securities Corp. Mortgage Loan Trust
124,656 Series 2006-OPT1, Class A1, 1 Mo. LIBOR + 0.18% (a).............. 0.36% 04/25/36 119,330
TCI-Flatiron CLO Ltd.
250,000 Series 2016-1A, Class AR, 3 Mo. LIBOR + 1.22% (a) (e)............ 1.49% 07/17/28 248,730
--------------
TOTAL ASSET-BACKED SECURITIES............................................................... 6,370,991
(Cost $6,081,224) --------------
MORTGAGE-BACKED SECURITIES -- 16.4%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 6.8%
Alternative Loan Trust
291,455 Series 2005-16, Class A4, 1 Mo. LIBOR + 0.48% (a)................ 0.66% 06/25/35 264,455
405,385 Series 2007-HY8C, Class A1, 1 Mo. LIBOR + 0.16% (a).............. 0.34% 09/25/47 372,457
255,368 Series 2007-OA7, Class A1A, 1 Mo. LIBOR + 0.18% (a).............. 0.36% 05/25/47 233,979
Banc of America Funding Trust
224,108 Series 2015-R2, Class 4A1, 1 Mo. LIBOR + 0.17% (a) (e)........... 0.34% 09/29/36 222,702
Bear Stearns ALT-A Trust
84,980 Series 2004-8, Class 2A, 1 Mo. LIBOR + 0.68% (a)................. 0.86% 09/25/34 84,675
GSR Mortgage Loan Trust
305,745 Series 2006-OA1, Class 2A2, 1 Mo. LIBOR + 0.26% (a).............. 0.44% 08/25/46 179,387
RALI Trust
195,685 Series 2006-QA6, Class A1, 1 Mo. LIBOR + 0.19% (a)............... 0.37% 07/25/36 190,116
WaMu Mortgage Pass-Through Certificates Trust
89,819 Series 2006-AR3, Class A1A, 12 Mo. Treasury Average +
1.00% (a)..................................................... 2.17% 02/25/46 87,286
130,782 Series 2006-AR17, Class 1A1A, 12 Mo. Treasury Average +
0.81% (a)..................................................... 2.13% 12/25/46 120,724
--------------
1,755,781
--------------
Page 66 See Notes to Financial Statements
FIRST TRUST TCW SECURITIZED PLUS ETF (DEED)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
MORTGAGE-BACKED SECURITIES (CONTINUED)
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 9.6%
BAMLL Commercial Mortgage Securities Trust
$ 105,000 Series 2018-PARK, Class A (c) (e)................................ 4.23% 08/10/38 $ 124,284
BBCMS Trust
120,000 Series 2015-SRCH, Class A2 (e)................................... 4.20% 08/10/35 136,239
CALI Mortgage Trust
100,000 Series 2019-101C, Class A (e).................................... 3.96% 03/10/39 115,424
Citigroup Commercial Mortgage Trust
594,190 Series 2012-GC8, Class XA, IO (c) (e)............................ 1.92% 09/10/45 16,262
780,573 Series 2013-GC15, Class XA, IO (c)............................... 1.07% 09/10/46 16,868
COMM Mortgage Trust
4,697,232 Series 2012-CR4, Class XA, IO (c)................................ 1.84% 10/15/45 142,560
1,330,779 Series 2014-CR17, Class XA, IO (c)............................... 1.13% 05/10/47 37,543
1,958,975 Series 2014-UBS2, Class XA, IO (c)............................... 1.32% 03/10/47 63,376
590,264 Series 2014-UBS3, Class XA, IO (c)............................... 1.23% 06/10/47 19,964
CSAIL Commercial Mortgage Trust
2,323,389 Series 2015-C2, Class XA, IO (c)................................. 0.89% 06/15/57 66,858
3,727,584 Series 2016-C5, Class XA, IO (c)................................. 1.07% 11/15/48 123,458
DBUBS Mortgage Trust
120,000 Series 2017-BRBK, Class A (e).................................... 3.45% 10/10/34 129,192
DC Office Trust
75,000 Series 2019-MTC, Class A (e)..................................... 2.97% 09/15/45 83,036
GS Mortgage Securities Trust
11,370,644 Series 2011-GC5, Class XA, IO (c) (e)............................ 1.49% 08/10/44 76,896
Hudson Yards Mortgage Trust
75,000 Series 2019-55HY, Class A (c) (e)................................ 3.04% 12/10/41 83,192
JP Morgan Chase Commercial Mortgage Securities Trust
1,967,867 Series 2013-LC11, Class XA, IO (c)............................... 1.39% 04/15/46 52,595
JPMBB Commercial Mortgage Securities Trust
1,170,796 Series 2015-C32, Class XA, IO (c)................................ 1.44% 11/15/48 37,002
MKT Mortgage Trust
95,000 Series 2020-525M, Class A (e).................................... 2.69% 02/12/40 103,302
Morgan Stanley Bank of America Merrill Lynch Trust
1,941,379 Series 2013-C13, Class XA, IO (c)................................ 1.13% 11/15/46 48,786
Natixis Commercial Mortgage Securities Trust
75,000 Series 2020-2PAC, Class A (e).................................... 2.97% 12/15/38 78,545
One Bryant Park Trust
125,000 Series 2019-OBP, Class A (e)..................................... 2.52% 09/15/54 134,194
SFAVE Commercial Mortgage Securities Trust
270,000 Series 2015-5AVE, Class A2A (c) (e).............................. 3.66% 01/05/43 277,501
UBS-Barclays Commercial Mortgage Trust
5,445,556 Series 2012-C2, Class XA, IO (c) (e)............................. 1.45% 05/10/63 105,324
714,736 Series 2012-C3, Class XA, IO (c) (e)............................. 1.98% 08/10/49 20,734
Wells Fargo Commercial Mortgage Trust
2,149,437 Series 2015-LC22, Class XA, IO (c)............................... 0.92% 09/15/58 68,792
WFRBS Commercial Mortgage Trust
674,788 Series 2012-C9, Class XA, IO (c) (e)............................. 2.04% 11/15/45 20,894
4,546,995 Series 2014-C20, Class XA, IO (c)................................ 1.12% 05/15/47 123,835
See Notes to Financial Statements Page 67
FIRST TRUST TCW SECURITIZED PLUS ETF (DEED)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------------- ----------- ------------ --------------
MORTGAGE-BACKED SECURITIES (CONTINUED)
COMMERCIAL MORTGAGE-BACKED SECURITIES (CONTINUED)
WFRBS Commercial Mortgage Trust (Continued)
$ 1,115,684 Series 2014-C22, Class XA, IO (c)................................ 0.95% 09/15/57 $ 28,597
5,196,083 Series 2014-C24, Class XA, IO (c)................................ 0.98% 11/15/47 136,457
632,485 Series 2014-LC14, Class XA, IO (c)............................... 1.36% 03/15/47 20,014
--------------
2,491,724
--------------
TOTAL MORTGAGE-BACKED SECURITIES............................................................... 4,247,505
(Cost $3,996,953) --------------
U.S. GOVERNMENT BONDS AND NOTES -- 0.5%
135,000 U.S. Treasury Note.................................................. 0.63% 08/15/30 134,103
(Cost $133,777) --------------
U.S. TREASURY BILLS -- 22.2%
560,000 U.S. Treasury Bill.................................................. (b) 10/22/20 559,925
5,000,000 U.S. Treasury Bill.................................................. (b) 10/29/20 4,999,255
75,000 U.S. Treasury Bill.................................................. (b) 11/12/20 74,986
110,000 U.S. Treasury Bill.................................................. (b) 01/28/21 109,954
--------------
TOTAL U.S. TREASURY BILLS...................................................................... 5,744,120
(Cost $5,743,887) --------------
SHARES DESCRIPTION VALUE
-------------- ----------------------------------------------------------------------------------------------- --------------
MONEY MARKET FUNDS -- 2.1%
533,814 JPMorgan 100% U.S. Treasury Securities Money Market - Fund Institutional Class - 0.01% (f)..... 533,814
(Cost $533,814) --------------
TOTAL INVESTMENTS -- 119.0%.................................................................... 30,793,549
(Cost $30,109,700) (g)
NET OTHER ASSETS AND LIABILITIES -- (19.0)%.................................................... (4,917,033)
--------------
NET ASSETS -- 100.0%........................................................................... $ 25,876,516
==============
FUTURES CONTRACTS AT AUGUST 31, 2020 (See Note 2C - Futures Contracts in the
Notes to Financial Statements):
UNREALIZED
APPRECIATION
NUMBER OF (DEPRECIATION)/
FUTURES CONTRACTS POSITION CONTRACTS EXPIRATION DATE NOTIONAL VALUE VALUE
--------------------------------- ------------ --------------- --------------- -------------- ---------------
U.S. 2-Year Treasury Notes Long 9 Dec-2020 $ 1,988,508 $ (18)
U.S. 5-Year Treasury Notes Long 6 Dec-2020 756,188 589
U.S. 10-Year Ultra Treasury Notes Short 7 Dec-2020 (1,116,063) 599
U.S. Treasury Ultra Bond Futures Short 2 Dec-2020 (441,813) 5,003
-------------- --------
$ 1,186,820 $ 6,173
============== ========
-----------------------------
(a) Floating or variable rate security.
(b) Zero coupon security.
(c) Collateral Strip Rate security. Coupon is based on the weighted net
interest rate of the investment's underlying collateral. The interest rate
resets periodically. (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).
Page 68 See Notes to Financial Statements
FIRST TRUST TCW SECURITIZED PLUS ETF (DEED)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
(e) This security, sold within the terms of a private placement memorandum, is
exempt from registration upon resale under Rule 144A of the Securities Act
of 1933, as amended, and may be resold in transactions exempt from
registration, normally to qualified institutional buyers. Pursuant to
procedures 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 August 31, 2020, securities noted as such amounted
to $3,343,568 or 12.9% of net assets.
(f) Rate shown reflects yield as of August 31, 2020.
(g) Aggregate cost for federal income tax purposes is $30,134,857. As of
August 31, 2020, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$688,263 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$23,398. The net unrealized appreciation was $664,865. 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 Rate
PO - Principal-Only Security
TBA - To-Be-Announced Security
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of August 31,
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
8/31/2020 PRICES INPUTS INPUTS
-------------- ------------- -------------- --------------
U.S. Government Agency Mortgage-Backed
Securities................................... $ 13,763,016 $ -- $ 13,763,016 $ --
Asset-Backed Securities......................... 6,370,991 -- 6,370,991 --
Mortgage-Backed Securities...................... 4,247,505 -- 4,247,505 --
U.S. Government Bonds and Notes................. 134,103 -- 134,103 --
U.S. Treasury Bills............................. 5,744,120 -- 5,744,120 --
Money Market Funds.............................. 533,814 533,814 -- --
-------------- ------------- -------------- --------------
Total Investments............................... 30,793,549 533,814 30,259,735 --
Futures Contracts*.............................. 6,191 6,191 -- --
-------------- ------------- -------------- --------------
Total........................................... $ 30,799,740 $ 540,005 $ 30,259,735 $ --
============== ============= ============== ==============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
8/31/2020 PRICES INPUTS INPUTS
-------------- ------------- -------------- --------------
Futures Contracts*.............................. $ (18) $ (18) $ -- $ --
============== ============= ============== ==============
* 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 69
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF ASSETS AND LIABILITIES
AUGUST 31, 2020
FIRST TRUST TCW FIRST TRUST TCW FIRST TRUST TCW
OPPORTUNISTIC FIXED UNCONSTRAINED SECURITIZED
INCOME ETF PLUS BOND ETF PLUS ETF
(FIXD) (UCON) (DEED)
------------------- ------------------- -------------------
ASSETS:
Investments, at value......................................... $ 4,361,719,803 $ 218,277,866 $ 30,793,549
Cash.......................................................... 17,226,696 91 --
Cash segregated as collateral for open futures contracts...... -- 111,000 53,000
Receivables:
Investment securities sold ................................ 202,337,594 465,357 991,136
Capital shares sold ....................................... 11,042,940 -- --
Interest................................................... 10,916,478 1,492,063 83,278
Variation margin........................................... 91,070 -- --
Dividends.................................................. 1,974 171 13
------------------- ------------------- -------------------
Total Assets............................................ 4,603,336,555 220,346,548 31,920,976
------------------- ------------------- -------------------
LIABILITIES:
Payables:
Investment securities purchased ........................... 961,236,793 15,678,557 6,021,673
Investment advisory fees................................... 1,594,883 127,412 14,207
Variation margin........................................... -- 245,570 8,580
------------------- ------------------- -------------------
Total Liabilities....................................... 962,831,676 16,051,539 6,044,460
------------------- ------------------- -------------------
NET ASSETS.................................................... $ 3,640,504,879 $ 204,295,009 $ 25,876,516
=================== =================== ===================
NET ASSETS CONSIST OF:
Paid-in capital............................................... $ 3,516,140,168 $ 200,591,902 $ 25,021,300
Par value..................................................... 660,000 78,000 10,000
Accumulated distributable earnings (loss)..................... 123,704,711 3,625,107 845,216
------------------- ------------------- -------------------
NET ASSETS.................................................... $ 3,640,504,879 $ 204,295,009 $ 25,876,516
=================== =================== ===================
NET ASSET VALUE, per share.................................... $ 55.16 $ 26.19 $ 25.88
=================== =================== ===================
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share)..................... 66,000,002 7,800,002 1,000,002
=================== =================== ===================
Investments, at cost.......................................... $ 4,294,824,052 $ 212,109,662 $ 30,109,700
=================== =================== ===================
Page 70 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF OPERATIONS
FIRST TRUST TCW FIRST TRUST TCW FIRST TRUST TCW
OPPORTUNISTIC FIXED UNCONSTRAINED SECURITIZED
INCOME ETF PLUS BOND ETF PLUS ETF
(FIXD) (UCON) (DEED)
------------------- ------------------- -------------------
YEAR ENDED YEAR ENDED PERIOD ENDED
8/31/2020 8/31/2020 8/31/2020 (a)
------------------- ------------------- -------------------
INVESTMENT INCOME:
Interest...................................................... $ 38,572,107 $ 7,350,795 $ 136,790
Dividends..................................................... 507,624 62,957 105
------------------- ------------------- -------------------
Total investment income.................................... 39,079,731 7,413,752 136,895
------------------- ------------------- -------------------
EXPENSES:
Investment advisory fees...................................... 11,771,455 1,738,100 64,493
------------------- ------------------- -------------------
Total expenses............................................. 11,771,455 1,738,100 64,493
Less fees waived by the investment advisor................. (1,810,993) (204,491) (8,599)
------------------- ------------------- -------------------
Net expenses............................................... 9,960,462 1,533,609 55,894
------------------- ------------------- -------------------
NET INVESTMENT INCOME (LOSS).................................. 29,119,269 5,880,143 81,001
------------------- ------------------- -------------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments................................................ 61,069,017 5,503,347 125,654
Futures contracts.......................................... 7,483,328 (3,725,059) 16,939
Forward foreign currency contracts......................... 1,314,998 258,384 --
Written options contracts.................................. 390,716 -- --
Swap contracts............................................. 136,699 13,673 --
Foreign currency transactions.............................. (115,292) 22,324 --
------------------- ------------------- -------------------
Net realized gain (loss)...................................... 70,279,466 2,072,669 142,593
------------------- ------------------- -------------------
Net change in unrealized appreciation (depreciation) on:
Investments................................................ 40,701,031 (3,353,684) 683,849
Swap contracts............................................. 85,289 31,803 --
Futures contracts.......................................... (288,738) 439,021 6,173
------------------- ------------------- -------------------
Net change in unrealized appreciation (depreciation).......... 40,497,582 (2,882,860) 690,022
------------------- ------------------- -------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)....................... 110,777,048 (810,191) 832,615
------------------- ------------------- -------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.................................. $ 139,896,317 $ 5,069,952 $ 913,616
=================== =================== ===================
(a) Inception date is April 29, 2020, 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 71
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)
---------------------------------- ----------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
8/31/2020 8/31/2019 8/31/2020 8/31/2019
---------------- ---------------- ---------------- ----------------
OPERATIONS:
Net investment income (loss).............................. $ 29,119,269 $ 13,110,777 $ 5,880,143 $ 5,213,728
Net realized gain (loss).................................. 70,279,466 16,057,033 2,072,669 (3,737,035)
Net change in unrealized appreciation (depreciation)...... 40,497,582 28,429,040 (2,882,860) 9,204,698
---------------- ---------------- ---------------- ----------------
Net increase (decrease) in net assets resulting from
operations............................................. 139,896,317 57,596,850 5,069,952 10,681,391
---------------- ---------------- ---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations..................................... (50,508,968) (14,132,128) (6,674,002) (5,539,586)
---------------- ---------------- ---------------- ----------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................. 2,802,717,770 545,941,078 80,410,130 191,160,543
Cost of shares redeemed................................... (152,059,261) (7,551,313) (82,116,874) (13,821,447)
---------------- ---------------- ---------------- ----------------
Net increase (decrease) in net assets resulting from
shareholder transactions............................... 2,650,658,509 538,389,765 (1,706,744) 177,339,096
---------------- ---------------- ---------------- ----------------
Total increase (decrease) in net assets................... 2,740,045,858 581,854,487 (3,310,794) 182,480,901
NET ASSETS:
Beginning of period....................................... 900,459,021 318,604,534 207,605,803 25,124,902
---------------- ---------------- ---------------- ----------------
End of period............................................. $ 3,640,504,879 $ 900,459,021 $ 204,295,009 $ 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............................................... 51,950,000 10,700,000 3,100,000 7,600,000
Shares redeemed........................................... (2,950,000) (150,000) (3,350,000) (550,000)
---------------- ---------------- ---------------- ----------------
Shares outstanding, end of period......................... 66,000,002 17,000,002 7,800,002 8,050,002
================ ================ ================ ================
(a) Inception date is April 29, 2020, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
Page 72 See Notes to Financial Statements
FIRST TRUST TCW
SECURITIZED
PLUS ETF
(DEED)
----------------
PERIOD
ENDED
8/31/2020 (a)
----------------
$ 81,001
142,593
690,022
----------------
913,616
----------------
(68,400)
----------------
25,031,300
--
----------------
25,031,300
----------------
25,876,516
--
----------------
$ 25,876,516
================
--
1,000,002
--
----------------
1,000,002
================
See Notes to Financial Statements Page 73
FIRST TRUST EXCHANGE-TRADED FUND VIII
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
YEAR ENDED AUGUST 31, PERIOD
------------------------------------------ ENDED
2020 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)................................... 1.06 1.39 1.15 0.49
Net realized and unrealized gain (loss)........................ 2.85 3.63 (1.46) 1.12
---------- ---------- ---------- ----------
Total from investment operations............................... 3.91 5.02 (0.31) 1.61
---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.......................................... (1.12) (1.45) (1.30) (0.60)
Net realized gain.............................................. (0.60) -- (0.00) (b) --
---------- ---------- ---------- ----------
Total distributions............................................ (1.72) (1.45) (1.30) (0.60)
---------- ---------- ---------- ----------
Net asset value, end of period................................. $ 55.16 $ 52.97 $ 49.40 $ 51.01
========== ========== ========== ==========
TOTAL RETURN (c)............................................... 7.57% 10.33% (0.57)% 3.23%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $3,640,505 $ 900,459 $ 318,605 $ 51,011
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets.................. 0.65% 0.65% 0.65% 0.65% (d)
Ratio of net expenses to average net assets.................... 0.55% 0.55% 0.55% 0.55% (d)
Ratio of net investment income (loss) to average net assets.... 1.61% 2.69% 2.29% 1.81% (d)
Portfolio turnover rate (e).................................... 431% (f) 246% (f) 358% (f) 231% (f)
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
YEAR ENDED AUGUST 31, PERIOD
--------------------------- ENDED
2020 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)................................... 0.75 0.77 0.17
Net realized and unrealized gain (loss)........................ 0.50 0.75 0.10
---------- ---------- ----------
Total from investment operations............................... 1.25 1.52 0.27
---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.......................................... (0.85) (0.81) (0.15)
Net realized gain.............................................. -- (0.04) --
---------- ---------- ----------
Total distributions............................................ (0.85) (0.85) (0.15)
---------- ---------- ----------
Net asset value, end of period................................. $ 26.19 $ 25.79 $ 25.12
========== ========== ==========
TOTAL RETURN (c)............................................... 4.97% 6.15% 1.06%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 204,295 $ 207,606 $ 25,125
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets.................. 0.85% 0.85% 0.85% (d)
Ratio of net expenses to average net assets.................... 0.75% 0.75% 0.75% (d)
Ratio of net investment income (loss) to average net assets.... 2.88% 3.16% 2.68% (d)
Portfolio turnover rate (e).................................... 111% (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 270%,
223%, 241% and 158% for the periods ending August 31, 2020, August 31,
2019, August 31, 2018 and August 31, 2017, respectively.
(g) The portfolio turnover rate not including mortgage dollar rolls was 67%
and 39% for the periods ending August 31, 2020 and August 31, 2019,
respectively.
Page 74 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FIRST TRUST TCW SECURITIZED PLUS ETF (DEED)
PERIOD
ENDED
8/31/2020 (a)
--------------
Net asset value, beginning of period........................... $ 25.00
----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... 0.08
Net realized and unrealized gain (loss)........................ 0.87
----------
Total from investment operations............................... 0.95
----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.......................................... (0.07)
----------
Net asset value, end of period................................. $ 25.88
==========
TOTAL RETURN (b)............................................... 3.80%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 25,877
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets.................. 0.75% (c)
Ratio of net expenses to average net assets.................... 0.65% (c)
Ratio of net investment income (loss) to average net assets.... 0.94% (c)
Portfolio turnover rate (d).................................... 186% (e)
(a) Inception date is April 29, 2020, which is consistent with the respective
Fund's 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. The total returns would have been lower if certain
fees had not been waived by the investment advisor.
(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.
(e) The portfolio turnover rate not including mortgage dollar rolls was 21%
for the period ending August 31, 2020.
See Notes to Financial Statements Page 75
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
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 twenty-five funds that are offering shares. This
report covers the three 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")
First Trust TCW Securitized Plus ETF - (NYSE Arca ticker "DEED")(1)
(1) Commenced investment operations on April 29, 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 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 of FIXD and UCON
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. DEED seeks to achieve its investment objective by
investing, under normal market conditions, at least 80% of its net assets
(including investment borrowings) in securitized debt securities.
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.
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;
-----------------------------
(1) The terms "security" and "securities" used throughout the Notes to
Financial Statements include Senior Loans.
Page 76
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
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.
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;
Page 77
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
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 August 31, 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 is recorded
daily on the accrual basis. Amortization of premiums and accretion of discounts
are recorded using the effective interest method.
In July 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. Further, the FCA has
subsequently stated, as recently as March 2020, that the central assumption
continues to be that firms should not rely on LIBOR being published after the
end of 2021.
In the United States, the Alternative Reference Rates Committee (the "ARRC"), a
group of market participants convened by the Board of Governors of the Federal
Reserve System and the Federal Reserve Bank of New York in cooperation with
other federal and state government agencies, has since 2014 undertaken efforts
to identify U.S. dollar reference interest rates as alternatives to LIBOR and to
facilitate the mitigation of LIBOR-related risks. In June 2017, the ARRC
identified the Secured Overnight Financing Rate ("SOFR"), a broad measure of the
cost of cash overnight borrowing collateralized by U.S. Treasury securities, as
the preferred alternative for U.S. dollar LIBOR. The Federal Reserve Bank of New
York began daily publishing of SOFR in April 2018.
At this time, it is not possible to predict the full impact of the elimination
of LIBOR and the establishment of an alternative reference rate on the Funds or
their investments.
Page 78
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
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 August 31, 2020, the Funds had no when-issued or
delayed-delivery securities. At August 31, 2020, FIXD, UCON and DEED held
$724,234,498, $14,725,769 and $4,884,626, respectively, 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
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 August 31, 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
Page 79
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
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 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.
As of August 31, 2020, the Funds had no open interest rate swap agreements. 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
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.
Page 80
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
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 period
ended August 31, 2020 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 $ 49,116,293 $ 1,392,675 $ --
First Trust TCW Unconstrained Plus Bond ETF 6,674,002 -- --
First Trust TCW Securitized Plus ETF 68,400 -- --
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, 2020, 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 $ 57,919,147 $ 4,965,890 $ 60,819,674
First Trust TCW Unconstrained Plus Bond ETF 303,491 (2,051,525) 5,373,141
First Trust TCW Securitized Plus ETF 166,476 13,875 664,865
K. INCOME TAXES
Each Fund intends to qualify or continue to qualify as a regulated investment
company by complying with the requirements under Subchapter M of the Internal
Revenue Code of 1986, as amended, which includes distributing substantially all
of its net investment income and net realized gains to shareholders.
Accordingly, no provision has been made for federal and state income taxes.
However, due to the timing and amount of distributions, each Fund may be subject
to an excise tax of 4% of the amount by which approximately 98% of each Fund's
taxable income exceeds the distributions from such taxable income for the
calendar year.
Page 81
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
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 ended
2017, 2018, 2019, and 2020 remain open to federal and state audit. For UCON, the
taxable years ended 2018, 2019, and 2020 remain open to federal and state audit.
For DEED, the taxable year ended 2020 remains open to federal and state audit.
As of August 31, 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, 2020, 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
Carryforward
-------------------------
First Trust TCW Opportunistic Fixed Income ETF $ --
First Trust TCW Unconstrained Plus Bond ETF 2,051,525
First Trust TCW Securitized Plus ETF --
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, 2020, the Funds had
no net late year ordinary or capital losses.
In order to present paid-in capital and accumulated distributable earnings
(loss) (which consists of accumulated net investment income (loss), accumulated
net realized gain (loss) on investments and net unrealized appreciation
(depreciation) on investments) on the Statements of Assets and Liabilities that
more closely represent their tax character, certain adjustments have been made
to paid-in capital, accumulated net investment income (loss) and accumulated net
realized gain (loss) on investments. These adjustments are primarily due to the
difference between book and tax treatments of income and gains on various
investment securities held by the Funds and in-kind transactions. The results of
operations and net assets were not affected by these adjustments. For the fiscal
period ended August 31, 2020, the adjustments for each Fund were as follows:
Accumulated
Accumulated Net Realized
Net Investment Gain (Loss) Paid-in
Income (Loss) on Investments Capital
-------------- -------------- -------------
First Trust TCW Opportunistic Fixed Income ETF $ 2,547,312 $ (5,047,312) $ 2,500,000
First Trust TCW Unconstrained Plus Bond ETF 440,122 (440,122) --
First Trust TCW Securitized Plus ETF -- -- --
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
Page 82
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
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, UCON and DEED have each agreed
to pay First Trust an annual unitary management fee equal to 0.65%, 0.85% and
0.75%, 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 FIXD and UCON and April 6, 2022 for
DEED. 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 for FIXD
and UCON and April 6, 2022 for DEED. During the fiscal period ended August 31,
2020, the Advisor waived fees of $1,810,993, $204,491 and $8,599 for FIXD, UCON,
and DEED, respectively.
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.
The Funds may purchase securities from or sell securities to an affiliated fund
or portfolio provided that the affiliation is due solely to having a common
investment advisor, sub-advisor, common officers or common trustees. For the
fiscal year ended August 31, 2020, UCON entered into purchase transactions with
affiliated portfolios in compliance with Rule 17a-7 under the 1940 Act in the
amount of $151,104.
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 fiscal period ended August 31, 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 $9,105,839,661 $7,507,036,405
Non-U.S. Government securities 1,196,485,714 263,900,702
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF
U.S. Government securities 115,454,104 128,456,635
Non-U.S. Government securities 89,114,352 85,839,009
FIRST TRUST TCW SECURITIZED PLUS ETF
U.S. Government securities 54,763,761 41,178,918
Non-U.S. Government securities 11,789,251 1,665,580
For the fiscal period ended August 31, 2020, the Funds had no in-kind
transactions.
Page 83
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
5. DERIVATIVE TRANSACTIONS
The following table presents the types of derivatives held by each Fund at
August 31, 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* $ 69,068 futures contracts* $ 77,008
UCON
Unrealized appreciation on Unrealized depreciation on
Futures contracts Interest Rate Risk futures contracts* 284,778 futures contracts* --
DEED
Unrealized appreciation on Unrealized depreciation on
Futures contracts Interest Rate Risk futures contracts* 6,191 futures contracts* 18
* 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.
The following table presents the amount of net realized gain (loss) and change
in net unrealized appreciation (depreciation) recognized for the fiscal period
ended August 31, 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 DEED
-------------------------------------------------------------------------------------------------------------
CURRENCY RISK EXPOSURE
Net realized gain (loss) on forward foreign currency contracts $ 1,314,998 $ 258,384 $ --
INTEREST RATE RISK EXPOSURE
Net realized gain (loss) on futures contracts 7,483,328 (3,725,059) 16,939
Net realized gain (loss) on swap contracts 136,699 13,673 --
Net realized gain (loss) on written options contracts 390,716 -- --
Net change in unrealized appreciation (depreciation) on
futures contracts (288,738) 439,021 6,173
Net change in unrealized appreciation (depreciation) on
swap contracts 85,289 31,803 --
FIXD
During the fiscal year ended August 31, 2020, the notional value of forward
foreign currency contracts opened and closed were $34,342,352 and $34,342,352,
respectively.
During the fiscal year ended August 31, 2020, the notional value of futures
contracts opened and closed were $628,586,594 and $638,760,614 respectively.
For the fiscal year ended August 31, 2020, the average volume of interest rate
swaps was $75,567,910.
During the fiscal year ended August 31, 2020, the premiums for written options
contracts opened were $390,716 and the premiums for written options contracts
closed, exercised and expired were $390,716.
UCON
During the fiscal year ended August 31, 2020, the notional value of forward
foreign currency contracts opened and closed were $4,278,731 and $4,278,731,
respectively.
During the fiscal year ended August 31, 2020, the notional value of futures
contracts opened and closed were $131,404,527 and $132,775,466, respectively.
For the fiscal year ended August 31, 2020, the average volume of interest rate
swaps was $15,963,811.
Page 84
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
DEED
During the fiscal period August 31, 2020, the notional value of futures
contracts opened and closed were $3,220,137 and $4,400,784, respectively.
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.
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, 2021 for
FIXD and UCON, and April 6, 2022 for DEED.
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 were the following subsequent events:
On September 21, 2020, FT Cboe Vest U.S. Equity Buffer ETF - September and FT
Cboe Vest U.S. Equity Deep Buffer ETF - September, additional series of the
Trust, began trading under the symbols "FSEP" and "DSEP", respectively, on Cboe
BZX Exchange, Inc.
On October 19, 2020, FT Cboe Vest U.S. Buffer ETF - October and FT Cboe Vest
U.S. Equity Deep Buffer ETF - October, additional series of the Trust, began
trading under the symbols "FOCT" and "DOCT", respectively, on the Cboe BZX
Exchange, Inc.
Page 85
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED FUND
VIII:
OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS
We have audited the accompanying statements of assets and liabilities of First
Trust TCW Opportunistic Fixed Income ETF, First Trust TCW Unconstrained Plus
Bond ETF, and First Trust TCW Securitized Plus ETF (the "Funds"), each a series
of the First Trust Exchange-Traded Fund VIII, including the portfolios of
investments, as of August 31, 2020, the related statements of operations, the
changes in net assets, and the financial highlights for the periods indicated in
the table below, and the related notes. In our opinion, the financial statements
and financial highlights present fairly, in all material respects, the financial
position of the Funds as of August 31, 2020, and the results of their
operations, the changes in their net assets, and the financial highlights for
the periods listed in the table below, in conformity with accounting principles
generally accepted in the United States of America.
-----------------------------------------------------------------------------------------------------------------------------
INDIVIDUAL FUNDS INCLUDED STATEMENTS OF STATEMENTS OF CHANGES
IN THE TRUST OPERATIONS IN NET ASSETS FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------------------------------------------------------
First Trust TCW Opportunistic For the year ended For the years ended For the years ended
Fixed Income ETF August 31, 2020 August 31, 2020 and 2019 August 31, 2020, 2019, 2018,
and the period from
February 14, 2017
(commencement of operations)
through August 31, 2017
-----------------------------------------------------------------------------------------------------------------------------
First Trust TCW Unconstrained For the year ended For the years ended For the years ended
Plus Bond ETF August 31, 2020 August 31, 2020 and 2019 August 31, 2020, 2019, and
the period from June 4, 2018
(commencement of operations)
through August 31, 2018
-----------------------------------------------------------------------------------------------------------------------------
First Trust TCW Securitized Plus For the period from April 29, 2020 (commencement of operations) through August 31, 2020
ETF
-----------------------------------------------------------------------------------------------------------------------------
BASIS FOR OPINION
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on the Funds'
financial statements and financial highlights based on our audits. We are a
public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to
the Funds in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement, whether due to error or fraud. The Funds are not
required to have, nor were we engaged to perform, an audit of their internal
control over financial reporting. As part of our audits we are required to
obtain an understanding of internal control over financial reporting but not for
the purpose of expressing an opinion on the effectiveness of the Funds' internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material
misstatement of the financial statements and financial highlights, whether due
to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements and financial highlights. Our audits
also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of August 31, 2020, by correspondence with
the custodian, agent banks, and brokers; when replies were not received from
brokers, we performed other auditing procedures. We believe that our audits
provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Chicago, Illinois
October 26, 2020
We have served as the auditor of one or more First Trust investment companies
since 2001.
Page 86
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 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.
FEDERAL TAX INFORMATION
Distributions paid to foreign shareholders for the taxable period ended August
31, 2020 that were properly designated by each Fund as "interest-related
dividends" or "short-term capital gain dividends," may not be subject to federal
income tax provided that the income was earned directly by such foreign
shareholders.
Of the ordinary income (including short-term capital gain) distribution made by
each Fund during the fiscal period ended August 31, 2020, none qualify for the
corporate dividends received deduction available to corporate shareholders or as
qualified dividend income.
For the fiscal year ended August 31, 2020, the amount of long-term capital gain
distributions designated by First Trust TCW Opportunistic Fixed Income ETF was
$1,392,675, which is taxable at the applicable capital gain tax rates for
federal income tax purposes.
For the tax year ended August 31, 2020, the First Trust TCW Opportunistic Fixed
Income ETF designated $2,500,000, or amounts necessary, as long-term capital
gain. During the tax year, Fund shareholders redeemed amounts in excess of our
long-term capital gain and of these proceeds, $2,500,000, or amounts necessary,
represents long-term capital gain from the Fund.
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. In July,
2020, TCW, the Sub-Advisor to the Funds was the target of a cyber security
attack. The incident was quickly identified and quarantined. Although the
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AUGUST 31, 2020 (UNAUDITED)
incident did impact some of TCW's computer systems, the Sub-Advisor was able to
maintain its critical business activities, including trading and portfolio
management for the Funds. All assets of the Funds are held with a third-party
bank custodian. That custodian was not affected by this incident.
DERIVATIVES RISK. To the extent a fund uses derivative instruments such as
futures contracts, options contracts and swaps, the fund may experience losses
because of adverse movements in the price or value of the underlying asset,
index or rate, which may be magnified by certain features of the derivative.
These risks are heightened when a fund's portfolio managers use derivatives to
enhance the fund's return or as a substitute for a position or security, rather
than solely to hedge (or offset) the risk of a position or security held by the
fund.
EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the
value of the fund's shares will fluctuate with changes in the value of the
equity securities. Equity securities prices fluctuate for several reasons,
including changes in investors' perceptions of the financial condition of an
issuer or the general condition of the relevant stock market, such as market
volatility, or when political or economic events affecting the issuers occur. In
addition, common stock prices may be particularly sensitive to rising interest
rates, as the cost of capital rises and borrowing costs increase. Equity
securities may decline significantly in price over short or extended periods of
time, and such declines may occur in the equity market as a whole, or they may
occur in only a particular country, company, industry or sector of the market.
ETF RISK. The shares of an ETF trade like common stock and represent an interest
in a portfolio of securities. The risks of owning an ETF generally reflect the
risks of owning the underlying securities, although lack of liquidity in an ETF
could result in it being more volatile and ETFs have management fees that
increase their costs. Shares of an ETF trade on an exchange at market prices
rather than net asset value, which may cause the shares to trade at a price
greater than net asset value (premium) or less than net asset value (discount).
In times of market stress, decisions by market makers to reduce or step away
from their role of providing a market for an ETF's shares, or decisions by an
ETF's authorized participants that they are unable or unwilling to proceed with
creation and/or redemption orders of an ETF's shares, could result in shares of
the ETF trading at a discount to net asset value and in greater than normal
intraday bid-ask spreads.
FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income
securities, the fund will be subject to credit risk, income risk, interest rate
risk, liquidity risk and prepayment risk. Income risk is the risk that income
from a fund's fixed income investments could decline during periods of falling
interest rates. Interest rate risk is the risk that the value of a fund's fixed
income securities will decline because of rising interest rates. Liquidity risk
is the risk that a security cannot be purchased or sold at the time desired, or
cannot be purchased or sold without adversely affecting the price. Prepayment
risk is the risk that the securities will be redeemed or prepaid by the issuer,
resulting in lower interest payments received by the fund. In addition to these
risks, high yield securities, or "junk" bonds, are subject to greater market
fluctuations and risk of loss than securities with higher ratings, and the
market for high yield securities is generally smaller and less liquid than that
for investment grade securities.
INDEX 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
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AUGUST 31, 2020 (UNAUDITED)
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 COVID-19 pandemic may last
for an extended period of time and will continue to impact the economy for the
foreseeable future.
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 AND SUB-ADVISORY AGREEMENTS
BOARD CONSIDERATIONS REGARDING APPROVAL OF INVESTMENT MANAGEMENT AND
SUB-ADVISORY AGREEMENTS
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF AND FIRST TRUST TCW UNCONSTRAINED
PLUS BOND ETF
The Board of Trustees of First Trust Exchange-Traded Fund VIII (the "Trust"),
including the Independent Trustees, unanimously approved the continuation of the
Investment Management Agreement (the "Advisory Agreement") with First Trust
Advisors L.P. (the "Advisor") and the Investment Sub-Advisory Agreements (as
applicable to a specific Fund, the "Sub-Advisory Agreement" and collectively,
the "Sub-Advisory Agreements" and together with the Advisory Agreement, the
"Agreements") among the Trust, the Advisor and TCW Investment Management Company
LLC (the "Sub-Advisor") on behalf of the following two series of the Trust (each
a "Fund" and collectively, the "Funds"):
First Trust TCW Opportunistic Fixed Income ETF (FIXD)
First Trust TCW Unconstrained Plus Bond ETF (UCON)
The Board approved the continuation of the applicable Agreements for each Fund
for a one-year period ending June 30, 2021 at a meeting held on June 8, 2020.
The Board determined for each Fund that the continuation of the applicable
Agreements is in the best interests of the Fund in light of the nature, extent
and quality of the services provided and such other matters as the Board
considered to be relevant in the exercise of its 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. At meetings held on May 11, 2020 and June 8, 2020, the
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AUGUST 31, 2020 (UNAUDITED)
Board, including the Independent Trustees, reviewed materials provided by the
Advisor and the Sub-Advisor responding to requests for information from counsel
to the Independent Trustees, submitted on behalf of the Independent Trustees,
that, among other things, outlined: the services provided by the Advisor and the
Sub-Advisor to each Fund (including the relevant personnel responsible for these
services and their experience); the 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 sub-advisory fee rate
as compared to fees charged to other clients of the Sub-Advisor; the expense
ratio of each Fund as compared to expense ratios of the funds in the Fund's
Expense Group and Expense Universe; performance information for each Fund,
including comparisons of each Fund's performance to that of one or more relevant
benchmark indexes and to that of a performance group of funds and a broad
performance universe of funds (the "Performance Universe"), each assembled by
Broadridge; the nature of expenses incurred in providing services to each Fund
and the potential for the Advisor and the Sub-Advisor to realize economies of
scale, if any; profitability and other financial data for the Advisor; financial
data for the Sub-Advisor; any fall-out benefits to the Advisor and its
affiliate, First Trust Portfolios L.P. ("FTP"), and the Sub-Advisor; and
information on the Advisor's and the Sub-Advisor's compliance programs. The
Board reviewed initial materials with the Advisor at the meeting held on May 11,
2020, prior to which the Independent Trustees and their counsel met separately
to discuss the information provided by the Advisor and the Sub-Advisor.
Following the May meeting, counsel to the Independent Trustees, on behalf of the
Independent Trustees, requested certain clarifications and supplements to the
materials provided, and the information provided in response to those requests
was considered at an executive session of the Independent Trustees and their
counsel held prior to the June 8, 2020 meeting, as well as at the meeting held
that day. The Board considered supplemental information provided by the Advisor
and the Sub-Advisor on the operations of the Advisor and the Sub-Advisor,
respectively, and the performance of the Funds since the onset of the COVID-19
pandemic. 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 continue to be reasonable business arrangements from each
Fund's perspective. The Board determined that, given the totality of the
information provided with respect to the Agreements, the Board had received
sufficient information to renew the Agreements. The Board considered that
shareholders chose to invest or remain invested in a Fund knowing that the
Advisor and the Sub-Advisor manage the Fund and knowing the Fund's unitary fee.
In reviewing the applicable Agreements for each Fund, the Board considered the
nature, extent and quality of the services provided by the Advisor and the
Sub-Advisor under the applicable Agreements. With respect to the Advisory
Agreement, the Board considered that the Advisor is responsible for the overall
management and administration of the Trust and each Fund and reviewed all of the
services 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 noted that the Advisor oversees the Sub-Advisor's
day-to-day management of each Fund's investments, including portfolio risk
monitoring and performance review. In reviewing the services provided, the Board
noted the compliance program that had been developed by the Advisor and
considered that it includes a robust program for monitoring the Advisor's, 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 also considered a report from the Advisor with respect to its risk
management functions related to the operation of the Funds. Finally, as part of
the Board's consideration of the Advisor's services, the Advisor, in its written
materials and at the May 11, 2020 meeting, described to the Board the scope of
its ongoing investment in additional infrastructure and personnel to maintain
and improve the quality of services provided to the Funds and the other funds in
the First Trust Fund Complex. With respect to the Sub-Advisory Agreements, the
Board noted that each Fund is an actively-managed ETF and the Sub-Advisor
actively manages the Fund's investments. The Board reviewed the materials
provided by the Sub-Advisor and considered the services that the Sub-Advisor
provides to each Fund, including the Sub-Advisor's day-to-day management of the
Funds' investments. In considering the Sub-Advisor's management of the Funds,
the Board noted the background and experience of the Sub-Advisor's portfolio
management team, including the Board's prior meetings with members of the
portfolio management team. In light of the information presented and the
considerations made, the Board concluded that the nature, extent and quality of
the services provided to the Trust and each Fund by the Advisor and the
Sub-Advisor under the Agreements have been and are expected to remain
satisfactory and that the Sub-Advisor, under the oversight of the Advisor, has
managed each Fund consistent with its investment objective, policies and
restrictions.
The Board considered the unitary fee rate payable by each Fund under the
Advisory Agreement for the services provided. The Board noted that the
sub-advisory fee for each Fund is paid by the Advisor from the Fund's unitary
fee. The Board considered that as part of the unitary fee the Advisor is
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, if any.
The Board noted that the Advisor had previously agreed to waive a portion of its
unitary fee for each Fund in an amount equal to 0.10% of the Fund's average
daily net assets until at least December 31, 2020. 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
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fee rates charged by the Advisor and the Sub-Advisor to other fund (including
ETFs) and non-fund clients, as applicable. Because each Fund pays a unitary fee,
the Board determined that expense ratios were the most relevant comparative data
point. Based on the information provided, the Board noted that the unitary fee
rate for FIXD, after taking into account the contractual fee waiver, was equal
to the median total (net) expense ratio of the peer funds in its Expense Group
and that the unitary fee rate for UCON, after taking into account the
contractual fee waiver, was above the median total (net) expense ratio of the
peer funds in its Expense Group. With respect to the Expense Groups, the Board,
at the May 11, 2020 meeting, discussed with Broadridge its methodology for
assembling peer groups and discussed with the Advisor limitations in creating
peer groups for actively-managed ETFs and different business models that may
affect the pricing of services among ETF sponsors. The Board also noted that not
all peer funds employ an advisor/sub-advisor management structure. The Board
took these limitations and differences into account in considering the peer
data. With respect to fees charged to other non-ETF clients, the Board
considered differences between the Funds and other non-ETF clients that limited
their comparability. In considering the unitary fee rates overall, the Board
also considered the Advisor's statement that it seeks to meet investor needs
through innovative and value-added investment solutions and the Advisor's
demonstrated long-term commitment to each Fund and the other funds in the First
Trust Fund Complex.
The Board considered performance information for each Fund. The Board noted the
process it has established for monitoring each Fund's performance and portfolio
risk on an ongoing basis, which includes quarterly performance reporting from
the Advisor and the Sub-Advisor for the Funds. The Board determined that this
process continues to be effective for reviewing each Fund's performance. The
Board received and reviewed information comparing each Fund's performance for
the one-year period ended December 31, 2019 to the performance of the funds in
its Performance Universe and a benchmark index. Based on the information
provided, the Board noted that each Fund underperformed its Performance Universe
median for the one-year period ended December 31, 2019 and outperformed its
benchmark index for the one-year period ended December 31, 2019.
On the basis of all the information provided on the unitary fee and performance
of each Fund and the ongoing oversight by the Board, the Board concluded that
the unitary fee for each Fund (out of which the Sub-Advisor is compensated)
continues to be reasonable and appropriate in light of the nature, extent and
quality of the services provided by the Advisor and the Sub-Advisor to each Fund
under the Agreements.
The Board considered information and discussed with the Advisor whether there
were any economies of scale in connection with providing advisory services to
the Funds and noted the Advisor's statement that it believes its expenses will
likely increase over the next twelve months as the Advisor continues to hire
personnel and build infrastructure, including technology, to improve the
services to the Funds. 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 considered the revenues and allocated costs (including the
allocation methodology) of the Advisor in serving as investment advisor to each
Fund for the twelve months ended December 31, 2019 and the estimated
profitability level for each Fund calculated by the Advisor based on such data,
as well as complex-wide and product-line profitability data, for the same
period. The Board noted the inherent limitations in the profitability analysis
and concluded that, based on the information provided, the Advisor's
profitability level for each Fund was not unreasonable. 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 concluded that the character and
amount of potential fall-out benefits to the Advisor were not unreasonable.
The Board considered the Sub-Advisor's statements that the Sub-Advisor believes
economies of scale in managing fixed-income portfolios are limited and that the
current sub-advisory fees appropriately reflect economies of scale, and that the
Sub-Advisor continues to add resources commensurate with and often ahead of the
demands of its business. The Board did not review the profitability of the
Sub-Advisor with respect to each Fund. The Board noted that the Advisor pays the
Sub-Advisor for each Fund from its unitary fee and its understanding that each
Fund's sub-advisory fee rate was the product of an arm's length negotiation. The
Board concluded that the profitability analysis for the Advisor was more
relevant. The Board considered the potential fall-out benefits to the
Sub-Advisor from being associated with the Advisor and the Funds, and noted the
Sub-Advisor's statements that the Sub-Advisor is not aware of any other benefits
derived or that may be derived from its relationship with the Advisor and the
Funds, and that the Sub-Advisor's Fixed Income Team does not enter into soft
dollar arrangements. The Board concluded that the character and amount of
potential fall-out benefits to 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 continue to be fair and reasonable and that the continuation
of the Agreements is in the best interests of each Fund. No single factor was
determinative in the Board's analysis.
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
FIRST TRUST TCW SECURITIZED PLUS ETF
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"), on behalf of First Trust TCW Securitized Plus ETF (the "Fund"),
and the Investment Sub-Advisory Agreement (the "Sub-Advisory Agreement" and
together with the Advisory Agreement, the "Agreements") among the Trust, on
behalf of the Fund, the Advisor and TCW Investment Management Company LLC (the
"Sub-Advisor"), for an initial two-year term at a meeting held on March 9, 2020.
The Board determined that the Agreements are in the best interests of the Fund
in light of the nature, extent and quality of the services expected to be
provided and such other matters as the Board considered to be relevant in the
exercise of its reasonable business judgment.
To reach this determination, the Board considered its duties under the
Investment Company Act of 1940, as amended (the "1940 Act"), as well as under
the general principles of state law, in reviewing and approving advisory
contracts; the requirements of the 1940 Act in such matters; the fiduciary duty
of investment advisors with respect to advisory agreements and compensation; the
standards used by courts in determining whether investment company boards have
fulfilled their duties; and the factors to be considered by the Board in voting
on such agreements. To assist the Board in its evaluation of the Agreements for
the Fund, the Independent Trustees received a separate report from each of the
Advisor and the Sub-Advisor in advance of the Board meeting responding to
requests for information from counsel to the Independent Trustees, submitted on
behalf of the Independent Trustees, that, among other things, outlined: the
services to be provided by the Advisor and the Sub-Advisor to the Fund
(including the relevant personnel responsible for these services and their
experience); the proposed unitary fee rate payable by the Fund as compared to
fees charged to a peer group of funds (the "Expense Group") and a broad peer
universe of funds (the "Expense Universe"), each assembled by Broadridge
Financial Solutions, Inc. ("Broadridge"), an independent source, and as compared
to fees charged to other 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 the Fund as compared to expense ratios of the funds in the
Fund's Expense Group and Expense Universe; the nature of expenses to be incurred
in providing services to the Fund and the potential for economies of scale, if
any; financial data on the Advisor and the Sub-Advisor; any fall-out benefits to
the Advisor and its affiliate, First Trust Portfolios L.P. ("FTP"), and the
Sub-Advisor; and information on the Advisor's and the Sub-Advisor's compliance
programs. The Independent Trustees and their counsel also met separately to
discuss the information provided by the Advisor and the Sub-Advisor. The Board
applied its business judgment to determine whether the arrangements between the
Trust and the Advisor and among the Trust, the Advisor and the Sub-Advisor are
reasonable business arrangements from the Fund's perspective.
In evaluating whether to approve the Agreements for the Fund, the Board
considered the nature, extent and quality of the services to be provided by the
Advisor and the Sub-Advisor under the Agreements. With respect to the Advisory
Agreement, the Board considered that the Advisor will be responsible for the
overall management and administration of the Fund and reviewed all of the
services to be provided by the Advisor to the Fund, including the oversight of
the Sub-Advisor, as well as the background and experience of the persons
responsible for such services. The Board considered that the Fund will be an
actively-managed ETF and will employ an advisor/sub-advisor management structure
and considered that the Advisor manages other ETFs with a similar structure in
the First Trust Fund Complex. The Board noted that the Advisor will oversee the
Sub-Advisor's day-to-day management of the Fund's investments, including
portfolio risk monitoring and performance review. In reviewing the services to
be provided, the Board noted the compliance program that had been developed by
the Advisor and considered that it includes a robust program for monitoring the
Advisor's, the Sub-Advisor's and the Fund's compliance with the 1940 Act, as
well as the Fund's compliance with its investment objective, policies and
restrictions. The Board noted that employees of the Advisor provide management
services to other ETFs and to other funds in the First Trust Fund Complex with
diligence and care. With respect to the Sub-Advisory Agreement, 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. The Board noted that the Sub-Advisor manages two other similar
fixed-income ETFs in the First Trust Fund Complex. 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 investment strategy for
the Fund. Because the Fund had yet to commence investment operations, the Board
could not consider the historical investment performance of the Fund. In light
of the information presented and the considerations made, the Board concluded
that the nature, extent and quality of the services to be provided to the Fund
by the Advisor and the Sub-Advisor under the Agreements are expected to be
satisfactory.
The Board considered the proposed unitary fee rate payable by the Fund under the
Advisory Agreement for the services to be provided. The Board noted that, under
the unitary fee arrangement, the Fund would pay the Advisor a unitary fee equal
to an annual rate of 0.75% of its average daily net assets. The Board considered
that, from the unitary fee for the Fund, the Advisor would pay the Sub-Advisor a
sub-advisory fee equal to 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 the Fund's expenses, including the cost of sub-advisory, transfer agency,
custody, fund administration, legal, audit and other services and license fees,
if any, but excluding the fee payment under the Advisory Agreement and interest,
taxes, brokerage commissions and other expenses connected with the execution of
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
portfolio transactions, distribution and service fees pursuant to a Rule 12b-1
plan, if any, and extraordinary expenses, if any. The Board noted that the
Advisor would contractually agree to waive fees in the amount of 0.10% of the
Fund's average daily net assets for at least a two-year period beginning upon
the effectiveness of the Fund's registration statement. The Board received and
reviewed information showing the advisory or unitary fee rates and expense
ratios of the peer funds in the Expense Group, as well as advisory and unitary
fee rates charged by the Advisor and the Sub-Advisor to other fund (including
ETF) and non-fund clients, as applicable. Because the Fund will pay a unitary
fee, the Board determined that expense ratios were the most relevant comparative
data point. Based on the information provided, the Board noted that the unitary
fee for the Fund (after fee waivers) was above the median total (net) expense
ratio of the peer funds in its Expense Group. With respect to the Expense Group,
the Board discussed with representatives of the Advisor how the Expense Group
was assembled and how the Fund compared and differed from the peer funds. The
Board took this information into account in considering the peer data. With
respect to fees charged to other clients, the Board considered differences
between the Fund and other clients that limited their comparability; however,
the Board considered the Advisor's statement that, although the Fund will be
unique to the First Trust Fund Complex given its focus on securitized
instruments and ability to invest up to 50% of its assets in non-agency
securities, the Fund will be most similar in its broad flexibility and total
return mandate to two other fixed-income ETFs in the First Trust Fund Complex
managed by the Advisor and the Sub-Advisor that pay unitary fees equal to annual
rates of 0.65% and 0.85% of their respective average daily net assets, as well
as two other ETFs in the First Trust Fund Complex that employ mortgage- and
government-based strategies and pay unitary fees equal to annual rates of 0.65%
of their respective average daily net assets. In light of the information
considered and the nature, extent and quality of the services expected to be
provided to the Fund under the Agreements, the Board determined that the
proposed unitary fee, including the sub-advisory fee to be paid by the Advisor
to the Sub-Advisor from the unitary fee, was fair and reasonable.
The Board noted that the proposed unitary fee for the Fund was not structured to
pass on to shareholders the benefits of any economies of scale as the Fund's
assets grow. The Board noted that any reduction in fixed costs associated with
the management of the Fund would benefit the Advisor and the Sub-Advisor, but
that the unitary fee structure provides a level of certainty in expenses for the
Fund. The Board noted that the Advisor has continued to 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 the Fund under the Advisory Agreement. The Board considered the Advisor's
estimate of the asset level for the Fund at which the Advisor expects the
Advisory Agreement to be profitable to the Advisor and the Advisor's estimate of
the profitability of the Advisory Agreement if the Fund's assets reach $100
million. The Board noted the inherent limitations in the profitability analysis
and concluded that, based on the information provided, the Advisor's estimated
profitability level for the Fund was not unreasonable. The Board did not review
any potential profitability of the Sub-Advisory Agreement for the Fund to the
Sub-Advisor. The Board considered that the Sub-Advisor would be paid by the
Advisor from the Fund's unitary fee and its understanding that the sub-advisory
fee rate was the product of an arm's length negotiation. In addition, the Board
considered fall-out benefits described by the Advisor that may be realized from
its relationship with the Fund. 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 Fund, may have had no
dealings with the Advisor or FTP. The Board also considered fall-out benefits to
the Sub-Advisor that may be realized from its relationship with the Fund, noting
the Sub-Advisor's statements that it is not aware of any other benefits derived
or that may be derived by the Sub-Advisor or its affiliates from the
Sub-Advisor's relationship with the Advisor and the Fund and that the
Sub-Advisor does not enter into soft-dollar arrangements. 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 the Fund. No single factor was
determinative in the Board's analysis.
LIQUIDITY RISK MANAGEMENT PROGRAM
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as
amended (the "1940 Act"), the Funds and each other fund in the First Trust Fund
Complex, other than the closed-end funds, have adopted and implemented a
liquidity risk management program (the "Program") reasonably designed to assess
and manage the funds' liquidity risk, i.e., the risk that a fund could not meet
requests to redeem shares issued by the fund without significant dilution of
remaining investors' interests in the fund. The Board of Trustees of the First
Trust Funds has appointed First Trust Advisors, L.P. (the "Advisor") as the
person designated to administer the Program, and in this capacity the Advisor
performs its duties primarily through the activities and efforts of the First
Trust Liquidity Committee (the "Liquidity Committee").
Pursuant to the Program, the Liquidity Committee classifies the liquidity of
each fund's portfolio investments into one of the four liquidity categories
specified by Rule 22e-4: highly liquid investments, moderately liquid
investments, less liquid investments and illiquid investments. The Liquidity
Committee determines certain of the inputs for this classification process,
Page 93
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
including reasonably anticipated trade sizes and significant investor dilution
thresholds. The Liquidity Committee also determines and periodically reviews a
highly liquid investment minimum for certain funds, monitors the funds' holdings
of assets classified as illiquid investments to seek to ensure they do not
exceed 15% of a fund's net assets and establishes policies and procedures
regarding redemptions in kind.
At the May 11, 2020 meeting of the Board of Trustees, as required by Rule 22e-4
and the Program, the Advisor provided the Board with a written report prepared
by the Advisor that addressed the operation of the Program during the period
from June 1, 2019 (the initial compliance date for certain requirements of Rule
22e-4) through the Liquidity Committee's annual meeting held on March 20, 2020
and assessed the Program's adequacy and effectiveness of implementation during
this period, including the operation of the highly liquid investment minimum for
each fund that is required under the Program to have one, and any material
changes to the Program. Note that because the Fund primarily holds assets that
are highly liquid investments, the Fund has not adopted a highly liquid
investment minimum.
As stated in the written report, during the review period, no fund breached the
15% limitation on illiquid investments, no fund with a highly liquid investment
minimum breached that minimum and no fund filed a Form N-LIQUID. The Advisor
concluded that each fund's investment strategy is appropriate for an open-end
fund; that the Program operated effectively in all material respects during the
review period; and that the Program is reasonably designed to assess and manage
the liquidity risk of each fund and to maintain compliance with Rule 22e-4.
Page 94
--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
The following tables identify the Trustees and Officers of the Trust. Unless
otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite
400, Wheaton, IL 60187.
The Trust's statement of additional information includes additional information
about the Trustees and is available, without charge, upon request, by calling
(800) 988-5891.
NUMBER OF OTHER
PORTFOLIOS IN TRUSTEESHIPS OR
TERM OF OFFICE THE FIRST TRUST DIRECTORSHIPS
NAME, AND YEAR FIRST FUND COMPLEX HELD BY TRUSTEE
YEAR OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST
POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
------------------------------------------------------------------------------------------------------------------------------------
Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 185 None
(1951) Limited Partner, Gundersen Real Estate
o Since Inception Limited Partnership (June 1992 to
December 2016); Member, Sportsmed LLC
(April 2007 to November 2015)
Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 185 Director of ADM
(1957) (Futures Commission Merchant) Investor Services,
o Since Inception Inc., ADM
Investor Services
International,
Futures Industry
Association, and
National Futures
Association
Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 185 Director of Trust
(1956) and Management Consulting) Company of
o Since Inception Illinois
Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 185 None
(1954) Managing Director and Chief Operating
o Since Inception Officer (January 2015 to August 2018),
Pelita Harapan Educational Foundation
(Educational Product and Services);
President and Chief Executive Officer
(June 2012 to September 2014), Servant
Interactive LLC (Educational Products
and Services); President and Chief
Executive Officer (June 2012 to
September 2014), Dew Learning LLC
(Educational Products and Services)
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 185 None
Chairman of the Board Advisors L.P. and First Trust
(1955) o Since Inception Portfolios L.P.; Chairman of the
Board of Directors, BondWave LLC
(Software Development Company)
and Stonebridge Advisors LLC
(Investment Advisor)
-----------------------------
(1) Mr. Bowen is deemed an "interested person" of the Trust due to his
position as Chief Executive Officer of First Trust Advisors L.P.,
investment advisor of the Trust.
Page 95
--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
POSITION AND TERM OF OFFICE
NAME OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS
AND YEAR OF BIRTH WITH TRUST SERVICE DURING PAST 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS(2)
------------------------------------------------------------------------------------------------------------------------------------
James M. Dykas President and Chief Executive o Indefinite Term Managing Director and Chief Financial Officer
(1966) Officer (January 2016 to Present), Controller (January 2011
o Since Inception to January 2016), Senior Vice President (April 2007
to January 2016), First Trust Advisors L.P. and First
Trust Portfolios L.P.; Chief Financial Officer
(January 2016 to Present), BondWave LLC
(Software Development Company) and Stonebridge
Advisors LLC (Investment Advisor)
Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President (July 2016 to Present), Vice
(1972) Officer and Chief President (April 2012 to July 2016), First Trust
Accounting Officer o Since Inception Advisors L.P. and First Trust Portfolios L.P.
W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and
(1960) Legal Officer First Trust Portfolios L.P.; Secretary and General
o Since Inception Counsel, BondWave LLC; Secretary, Stonebridge
Advisors LLC
Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and
(1970) First Trust Portfolios L.P.
o Since Inception
Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P.
(1966) and Assistant Secretary and First Trust Portfolios L.P.
o Since Inception
Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
(1966) and First Trust Portfolios L.P.
o Since Inception
Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
(1970) and First Trust Portfolios L.P.
o Since Inception
-----------------------------
(2) The term "officer" means the president, vice president, secretary,
treasurer, controller or any other officer who performs a policy making
function.
Page 96
--------------------------------------------------------------------------------
PRIVACY POLICY
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
PRIVACY POLICY
First Trust values our relationship with you and considers your privacy an
important priority in maintaining that relationship. We are committed to
protecting the security and confidentiality of your personal information.
SOURCES OF INFORMATION
We collect nonpublic personal information about you from the following sources:
o Information we receive from you and your broker-dealer, investment
advisor or financial representative through interviews,
applications, agreements or other forms;
o Information about your transactions with us, our affiliates or
others;
o Information we receive from your inquiries by mail, e-mail or
telephone; and
o Information we collect on our website through the use of "cookies".
For example, we may identify the pages on our website that your
browser requests or visits.
INFORMATION COLLECTED
The type of data we collect may include your name, address, social security
number, age, financial status, assets, income, tax information, retirement and
estate plan information, transaction history, account balance, payment history,
investment objectives, marital status, family relationships and other personal
information.
DISCLOSURE OF INFORMATION
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. In addition to using
this information to verify your identity (as required under law), the permitted
uses may also include the disclosure of such information to unaffiliated
companies for the following reasons:
o In order to provide you with products and services and to effect
transactions that you request or authorize, we may disclose your
personal information as described above to unaffiliated financial
service providers and other companies that perform administrative or
other services on our behalf, such as transfer agents, custodians
and trustees, or that assist us in the distribution of investor
materials such as trustees, banks, financial representatives, proxy
services, solicitors and printers.
o We may release information we have about you if you direct us to do
so, if we are compelled by law to do so, or in other legally limited
circumstances (for example to protect your account from fraud).
In addition, in order to alert you to our other financial products and services,
we may share your personal information within First Trust.
USE OF WEBSITE ANALYTICS
We currently use third party analytics tools, Google Analytics and AddThis, to
gather information for purposes of improving First Trust's website and marketing
our products and services to you. These tools employ cookies, which are small
pieces of text stored in a file by your web browser and sent to websites that
you visit, to collect information, track website usage and viewing trends such
as the number of hits, pages visited, videos and PDFs viewed and the length of
user sessions in order to evaluate website performance and enhance navigation of
the website. We may also collect other anonymous information, which is generally
limited to technical and web navigation information such as the IP address of
your device, internet browser type and operating system for purposes of
analyzing the data to make First Trust's website better and more useful to our
users. The information collected does not include any personal identifiable
information such as your name, address, phone number or email address unless you
provide that information through the website for us to contact you in order to
answer your questions or respond to your requests. To find out how to opt-out of
these services click on: Google Analytics and AddThis.
CONFIDENTIALITY AND SECURITY
With regard to our internal security procedures, First Trust restricts access to
your nonpublic personal information to those First Trust employees who need to
know that information to provide products or services to you. We maintain
physical, electronic and procedural safeguards to protect your nonpublic
personal information.
POLICY UPDATES AND INQUIRIES
As required by federal law, we will notify you of our privacy policy annually.
We reserve the right to modify this policy at any time, however, if we do change
it, we will tell you promptly. For questions about our policy, or for additional
copies of this notice, please go to www.ftportfolios.com, or contact us at
1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust
Advisors).
March 2019
Page 97
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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)
----------------------------
Annual Report
For the Year Ended
August 31, 2020
----------------------------
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
ANNUAL REPORT
AUGUST 31, 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 Commentary......................................................... 7
Understanding Your Fund Expenses............................................. 9
Portfolio of Investments
EquityCompass Risk Manager ETF (ERM)...................................... 10
EquityCompass Tactical Risk Manager ETF (TERM)............................ 14
Statements of Assets and Liabilities......................................... 18
Statements of Operations..................................................... 19
Statements of Changes in Net Assets.......................................... 20
Financial Highlights......................................................... 21
Notes to Financial Statements................................................ 22
Report of Independent Registered Public Accounting Firm...................... 28
Additional Information....................................................... 29
Board of Trustees and Officers............................................... 35
Privacy Policy............................................................... 37
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's shares may therefore be less than what you paid
for them. Accordingly, you can lose money investing in a Fund. See "Risk
Considerations" in the Additional Information section of this report for a
discussion of 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.
By reading the portfolio commentary from the portfolio management team of the
Funds, you may obtain an understanding of how the market environment affected
each Fund's performance. 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
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
AUGUST 31, 2020
Dear Shareholders:
First Trust is pleased to provide you with the 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 twelve months ended August 31, 2020.
In case you missed the latest big news from the Federal Reserve ("Fed") in
September, it stated that it expects to hold short-term interest rates near zero
until two things happen: (1) the U.S. unemployment rate is back to normal, or
around the 4.0% level; and (2) the inflation rate is at, or above, 2.0%. As of
August 31, 2020, the U.S. unemployment rate stood at 8.4%, according to data
from the Bureau of Labor Statistics. The Fed's top benchmark for inflation (U.S.
Personal Consumption Expenditures Chain Type Price Index) stood at 1.0% on July
31, 2020. Brian Wesbury, Chief Economist at First Trust Advisors L.P., notes
that the Fed does not expect to achieve both goals until 2024.
What does this mean for investors? We believe that one of the Fed's motivations
in promoting a multi-year commitment to a near zero interest rate monetary
policy is to incentivize risk-taking. By holding interest rates artificially low
for an extended period, the Fed is essentially disincentivizing saving. The Fed
wants individuals to invest their capital in risk assets and is offering
valuable guidance on its monetary policy to instill confidence in the markets,
in my opinion.
In his testimony to the House Financial Services Committee on September 22,
2020, Fed Chairman Jerome Powell stated that the U.S. economy has a long road to
a full recovery and needs more financial support. U.S. Treasury Secretary Steven
Mnuchin also testified and said that he and the White House will continue to
push Congress to pass another fiscal relief package to help support American
workers. In pursuing additional fiscal support, the U.S. government is
ultimately looking to buy time until a coronavirus ("COVID-19") vaccine arrives.
With the U.S. Presidential election less than two months away, getting a
trillion dollar or so stimulus package through Congress will be no easy task, in
my opinion. Let us hope they surprise us.
Thanks to the monetary and fiscal support already brought to bear to fight
COVID-19, the securities markets appear to be in relatively good shape, in my
opinion. On September 22, 2020, the S&P 500(R) Index closed a little more than
two percentage points off its pre-COVID-19 high set on February 19, 2020,
according to data from Bloomberg. I find that to be an amazing feat in the
current climate. The combination of low interest rates and low inflation
continues to reward bond investors. Looking ahead, even bond investors are going
to need to assume some additional credit risk to achieve higher returns. Yields
on Treasury notes and bonds are poised at this time to stay low and fairly range
bound. The Fed's pledge to keep its benchmark rate low for up to three years
could lend some stability and reassurance to the debt markets, in my opinion.
We believe the U.S. economy is on its way back. While we have too many workers
still unemployed, I do find it encouraging that U.S. consumers have done such a
terrific job of getting their fiscal houses in order. Consumer spending
typically accounts for roughly 70% of U.S. gross domestic product output each
year. So goes the consumer, so goes the economy. The S&P/Experian Consumer
Credit Default Composite Index stood at 0.67% in August 2020, down from 0.92% in
August 2019 and well below its 1.79% average since its inception in July 2004,
according to S&P Dow Jones Indices. As we previously noted, the near-term
outlook rests on getting one or more FDA-approved vaccines or therapeutics. The
year-end target that has been touted by some, including President Donald J.
Trump, would coincide with the end to the government's moratorium on home
evictions and foreclosures, which is due to expire on December 31, 2020. Keep in
mind that the moratorium has already been extended three times. Things could get
interesting over the next few months. Stay tuned and stay the course.
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 "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
1 Year Ended Inception (4/10/17) Inception (4/10/17)
8/31/20 to 8/31/20 to 8/31/20
FUND PERFORMANCE
NAV -5.36% -1.06% -3.56%
Market Price -5.32% -1.10% -3.67%
INDEX PERFORMANCE
S&P 500(R) Index 21.94% 14.60% 58.75%
Hedge Fund Research HFRI Equity Hedge Index(1) 9.85% 5.51% 19.65%
---------------------------------------------------------------------------------------------------------------------
(1) Cumulative total return for the period April 30, 2017 through August 31,
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 20.80%
Health Care 12.86
Financials 11.82
Industrials 10.01
Consumer Discretionary 9.75
Consumer Staples 9.54
Communication Services 8.98
Utilities 5.26
Materials 3.96
Energy 3.75
Real Estate 3.27
--------
Total 100.00%
========
----------------------------------------------------------
% OF TOTAL
LONG-TERM
TOP TEN HOLDINGS INVESTMENTS
----------------------------------------------------------
NVIDIA Corp. 0.78%
Adobe, Inc. 0.77
NetApp, Inc. 0.76
Facebook, Inc., Class A 0.76
Apple, Inc. 0.76
Target Corp. 0.75
Live Nation Entertainment, Inc. 0.74
Mastercard, Inc., Class A 0.74
Netflix, Inc. 0.74
Amazon.com, Inc. 0.73
--------
Total 7.53%
========
Page 2
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
EQUITYCOMPASS RISK MANAGER ETF (ERM) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
APRIL 10, 2017 - AUGUST 31, 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
8/31/20 9,644 15,875
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 AUGUST 31, 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 August 31, 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 - 8/31/20 194 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 - 8/31/20 56 1 0 1
Page 3
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
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 "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
1 Year Ended Inception (4/10/17) Inception (4/10/17)
8/31/20 to 8/31/20 to 8/31/20
FUND PERFORMANCE
NAV -5.36% -5.07% -16.18%
Market Price -5.18% -5.05% -16.13%
INDEX PERFORMANCE
S&P 500(R) Index 21.94% 14.60% 58.75%
Hedge Fund Research HFRI Equity Hedge Index(1) 9.85% 5.51% 19.65%
---------------------------------------------------------------------------------------------------------------------
(1) Cumulative total return for the period April 30, 2017 through August 31,
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 20.80%
Health Care 12.87
Financials 11.82
Industrials 10.00
Consumer Discretionary 9.75
Consumer Staples 9.53
Communication Services 8.98
Utilities 5.27
Materials 3.96
Energy 3.75
Real Estate 3.27
--------
Total 100.00%
========
----------------------------------------------------------
% OF TOTAL
LONG-TERM
TOP TEN HOLDINGS INVESTMENTS
----------------------------------------------------------
NVIDIA Corp. 0.78%
Adobe, Inc. 0.77
NetApp, Inc. 0.76
Facebook, Inc., Class A 0.76
Apple, Inc. 0.75
Target Corp. 0.74
Live Nation Entertainment, Inc. 0.74
Netflix, Inc. 0.74
Amazon.com, Inc. 0.74
Mastercard, Inc., Class A 0.74
--------
Total 7.52%
========
Page 4
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
EQUITYCOMPASS TACTICAL RISK MANAGER ETF (TERM) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
APRIL 10, 2017 - AUGUST 31, 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
8/31/20 8,382 15,875
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 AUGUST 31, 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 August 31, 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 - 8/31/20 22 1 0 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%
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 - 8/31/20 226 2 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 COMMENTARY
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
ANNUAL REPORT
AUGUST 31, 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, SENIOR 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.
COMMENTARY
MARKET RECAP
In what may be the most unprecedented year of economic stress and market
oscillation, much has changed in the last twelve-month period ended August 31,
2020. The fourth quarter of 2019 saw depressed levels of volatility as the S&P
500(R) Index continued to make new highs each week. Large Cap weighted stocks
continued to outperform over their mid and small-cap counterparts and growth
continued to shine into year-end. At some time over the winter season, a new
strain of the virus, SARS-CoV, now dubbed the coronavirus ("COVID-19"), spread
across the globe. The uncertainty about the effects of the virus, as well as its
implications to global travel and trade, spread into fiscal expectation.
Business confidence wavered as analysts rushed to adjust earnings in the wake of
statewide shutdowns. U-3 unemployment went from 4.4% in March 2020 to 14.7% in
April 2020. The VIX Index soared to the highest level since 2008, peaking at a
level of 53 as millions of Americans sat home, jobless or on furlough. While the
bulk of U.S. workers continued to operate remotely, mandatory business closings
took their toll on the economy. The yield on the 10-Year U.S. Treasury plummeted
from 1.45% in August 2019, and from the 12-month high of 1.94%, to 0.70% as of
August 31, 2020. Consistent with the Federal Reserve's (the "Fed") second
mandate to stabilize prices, rates have been kept at zero in an attempt to spur
the economy. The Fed's "Lower for Longer" mantra is here to stay for quite some
time as global demand for Treasury bonds remains solid and the effects of the
COVID-19 pandemic linger. Additionally, S&P 500 earnings expectations fell
substantially with the maximum 12-month peak-to-trough decline being 22.2%, or
$39.28. Since the trough in S&P earnings in April 2020, expectations have
gradually regained strength as we approach a vaccine. Equity returns were
extraordinarily volatile and mixed for the full twelve-month period ended August
31, 2020. Large cap stocks, as represented by the S&P 500(R) Index, gained
21.92%. Mid-cap stocks, represented by the S&P MidCap 400(R) Index, returned a
modest 4.21% and small-cap stocks, represented by the S&P SmallCap 600(R), fell
0.58% in the period. In a display of colossal proportions, the disparity between
the Russell 1000(R) Growth Index and the Russell 1000(R) Value Index was 43.52%,
with growth returning 44.34% and the value counterpart returning a meager 0.82%
over the twelve-month period ended August 31, 2020. Information Technology,
Consumer Discretionary, and Communication
Page 7
--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
ANNUAL REPORT
AUGUST 31, 2020 (UNAUDITED)
Services were the strongest advancing sectors while Financials, Real Estate, and
Energy were the weakest for the same period. Bonds, as represented by the
Bloomberg Barclays U.S. Aggregate Bond Total Return Index, posted a strong 6.47%
for the same period. Forward 12-month earnings estimates for the S&P 500(R)
currently sit at $152.08 on August 31, 2020.
PERFORMANCE REVIEW (ERM/TERM)
ERM and TERM seek to reliably capture broad equity market performance when
fundamental and technical conditions are favorable and to reduce equity exposure
when either, or both, of those indicators show evidence of deterioration. Both
ERM and TERM reduced equity exposure to 50% at the end of March 2020 as forward
earnings trends were negative and technical conditions were also highly
unfavorable. With a sharp rebound in prices beginning in April 2020, technical
conditions improved while S&P 500 earnings estimates recovered with more
trepidation than prices. Understandably so, many analysts sat idly on their 2020
outlook as the COVID-19 narrative was evolving far beyond expectations. Both
Funds moved to restore full equity on August 14, 2020 as improvements in the
market became evident.
For the twelve-month period ended August 31, 2020, ERM and TERM posted net asset
value ("NAV") returns of -5.36%. Market price returns for ERM and TERM were
-5.32% and -5.18%, respectively. The primary benchmark for the Funds is the S&P
500(R) Index (the "Benchmark"). For the same period, the S&P 500(R) Equal Weight
Index was up 8.44% on a total return basis. Both ERM and TERM underperformed
their Benchmark for the same period as a result of significant market forces
supporting primarily the largest cap stocks and creating a top-heavy market.
The most prevalent factors contributing to underperformance versus the Benchmark
were market timing (reduced equity exposure) and the significant performance
spread between cap weight and equal weight indices for the same period.
Year-to-date through August 31, 2020, the spread between the S&P 500(R) Total
Return Index and its equal weight counterpart was in excess of 1,200 basis
points favoring cap weight. The performance of the market has been exceptionally
narrow as the recovery from COVID-19 drags on. In response to the first wave of
COVID-19 infections in the U.S., S&P 500 earnings and sales began their decline
in March 2020 as analysts scurried to lower or remove 2020 guidance. Throughout
the twelve-month period ended August 31, 2020, the compositional structure of
both exchange-traded funds ("ETFs") have maintained the same exposure and
underlying composition.
Our selection process for the underlying 150 names--representing the long
component--tends to result in two distinct biases relative to the equal weight
S&P 500. Roughly one-third of the portfolio will generally be comprised of the
smallest names in the S&P 500(R) Index across all major sectors. As a result,
they tend to have smaller capitalizations and value-like characteristics. During
the period, small and mid-cap stocks significantly underperformed their large
cap peers. The S&P 500(R) Index advanced 9.74% while the S&P Mid Cap 400(R)
Index declined 5.55% and the S&P Small Cap 600(R) Index fell 11.08%.
Additionally, value significantly underperformed growth during the period with
the Russell 1000(R) Growth Index advancing 30.46% versus the Russell 1000(R)
Value Index declining 9.35%.
Seven of the 11 benchmark sectors produced positive returns during the period,
with Information Technology (+55.91%), Consumer Discretionary (+33.33%), and
Communication Services (+25.49%) leading the advancers. Energy, Real Estate, and
Financials were the worst performing sectors for the period declining 36.86%,
7.37%, and 6.76%, respectively.
MARKET AND FUND OUTLOOK
As of August 31, 2020, forward looking earnings expectations for the S&P 500(R)
Index have expanded gradually over second quarter 2020 lows. However,
year-to-date through August, 1-year forward earnings estimates are still lower
by $22.97 (-13.12%) to a level of $152.08 throughout the year. Earnings
multiples on the S&P 500 have increased from 18.45x at the beginning of 2020 to
23.01x at the end of August, as prices rebounded on news of the ongoing vaccine
development and the gradual reopening of businesses. So long as expectations for
earnings continue to rise and technical patterns remain favorable we anticipate
both funds to maintain full equity exposure. Looking forward, it's evident that
the Fed is working diligently to uphold its mandates of stable prices and
maximum employment. In supporting the stability of domestic stocks, the "Lower
for Longer" scenario is here for the foreseeable future. This should effectively
provide fuel for continued economic expansion once a vaccine becomes available,
possibly sparking a consumer and retail demand boom. The U.S. mid-term elections
are only months away with much uncertainty remaining around the ramifications of
a party flip. At the moment, the market from March lows is stalling as we near
the U.S. elections in November and the fate of another stimulus bill hangs in
the balance.
The Equity Risk Management Strategy ("ERMS") is designed to remove emotional
decision making and react to, not anticipate, changes in fundamental and
technical conditions to adjust equity exposure accordingly. Currently, the ERMS
is fully invested as both fundamental and technical indicators signal favorable
near term outcomes. Should either of these conditions deteriorate, the strategy
will move to a partially defensive position. However if both signals deteriorate
concurrently the strategy will move to a more significant defensive position.
Page 8
FIRST TRUST EXCHANGE-TRADED FUND VIII
UNDERSTANDING YOUR FUND EXPENSES
AUGUST 31, 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 (12b-1) fees, if any, and other
Fund expenses. This Example is intended to help you understand your ongoing
costs of investing in the Funds and to compare these costs with the ongoing
costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended August 31, 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 six-month
period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on 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
MARCH 1, 2020 AUGUST 31, 2020 PERIOD (a) PERIOD (a) (b)
-------------------------------------------------------------------------------------------------------------------
EQUITYCOMPASS RISK MANAGER ETF (ERM)
Actual $1,000.00 $ 948.20 0.65% $3.18
Hypothetical (5% return before expenses) $1,000.00 $1,021.87 0.65% $3.30
EQUITYCOMPASS TACTICAL RISK MANAGER ETF (TERM)
Actual $1,000.00 $ 948.70 0.65% $3.18
Hypothetical (5% return before expenses) $1,000.00 $1,021.87 0.65% $3.30
(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 (March 1,
2020 through August 31, 2020), multiplied by 184/366 (to reflect the
six-month period).
Page 9
EQUITYCOMPASS RISK MANAGER ETF (ERM)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS -- 98.9%
AEROSPACE & DEFENSE -- 2.6%
444 Boeing (The) Co. $ 76,288
504 General Dynamics Corp. 75,272
202 Lockheed Martin Corp. 78,833
1,233 Raytheon Technologies Corp. 75,213
-------------
305,606
-------------
AIR FREIGHT & LOGISTICS -- 1.4%
378 FedEx Corp. 83,100
489 United Parcel Service, Inc.,
Class B 80,010
-------------
163,110
-------------
AUTO COMPONENTS -- 0.6%
1,894 BorgWarner, Inc. 76,877
-------------
AUTOMOBILES -- 1.3%
11,147 Ford Motor Co. 76,022
2,827 General Motors Co. 83,764
-------------
159,786
-------------
BANKS -- 3.2%
2,971 Bank of America Corp. 76,473
1,490 Citigroup, Inc. 76,169
768 JPMorgan Chase & Co. 76,946
2,090 U.S. Bancorp 76,076
3,120 Wells Fargo & Co. 75,348
-------------
381,012
-------------
BEVERAGES -- 2.0%
1,631 Coca-Cola (The) Co. 80,784
2,086 Molson Coors Beverage Co.,
Class B 78,517
573 PepsiCo, Inc. 80,254
-------------
239,555
-------------
BIOTECHNOLOGY -- 2.7%
830 AbbVie, Inc. 79,489
330 Amgen, Inc. 83,596
272 Biogen, Inc. (a) 78,238
1,150 Gilead Sciences, Inc. 76,762
-------------
318,085
-------------
BUILDING PRODUCTS -- 0.7%
951 Fortune Brands Home &
Security, Inc. 79,960
-------------
CAPITAL MARKETS -- 2.6%
2,094 Bank of New York Mellon (The)
Corp. 77,436
134 BlackRock, Inc. 79,621
379 Goldman Sachs Group (The), Inc. 77,646
1,510 Morgan Stanley 78,913
-------------
313,616
-------------
CHEMICALS -- 3.3%
858 Albemarle Corp. 78,087
2,275 CF Industries Holdings, Inc. 74,233
1,762 Dow, Inc. 79,501
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
CHEMICALS (CONTINUED)
1,359 DuPont de Nemours, Inc. $ 75,778
1,078 Eastman Chemical Co. 78,813
-------------
386,412
-------------
COMMUNICATIONS EQUIPMENT
-- 2.0%
1,860 Cisco Systems, Inc. 78,529
581 F5 Networks, Inc. (a) 76,884
3,180 Juniper Networks, Inc. 79,500
-------------
234,913
-------------
CONSUMER FINANCE -- 1.3%
784 American Express Co. 79,647
1,138 Capital One Financial Corp. 78,556
-------------
158,203
-------------
CONTAINERS & PACKAGING -- 0.7%
2,578 WestRock Co. 78,191
-------------
DIVERSIFIED FINANCIAL SERVICES
-- 0.7%
374 Berkshire Hathaway, Inc.,
Class B (a) 81,547
-------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 2.0%
2,626 AT&T, Inc. 78,281
7,155 CenturyLink, Inc. 76,916
1,342 Verizon Communications, Inc. 79,541
-------------
234,738
-------------
ELECTRIC UTILITIES -- 3.9%
958 Duke Energy Corp. 76,966
2,079 Exelon Corp. 76,736
281 NextEra Energy, Inc. 78,447
2,245 NRG Energy, Inc. 77,250
1,010 Pinnacle West Capital Corp. 74,084
1,469 Southern (The) Co. 76,652
-------------
460,135
-------------
ELECTRICAL EQUIPMENT -- 0.7%
1,131 Emerson Electric Co. 78,571
-------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 1.3%
496 IPG Photonics Corp. (a) 80,218
278 Zebra Technologies Corp.,
Class A (a) 79,655
-------------
159,873
-------------
ENERGY EQUIPMENT & SERVICES
-- 0.6%
3,931 Schlumberger N.V. 74,728
-------------
ENTERTAINMENT -- 2.1%
1,532 Live Nation Entertainment,
Inc. (a) 87,018
163 Netflix, Inc. (a) 86,318
605 Walt Disney (The) Co. 79,781
-------------
253,117
-------------
Page 10 See Notes to Financial Statements
EQUITYCOMPASS RISK MANAGER ETF (ERM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
EQUITY REAL ESTATE INVESTMENT
TRUSTS -- 3.2%
2,141 Apartment Investment &
Management Co., Class A $ 77,140
950 Federal Realty Investment Trust 75,278
2,659 Iron Mountain, Inc. 80,010
1,827 Regency Centers Corp. 72,550
1,159 Simon Property Group, Inc. 78,638
-------------
383,616
-------------
FOOD & STAPLES RETAILING -- 2.0%
234 Costco Wholesale Corp. 81,352
1,904 Walgreens Boots Alliance, Inc. 72,390
595 Walmart, Inc. 82,616
-------------
236,358
-------------
FOOD PRODUCTS -- 2.7%
692 J.M. Smucker (The) Co. 83,165
2,220 Kraft Heinz (The) Co. 77,789
1,223 Lamb Weston Holdings, Inc. 76,865
1,406 Mondelez International, Inc.,
Class A 82,138
-------------
319,957
-------------
HEALTH CARE EQUIPMENT
& SUPPLIES -- 2.8%
788 Abbott Laboratories 86,262
257 ABIOMED, Inc. (a) 79,058
384 Danaher Corp. 79,285
781 Medtronic PLC 83,934
-------------
328,539
-------------
HEALTH CARE PROVIDERS & SERVICES
-- 1.9%
1,211 CVS Health Corp. 75,228
1,166 Henry Schein, Inc. (a) 77,469
244 UnitedHealth Group, Inc. 76,262
-------------
228,959
-------------
HOTELS, RESTAURANTS & LEISURE
-- 1.4%
382 McDonald's Corp. 81,565
1,005 Starbucks Corp. 84,892
-------------
166,457
-------------
HOUSEHOLD DURABLES -- 1.3%
878 Mohawk Industries, Inc. (a) 81,066
435 Whirlpool Corp. 77,308
-------------
158,374
-------------
HOUSEHOLD PRODUCTS -- 1.4%
1,022 Colgate-Palmolive Co. 81,004
585 Procter & Gamble (The) Co. 80,923
-------------
161,927
-------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS -- 0.7%
4,497 AES (The) Corp. 79,822
-------------
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES -- 2.0%
475 3M Co. $ 77,434
11,841 General Electric Co. 75,072
494 Honeywell International, Inc. 81,782
-------------
234,288
-------------
INSURANCE -- 3.8%
824 Allstate (The) Corp. 76,632
2,545 American International Group,
Inc. 74,161
630 Assurant, Inc. 76,583
923 Globe Life, Inc. 76,129
2,034 Lincoln National Corp. 73,326
2,001 MetLife, Inc. 76,958
-------------
453,789
-------------
INTERACTIVE MEDIA & SERVICES
-- 1.5%
52 Alphabet, Inc., Class A (a) 84,735
303 Facebook, Inc., Class A (a) 88,840
-------------
173,575
-------------
INTERNET & DIRECT MARKETING RETAIL
-- 1.4%
25 Amazon.com, Inc. (a) 86,274
45 Booking Holdings, Inc. (a) 85,970
-------------
172,244
-------------
IT SERVICES -- 6.7%
342 Accenture PLC, Class A 82,056
566 Broadridge Financial Solutions,
Inc. 77,768
606 Gartner, Inc. (a) 78,671
631 International Business Machines
Corp. 77,809
407 Jack Henry & Associates, Inc. 67,326
832 Leidos Holdings, Inc. 75,288
241 Mastercard, Inc., Class A 86,324
411 PayPal Holdings, Inc. (a) 83,901
401 Visa, Inc., Class A 85,008
3,331 Western Union (The) Co. 78,578
-------------
792,729
-------------
LIFE SCIENCES TOOLS & SERVICES
-- 0.7%
191 Thermo Fisher Scientific, Inc. 81,935
-------------
MACHINERY -- 2.0%
563 Caterpillar, Inc. 80,120
1,741 Pentair PLC 78,589
512 Snap-on, Inc. 75,914
-------------
234,623
-------------
MEDIA -- 3.3%
130 Charter Communications, Inc.,
Class A (a) 80,029
1,794 Comcast Corp., Class A 80,389
2,273 DISH Network Corp., Class A (a) 80,737
See Notes to Financial Statements Page 11
EQUITYCOMPASS RISK MANAGER ETF (ERM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MEDIA (CONTINUED)
4,176 Interpublic Group of Cos. (The),
Inc. $ 74,166
5,125 News Corp., Class A 77,490
-------------
392,811
-------------
MULTILINE RETAIL -- 0.7%
579 Target Corp. 87,551
-------------
MULTI-UTILITIES -- 0.6%
3,855 CenterPoint Energy, Inc. 77,370
-------------
OIL, GAS & CONSUMABLE FUELS
-- 3.1%
875 Chevron Corp. 73,439
1,938 ConocoPhillips 73,431
1,833 Exxon Mobil Corp. 73,210
5,531 Kinder Morgan, Inc. 76,438
5,469 Occidental Petroleum Corp. 69,675
-------------
366,193
-------------
PHARMACEUTICALS -- 4.7%
1,249 Bristol-Myers Squibb Co. 77,688
527 Eli Lilly and Co. 78,202
530 Johnson & Johnson 81,307
941 Merck & Co., Inc. 80,239
4,866 Mylan N.V. (a) 79,705
1,480 Perrigo Co. PLC 77,404
2,067 Pfizer, Inc. 78,112
-------------
552,657
-------------
ROAD & RAIL -- 0.7%
409 Union Pacific Corp. 78,708
-------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 4.1%
1,609 Intel Corp. 81,979
1,142 Maxim Integrated Products, Inc. 78,158
172 NVIDIA Corp. 92,017
599 Qorvo, Inc. (a) 76,834
694 QUALCOMM, Inc. 82,655
573 Texas Instruments, Inc. 81,452
-------------
493,095
-------------
SOFTWARE -- 2.8%
176 Adobe, Inc. (a) 90,357
378 Microsoft Corp. 85,250
1,456 Oracle Corp. 83,312
257 Paycom Software, Inc. (a) 76,961
-------------
335,880
-------------
SPECIALTY RETAIL -- 1.4%
281 Home Depot (The), Inc. 80,096
511 Lowe's Cos., Inc. 84,157
-------------
164,253
-------------
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 3.6%
688 Apple, Inc. 88,780
8,148 Hewlett Packard Enterprise Co. 78,791
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS (CONTINUED)
1,890 NetApp, Inc. $ 89,567
1,752 Seagate Technology PLC 84,078
2,200 Western Digital Corp. 84,524
-------------
425,740
-------------
TEXTILES, APPAREL & LUXURY GOODS
-- 1.3%
743 NIKE, Inc., Class B 83,134
1,116 Ralph Lauren Corp. 76,815
-------------
159,949
-------------
TOBACCO -- 1.4%
1,855 Altria Group, Inc. 81,138
1,014 Philip Morris International, Inc. 80,907
-------------
162,045
-------------
TOTAL COMMON STOCKS -- 98.9% 11,741,479
(Cost $11,480,873) -------------
MONEY MARKET FUNDS -- 1.0%
116,343 Morgan Stanley Institutional Liquidity
Funds - Treasury Portfolio -
Institutional Class - 0.01% (b) 116,343
(Cost $116,343) -------------
TOTAL INVESTMENTS -- 99.9% 11,857,822
(Cost $11,597,216) (c)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 17,341
-------------
NET ASSETS -- 100.0% $ 11,875,163
=============
(a) Non-income producing security.
(b) Rate shown reflects yield as of August 31, 2020.
(c) Aggregate cost for federal income tax purposes is $11,611,388. As of
August 31, 2020, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$1,170,915 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$924,481. The net unrealized appreciation was $246,434.
Page 12 See Notes to Financial Statements
EQUITYCOMPASS RISK MANAGER ETF (ERM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of August 31,
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* $ 11,741,479 $ -- $ --
Money Market Funds 116,343 -- --
---------------------------------------------
Total Investments $ 11,857,822 $ -- $ --
=============================================
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 13
EQUITYCOMPASS TACTICAL RISK MANAGER ETF (TERM)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS -- 98.7%
AEROSPACE & DEFENSE -- 2.6%
476 Boeing (The) Co. $ 81,786
541 General Dynamics Corp. 80,799
216 Lockheed Martin Corp. 84,296
1,324 Raytheon Technologies Corp. 80,764
-------------
327,645
-------------
AIR FREIGHT & LOGISTICS -- 1.4%
407 FedEx Corp. 89,475
525 United Parcel Service, Inc.,
Class B 85,900
-------------
175,375
-------------
AUTO COMPONENTS -- 0.6%
2,036 BorgWarner, Inc. 82,641
-------------
AUTOMOBILES -- 1.3%
11,969 Ford Motor Co. 81,629
3,034 General Motors Co. 89,897
-------------
171,526
-------------
BANKS -- 3.2%
3,197 Bank of America Corp. 82,291
1,602 Citigroup, Inc. 81,894
825 JPMorgan Chase & Co. 82,657
2,248 U.S. Bancorp 81,827
3,354 Wells Fargo & Co. 80,999
-------------
409,668
-------------
BEVERAGES -- 2.0%
1,751 Coca-Cola (The) Co. 86,727
2,240 Molson Coors Beverage Co.,
Class B 84,314
615 PepsiCo, Inc. 86,137
-------------
257,178
-------------
BIOTECHNOLOGY -- 2.7%
892 AbbVie, Inc. 85,427
354 Amgen, Inc. 89,675
293 Biogen, Inc. (a) 84,279
1,235 Gilead Sciences, Inc. 82,436
-------------
341,817
-------------
BUILDING PRODUCTS -- 0.7%
1,021 Fortune Brands Home &
Security, Inc. 85,846
-------------
CAPITAL MARKETS -- 2.6%
2,251 Bank of New York Mellon (The)
Corp. 83,242
144 BlackRock, Inc. 85,563
407 Goldman Sachs Group (The), Inc. 83,382
1,621 Morgan Stanley 84,714
-------------
336,901
-------------
CHEMICALS -- 3.2%
920 Albemarle Corp. 83,729
2,444 CF Industries Holdings, Inc. 79,748
1,892 Dow, Inc. 85,367
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
CHEMICALS (CONTINUED)
1,457 DuPont de Nemours, Inc. $ 81,242
1,158 Eastman Chemical Co. 84,662
-------------
414,748
-------------
COMMUNICATIONS EQUIPMENT
-- 2.0%
1,997 Cisco Systems, Inc. 84,314
625 F5 Networks, Inc. (a) 82,706
3,417 Juniper Networks, Inc. 85,425
-------------
252,445
-------------
CONSUMER FINANCE -- 1.3%
842 American Express Co. 85,539
1,222 Capital One Financial Corp. 84,354
-------------
169,893
-------------
CONTAINERS & PACKAGING -- 0.7%
2,780 WestRock Co. 84,317
-------------
DIVERSIFIED FINANCIAL SERVICES
-- 0.7%
402 Berkshire Hathaway, Inc.,
Class B (a) 87,652
-------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 2.0%
2,823 AT&T, Inc. 84,154
7,691 CenturyLink, Inc. 82,678
1,442 Verizon Communications, Inc. 85,467
-------------
252,299
-------------
ELECTRIC UTILITIES -- 3.9%
1,032 Duke Energy Corp. 82,911
2,238 Exelon Corp. 82,605
302 NextEra Energy, Inc. 84,309
2,415 NRG Energy, Inc. 83,100
1,087 Pinnacle West Capital Corp. 79,732
1,580 Southern (The) Co. 82,444
-------------
495,101
-------------
ELECTRICAL EQUIPMENT -- 0.7%
1,216 Emerson Electric Co. 84,476
-------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 1.3%
533 IPG Photonics Corp. (a) 86,202
298 Zebra Technologies Corp.,
Class A (a) 85,386
-------------
171,588
-------------
ENERGY EQUIPMENT & SERVICES
-- 0.6%
4,228 Schlumberger N.V. 80,374
-------------
ENTERTAINMENT -- 2.1%
1,644 Live Nation Entertainment,
Inc. (a) 93,379
176 Netflix, Inc. (a) 93,203
650 Walt Disney (The) Co. 85,715
-------------
272,297
-------------
Page 14 See Notes to Financial Statements
EQUITYCOMPASS TACTICAL RISK MANAGER ETF (TERM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
EQUITY REAL ESTATE INVESTMENT
TRUSTS -- 3.2%
2,303 Apartment Investment &
Management Co., Class A $ 82,977
1,020 Federal Realty Investment Trust 80,825
2,855 Iron Mountain, Inc. 85,907
1,964 Regency Centers Corp. 77,991
1,244 Simon Property Group, Inc. 84,405
-------------
412,105
-------------
FOOD & STAPLES RETAILING -- 2.0%
251 Costco Wholesale Corp. 87,263
2,043 Walgreens Boots Alliance, Inc. 77,675
639 Walmart, Inc. 88,725
-------------
253,663
-------------
FOOD PRODUCTS -- 2.7%
743 J.M. Smucker (The) Co. 89,294
2,383 Kraft Heinz (The) Co. 83,500
1,313 Lamb Weston Holdings, Inc. 82,522
1,510 Mondelez International, Inc.,
Class A 88,214
-------------
343,530
-------------
HEALTH CARE EQUIPMENT
& SUPPLIES -- 2.8%
847 Abbott Laboratories 92,721
277 ABIOMED, Inc. (a) 85,211
412 Danaher Corp. 85,065
840 Medtronic PLC 90,275
-------------
353,272
-------------
HEALTH CARE PROVIDERS & SERVICES
-- 1.9%
1,303 CVS Health Corp. 80,942
1,252 Henry Schein, Inc. (a) 83,183
262 UnitedHealth Group, Inc. 81,888
-------------
246,013
-------------
HOTELS, RESTAURANTS & LEISURE
-- 1.4%
409 McDonald's Corp. 87,330
1,079 Starbucks Corp. 91,143
-------------
178,473
-------------
HOUSEHOLD DURABLES -- 1.3%
942 Mohawk Industries, Inc. (a) 86,975
466 Whirlpool Corp. 82,817
-------------
169,792
-------------
HOUSEHOLD PRODUCTS -- 1.4%
1,098 Colgate-Palmolive Co. 87,027
629 Procter & Gamble (The) Co. 87,010
-------------
174,037
-------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS -- 0.7%
4,840 AES (The) Corp. 85,910
-------------
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES -- 2.0%
511 3M Co. $ 83,303
12,723 General Electric Co. 80,664
530 Honeywell International, Inc. 87,742
-------------
251,709
-------------
INSURANCE -- 3.8%
883 Allstate (The) Corp. 82,119
2,733 American International Group,
Inc. 79,640
677 Assurant, Inc. 82,296
992 Globe Life, Inc. 81,820
2,184 Lincoln National Corp. 78,733
2,151 MetLife, Inc. 82,728
-------------
487,336
-------------
INTERACTIVE MEDIA & SERVICES
-- 1.5%
56 Alphabet, Inc., Class A (a) 91,254
325 Facebook, Inc., Class A (a) 95,290
-------------
186,544
-------------
INTERNET & DIRECT MARKETING RETAIL
-- 1.4%
27 Amazon.com, Inc. (a) 93,176
48 Booking Holdings, Inc. (a) 91,701
-------------
184,877
-------------
IT SERVICES -- 6.7%
367 Accenture PLC, Class A 88,054
609 Broadridge Financial Solutions,
Inc. 83,677
652 Gartner, Inc. (a) 84,643
678 International Business Machines
Corp. 83,604
437 Jack Henry & Associates, Inc. 72,288
895 Leidos Holdings, Inc. 80,989
259 Mastercard, Inc., Class A 92,771
442 PayPal Holdings, Inc. (a) 90,230
431 Visa, Inc., Class A 91,368
3,582 Western Union (The) Co. 84,499
-------------
852,123
-------------
LIFE SCIENCES TOOLS & SERVICES
-- 0.7%
205 Thermo Fisher Scientific, Inc. 87,941
-------------
MACHINERY -- 2.0%
603 Caterpillar, Inc. 85,813
1,870 Pentair PLC 84,412
550 Snap-on, Inc. 81,548
-------------
251,773
-------------
MEDIA -- 3.3%
139 Charter Communications, Inc.,
Class A (a) 85,570
1,928 Comcast Corp., Class A 86,394
2,445 DISH Network Corp., Class A (a) 86,846
See Notes to Financial Statements Page 15
EQUITYCOMPASS TACTICAL RISK MANAGER ETF (TERM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MEDIA (CONTINUED)
4,486 Interpublic Group of Cos. (The),
Inc. $ 79,671
5,505 News Corp., Class A 83,236
-------------
421,717
-------------
MULTILINE RETAIL -- 0.7%
621 Target Corp. 93,901
-------------
MULTI-UTILITIES -- 0.6%
4,152 CenterPoint Energy, Inc. 83,331
-------------
OIL, GAS & CONSUMABLE FUELS
-- 3.1%
939 Chevron Corp. 78,810
2,087 ConocoPhillips 79,076
1,965 Exxon Mobil Corp. 78,482
5,946 Kinder Morgan, Inc. 82,174
5,893 Occidental Petroleum Corp. 75,077
-------------
393,619
-------------
PHARMACEUTICALS -- 4.6%
1,344 Bristol-Myers Squibb Co. 83,597
566 Eli Lilly and Co. 83,989
570 Johnson & Johnson 87,444
1,011 Merck & Co., Inc. 86,208
5,236 Mylan N.V. (a) 85,766
1,591 Perrigo Co. PLC 83,209
2,222 Pfizer, Inc. 83,969
-------------
594,182
-------------
ROAD & RAIL -- 0.7%
440 Union Pacific Corp. 84,674
-------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 4.1%
1,728 Intel Corp. 88,042
1,226 Maxim Integrated Products, Inc. 83,908
184 NVIDIA Corp. 98,436
642 Qorvo, Inc. (a) 82,349
744 QUALCOMM, Inc. 88,610
616 Texas Instruments, Inc. 87,564
-------------
528,909
-------------
SOFTWARE -- 2.8%
189 Adobe, Inc. (a) 97,031
407 Microsoft Corp. 91,791
1,565 Oracle Corp. 89,549
275 Paycom Software, Inc. (a) 82,351
-------------
360,722
-------------
SPECIALTY RETAIL -- 1.4%
302 Home Depot (The), Inc. 86,082
549 Lowe's Cos., Inc. 90,415
-------------
176,497
-------------
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 3.6%
736 Apple, Inc. 94,973
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS (CONTINUED)
8,770 Hewlett Packard Enterprise Co. $ 84,806
2,035 NetApp, Inc. 96,439
1,884 Seagate Technology PLC 90,413
2,362 Western Digital Corp. 90,748
-------------
457,379
-------------
TEXTILES, APPAREL & LUXURY GOODS
-- 1.3%
797 NIKE, Inc., Class B 89,176
1,196 Ralph Lauren Corp. 82,321
-------------
171,497
-------------
TOBACCO -- 1.4%
1,993 Altria Group, Inc. 87,174
1,088 Philip Morris International, Inc. 86,811
-------------
173,985
-------------
TOTAL COMMON STOCKS -- 98.7% 12,613,298
(Cost $12,441,935) -------------
MONEY MARKET FUNDS -- 1.2%
147,739 Morgan Stanley Institutional Liquidity
Funds - Treasury Portfolio -
Institutional Class - 0.01% (b) 147,739
(Cost $147,739) -------------
TOTAL INVESTMENTS -- 99.9% 12,761,037
(Cost $12,589,674) (c)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 18,596
-------------
NET ASSETS -- 100.0% $ 12,779,633
=============
(a) Non-income producing security.
(b) Rate shown reflects yield as of August 31, 2020.
(c) Aggregate cost for federal income tax purposes is $12,589,674. As of
August 31, 2020, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$1,205,394 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$1,034,031. The net unrealized appreciation was $171,363.
Page 16 See Notes to Financial Statements
EQUITYCOMPASS TACTICAL RISK MANAGER ETF (TERM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of August 31,
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* $ 12,613,298 $ -- $ --
Money Market Funds 147,739 -- --
---------------------------------------------
Total Investments $ 12,761,037 $ -- $ --
=============================================
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 17
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF ASSETS AND LIABILITIES
AUGUST 31, 2020
EQUITYCOMPASS
EQUITYCOMPASS TACTICAL
RISK MANAGER ETF RISK MANAGER ETF
(ERM) (TERM)
---------------- ----------------
ASSETS:
Investments, at value.................................................. $ 11,857,822 $ 12,761,037
Dividends receivable................................................... 24,091 25,882
---------------- ----------------
Total Assets........................................................ 11,881,913 12,786,919
---------------- ----------------
LIABILITIES:
Investment advisory fees payable....................................... 6,750 7,286
---------------- ----------------
Total Liabilities................................................... 6,750 7,286
---------------- ----------------
NET ASSETS............................................................. $ 11,875,163 $ 12,779,633
================ ================
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $ 17,639,625 $ 28,592,693
Par value.............................................................. 6,500 8,000
Accumulated distributable earnings (loss).............................. (5,770,962) (15,821,060)
---------------- ----------------
NET ASSETS............................................................. $ 11,875,163 $ 12,779,633
================ ================
NET ASSET VALUE, per share............................................. $ 18.27 $ 15.97
================ ================
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share).............................. 650,002 800,002
================ ================
Investments, at cost................................................... $ 11,597,216 $ 12,589,674
================ ================
Page 18 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 2020
EQUITYCOMPASS
EQUITYCOMPASS TACTICAL
RISK MANAGER ETF RISK MANAGER ETF
(ERM) (TERM)
---------------- ----------------
INVESTMENT INCOME:
Dividends.............................................................. $ 382,346 $ 519,741
---------------- ----------------
Total investment income............................................. 382,346 519,741
---------------- ----------------
EXPENSES:
Investment advisory fees............................................... 110,076 145,231
---------------- ----------------
Total expenses...................................................... 110,076 145,231
---------------- ----------------
NET INVESTMENT INCOME (LOSS)........................................... 272,270 374,510
---------------- ----------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments......................................................... (2,603,675) (2,583,046)
In-kind redemptions................................................. 633,898 (1,233,876)
---------------- ----------------
Net realized gain (loss)............................................... (1,969,777) (3,816,922)
---------------- ----------------
Net change in unrealized appreciation (depreciation) on investments.... 1,007,138 1,457,681
---------------- ----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ (962,639) (2,359,241)
---------------- ----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ (690,369) $ (1,984,731)
================ ================
See Notes to Financial Statements Page 19
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF CHANGES IN NET ASSETS
EQUITYCOMPASS EQUITYCOMPASS
RISK MANAGER ETF TACTICAL RISK MANAGER ETF
(ERM) (TERM)
-------------------------------- --------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
8/31/2020 8/31/2019 8/31/2020 8/31/2019
--------------- --------------- --------------- ---------------
OPERATIONS:
Net investment income (loss).............................. $ 272,270 $ 511,567 $ 374,510 $ 784,765
Net realized gain (loss).................................. (1,969,777) (1,899,156) (3,816,922) (10,612,945)
Net change in unrealized appreciation (depreciation)...... 1,007,138 (2,924,408) 1,457,681 (6,042,566)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from operations........................................ (690,369) (4,311,997) (1,984,731) (15,870,746)
--------------- --------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations..................................... (352,901) (605,746) (499,661) (832,241)
--------------- --------------- --------------- ---------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................. 1,596,480 9,146,356 -- 17,687,113
Cost of shares redeemed................................... (9,347,428) (11,547,316) (14,846,973) (32,708,789)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from shareholder transactions.......................... (7,750,948) (2,400,960) (14,846,973) (15,021,676)
--------------- --------------- --------------- ---------------
Total increase (decrease) in net assets................... (8,794,218) (7,318,703) (17,331,365) (31,724,663)
NET ASSETS:
Beginning of period....................................... 20,669,381 27,988,084 30,110,998 61,835,661
--------------- --------------- --------------- ---------------
End of period............................................. $ 11,875,163 $ 20,669,381 $ 12,779,633 $ 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............................................... 100,000 400,000 -- 850,000
Shares redeemed........................................... (500,000) (550,000) (950,000) (1,750,000)
--------------- --------------- --------------- ---------------
Shares outstanding, end of period......................... 650,002 1,050,002 800,002 1,750,002
=============== =============== =============== ===============
Page 20 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
EQUITYCOMPASS RISK MANAGER ETF (ERM)
YEAR ENDED AUGUST 31, PERIOD
---------------------------------- ENDED
2020 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).................................... 0.33 0.39 0.30 0.10
Net realized and unrealized gain (loss)......................... (1.36) (3.56) 2.80 0.39
-------- -------- -------- --------
Total from investment operations................................ (1.03) (3.17) 3.10 0.49
-------- -------- -------- --------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income........................................... (0.39) (0.46) (0.28) (0.04)
Net realized gain............................................... -- (0.00)(b) -- --
-------- -------- -------- --------
Total distributions............................................. (0.39) (0.46) (0.28) (0.04)
-------- -------- -------- --------
Net asset value, end of period.................................. $ 18.27 $ 19.69 $ 23.32 $ 20.50
======== ======== ======== ========
TOTAL RETURN (c)................................................ (5.36)% (13.68)% 15.23% 2.44%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)............................ $ 11,875 $ 20,669 $ 27,988 $ 10,250
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets (d)............... 0.65% 0.65% 0.65% 0.65% (e)
Ratio of net expenses to average net assets (d)................. 0.65% 0.59% 0.64% 0.65% (e)
Ratio of net investment income (loss) to average net assets..... 1.61% 1.89% 1.52% 1.81% (e)
Portfolio turnover rate (f)..................................... 81% 207% 121% 8%
EQUITYCOMPASS TACTICAL RISK MANAGER ETF (TERM)
YEAR ENDED AUGUST 31, PERIOD
---------------------------------- ENDED
2020 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).................................... 0.29 0.34 0.29 0.09
Net realized and unrealized gain (loss)......................... (1.19) (6.13) 2.81 0.40
-------- -------- -------- --------
Total from investment operations................................ (0.90) (5.79) 3.10 0.49
-------- -------- -------- --------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income........................................... (0.34) (0.33) (0.27) (0.04)
-------- -------- -------- --------
Net asset value, end of period.................................. $ 15.97 $ 17.21 $ 23.33 $ 20.50
======== ======== ======== ========
TOTAL RETURN (c)................................................ (5.36)% (24.98)% 15.24% 2.44%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)............................ $ 12,780 $ 30,111 $ 61,836 $ 22,551
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets (d)............... 0.65% 0.65% 0.65% 0.65% (e)
Ratio of net expenses to average net assets (d)................. 0.65% 0.59% 0.64% 0.65% (e)
Ratio of net investment income (loss) to average net assets..... 1.68% 1.65% 1.52% 1.85% (e)
Portfolio turnover rate (f)..................................... 74% 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.
See Notes to Financial Statements Page 21
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NOTES TO FINANCIAL STATEMENTS
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
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 twenty-five 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 22
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
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 August 31, 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, 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.
Page 23
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
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, 2020 was as follows:
Distributions Distributions Distributions
paid from paid from paid from
Ordinary Capital Return of
Income Gains Capital
------------- ------------- -------------
EquityCompass Risk Manager ETF $ 352,901 $ -- $ --
EquityCompass Tactical Risk Manager ETF 499,661 -- --
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, 2020, 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 $ 25,760 $ (6,043,156) $ 246,434
EquityCompass Tactical Risk Manager ETF 27,654 (16,020,077) 171,363
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,
2019 and 2020 remain open to federal and state audit. As of August 31, 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, 2020, 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 $ 6,043,156
EquityCompass Tactical Risk Manager ETF 16,020,077
Page 24
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
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, 2020, the Funds had no
net late year ordinary or capital losses.
In order to present paid-in capital and accumulated distributable earnings
(loss) (which consists of accumulated net investment income (loss), accumulated
net realized gain (loss) on investments and net unrealized appreciation
(depreciation) on investments) on the Statements of Assets and Liabilities that
more closely represent their tax character, certain adjustments have been made
to paid-in capital, accumulated net investment income (loss) and accumulated net
realized gain (loss) on investments. These adjustments are primarily due to the
difference between book and tax treatments of income and gains on various
investment securities held by the Funds and in-kind transactions. The results of
operations and net assets were not affected by these adjustments. For the fiscal
year ended August 31, 2020, the adjustments for each Fund were as follows:
Accumulated
Accumulated Net Realized
Net Investment Gain (Loss) Paid-in
Income (Loss) on Investments Capital
-------------- -------------- -------------
EquityCompass Risk Manager ETF $ -- $ (254,923) $ 254,923
EquityCompass Tactical Risk Manager ETF -- 1,238,917 (1,238,917)
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.
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.
Page 25
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
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 fiscal year ended August 31, 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 $ 12,003,915 $ 13,709,905
EquityCompass Tactical Risk Manager ETF 14,768,160 16,354,105
For the fiscal year ended August 31, 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 $ 1,585,866 $ 7,719,373
EquityCompass Tactical Risk Manager ETF -- 13,379,364
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.
Page 26
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
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, 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. OTHER MATTERS
By operation of law, ERM and TERM now operate as diversified open-end management
investment companies as defined in Section 5(b) of the 1940 Act.
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 were the following subsequent events:
On September 21, 2020, FT Cboe Vest U.S. Equity Buffer ETF - September and FT
Cboe Vest U.S. Equity Deep Buffer ETF - September, additional series of the
Trust, began trading under the symbols "FSEP" and "DSEP", respectively, on Cboe
BZX Exchange, Inc.
On October 19, 2020, FT Cboe Vest U.S. Equity Buffer ETF - October and FT Cboe
Vest U.S. Equity Deep Buffer ETF - October, additional series of the Trust,
began trading under the symbols "FOCT" and "DOCT", respectively, on Cboe BZX
Exchange, Inc.
Page 27
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED
FUND VIII:
OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS
We have audited the accompanying statements of assets and liabilities of
EquityCompass Risk Manager ETF and EquityCompass Tactical Risk Manager ETF (the
"Funds"), each a series of the First Trust Exchange-Traded Fund VIII, including
the portfolios of investments, as of August 31, 2020, the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, the financial highlights for
years ended August 31, 2020, 2019, and 2018, and the period from April 10, 2017
(commencement of operations) through August 31, 2017, and the related notes. In
our opinion, the financial statements and financial highlights present fairly,
in all material respects, the financial position of the Funds as of August 31,
2020, and the results of their operations for the year then ended, the changes
in their net assets for each of the two years in the period then ended, and the
financial highlights for the years ended August 31, 2020, 2019 and 2018, and for
the period from April 10, 2017 (commencement of operations) through August 31,
2017, in conformity with accounting principles generally accepted in the United
States of America.
BASIS FOR OPINION
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on the Funds'
financial statements and financial highlights based on our audits. We are a
public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to
the Funds in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement, whether due to error or fraud. The Funds are not
required to have, nor were we engaged to perform, an audit of their internal
control over financial reporting. As part of our audits we are required to
obtain an understanding of internal control over financial reporting but not for
the purpose of expressing an opinion on the effectiveness of the Funds' internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material
misstatement of the financial statements and financial highlights, whether due
to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements and financial highlights. Our audits
also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of August 31, 2020, by correspondence with
the custodian and brokers. We believe that our audits provide a reasonable basis
for our opinion.
/s/ Deloitte & Touche LLP
Chicago, Illinois
October 22, 2020
We have served as the auditor of one or more First Trust investment companies
since 2001.
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 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.
FEDERAL TAX INFORMATION
For the taxable year ended August 31, 2020, the following percentages of income
dividend paid by the Funds qualify for the dividends received deduction
available to corporations:
Dividends Received Deduction
----------------------------
EquityCompass Risk Manager ETF 99.03%
EquityCompass Tactical Risk Manager ETF 99.26%
For the taxable year ended August 31, 2020, the following percentages of income
dividend paid by the Funds are hereby designated as qualified dividend income:
Qualified Dividend Income
----------------------------
EquityCompass Risk Manager ETF 100.00%
EquityCompass Tactical Risk Manager ETF 100.00%
A portion of each of the Funds' 2020 ordinary dividends (including short-term
capital gains) paid to its shareholders during the fiscal year ended August 31,
2020, may be eligible for the Qualified Business Income Deduction (QBI) under
Code Section 199A for the aggregate dividends each Fund received from the
underlying Real Estate Investment Trusts (REITs) these Funds invest in.
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE
APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS
RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW
APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT
IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY
FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE,
RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT
WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO
REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
CONCENTRATION RISK. To the extent that a fund is able to invest a 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,
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
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.
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
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
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 COVID-19 pandemic may last
for an extended period of time and will continue to impact the economy for the
foreseeable future.
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 AND SUB-ADVISORY AGREEMENTS
BOARD CONSIDERATIONS REGARDING CONTINUATION OF INVESTMENT MANAGEMENT AND
SUB-ADVISORY AGREEMENTS
The Board of Trustees of First Trust Exchange-Traded Fund VIII (the "Trust"),
including the Independent Trustees, unanimously approved the continuation of 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 EquityCompass Investment
Management, LLC (the "Sub-Advisor") on behalf of the following two series of the
Trust (each a "Fund" and collectively, the "Funds"):
EquityCompass Equity Risk Manager ETF (ERM)
EquityCompass Tactical Equity Risk Manager ETF (TERM)
The Board approved the continuation of the Agreements for each Fund for a
one-year period ending June 30, 2021 at a meeting held on June 8, 2020. The
Board determined for each Fund that the continuation of the Agreements is in the
best interests of the Fund in light of the nature, extent and quality of the
services provided and such other matters as the Board considered to be relevant
in the exercise of its 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. At meetings held on May 11, 2020 and June 8, 2020, the
Board, including the Independent Trustees, reviewed materials provided by the
Advisor and the Sub-Advisor responding to requests for information from counsel
to the Independent Trustees, submitted on behalf of the Independent Trustees,
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AUGUST 31, 2020 (UNAUDITED)
that, among other things, outlined: the services provided by the Advisor and the
Sub-Advisor to each Fund (including the relevant personnel responsible for these
services and their experience); the 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 sub-advisory fee rate
as compared to fees charged to other clients of the Sub-Advisor; the expense
ratio of each Fund as compared to expense ratios of the funds in the Fund's
Expense Group and Expense Universe; performance information for each Fund,
including comparisons of each Fund's performance to that of one or more relevant
benchmark indexes and to that of a performance group of funds and a broad
performance universe of funds (the "Performance Universe"), each assembled by
Broadridge; the nature of expenses incurred in providing services to each Fund
and the potential for the Advisor and the Sub-Advisor to realize economies of
scale, if any; profitability and other financial data for the Advisor; financial
data for the Sub-Advisor; any fall-out benefits to the Advisor and its
affiliate, First Trust Portfolios L.P. ("FTP"), and the Sub-Advisor; and
information on the Advisor's and the Sub-Advisor's compliance programs. The
Board reviewed initial materials with the Advisor at the meeting held on May 11,
2020, prior to which the Independent Trustees and their counsel met separately
to discuss the information provided by the Advisor and the Sub-Advisor.
Following the May meeting, counsel to the Independent Trustees, on behalf of the
Independent Trustees, requested certain clarifications and supplements to the
materials provided, and the information provided in response to those requests
was considered at an executive session of the Independent Trustees and their
counsel held prior to the June 8, 2020 meeting, as well as at the meeting held
that day. The Board considered supplemental information provided by the Advisor
and the Sub-Advisor on the operations of the Advisor and the Sub-Advisor,
respectively, and the performance of the Funds since the onset of the COVID-19
pandemic. 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 continue to be reasonable business arrangements from each
Fund's perspective. The Board determined that, given the totality of the
information provided with respect to the Agreements, the Board had received
sufficient information to renew the Agreements. The Board considered that
shareholders chose to invest or remain invested in a Fund knowing that the
Advisor and the Sub-Advisor manage the Fund and knowing the Fund's unitary fee.
In reviewing the Agreements for each Fund, the Board considered the nature,
extent and quality of the services provided by the Advisor and the Sub-Advisor
under the Agreements. With respect to the Advisory Agreement, the Board
considered that the Advisor is responsible for the overall management and
administration of the Trust and each Fund and reviewed all of the services
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 noted that the Advisor oversees the Sub-Advisor's
day-to-day management of each Fund's investments, including portfolio risk
monitoring and performance review. The Board considered that the Sub-Advisor is
responsible for the selection and ongoing monitoring of the securities in the
Funds' investment portfolios, but that the Advisor executes each Fund's
portfolio trades. In reviewing the services provided, the Board noted the
compliance program that had been developed by the Advisor and considered that it
includes a robust program for monitoring the Advisor's, 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 also considered a
report from the Advisor with respect to its risk management functions related to
the operation of the Funds. Finally, as part of the Board's consideration of the
Advisor's services, the Advisor, in its written materials and at the May 11,
2020 meeting, described to the Board the scope of its ongoing investment in
additional infrastructure and personnel to maintain and improve the quality of
services provided to the Funds and the other funds in the First Trust Fund
Complex. With respect to the Sub-Advisory Agreement, the Board noted that each
Fund is an actively-managed ETF and the Sub-Advisor actively manages the Fund's
investments. In addition to the written materials provided by the Sub-Advisor,
at the May 11, 2020 meeting, the Board also received a presentation from
representatives of the Sub-Advisor discussing the services that the Sub-Advisor
provides to each Fund, including the Sub-Advisor's day-to-day management of the
Funds' investments. In considering the Sub-Advisor's management of the Funds,
the Board noted the background and experience of the Sub-Advisor's portfolio
management team. In light of the information presented and the considerations
made, the Board concluded that the nature, extent and quality of the services
provided to the Trust and each Fund by the Advisor and the Sub-Advisor under the
Agreements have been and are expected to remain satisfactory and that the
Sub-Advisor, under the oversight of the Advisor, has managed each Fund
consistent with its investment objective, policies and restrictions.
The Board considered the unitary fee rate payable by each Fund under the
Advisory Agreement for the services provided. The Board noted that the
sub-advisory fee for each Fund is paid by the Advisor from the Fund's unitary
fee. The Board considered that as part of the unitary fee the Advisor is
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, acquired fund fees and expenses, brokerage
commissions and other expenses connected with the execution of portfolio
transactions, distribution and service fees pursuant to a Rule 12b 1 plan, if
any, and extraordinary expenses, if any. The Board noted that the Advisor had
previously agreed to waive its unitary fee to the extent of acquired fund fees
and expenses of shares of investment companies advised by the Advisor that are
held by the Fund. 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 ETFs) and non-fund clients, as
applicable. Because each Fund pays a unitary fee, the Board determined that
expense ratios were the most relevant comparative data point. Based on the
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AUGUST 31, 2020 (UNAUDITED)
information provided, the Board noted that the unitary fee rate for each Fund
was above the median total (net) expense ratio of the peer funds in its
respective Expense Group. With respect to the Expense Groups, the Board, at the
May 11, 2020 meeting, discussed with Broadridge its methodology for assembling
peer groups and discussed with the Advisor limitations in creating peer groups
for actively-managed ETFs and different business models that may affect the
pricing of services among ETF sponsors. The Board also noted that not all peer
funds employ an advisor/sub-advisor management structure. The Board took these
limitations and differences into account in considering the peer data. With
respect to fees charged to other non-ETF clients, the Board considered
differences between the Funds and other non-ETF clients that limited their
comparability. In considering the unitary fee rates overall, the Board also
considered the Advisor's statement that it seeks to meet investor needs through
innovative and value-added investment solutions and the Advisor's demonstrated
long-term commitment to each Fund and the other funds in the First Trust Fund
Complex.
The Board considered performance information for each Fund. The Board noted the
process it has established for monitoring each Fund's performance and portfolio
risk on an ongoing basis, which includes quarterly performance reporting from
the Advisor and the Sub-Advisor for the Funds. The Board determined that this
process continues to be effective for reviewing each Fund's performance. The
Board received and reviewed information comparing each Fund's performance for
the one-year period ended December 31, 2019 to the performance of the funds in
its Performance Universe and a benchmark index. Based on the information
provided, the Board noted that each Fund underperformed its Performance Universe
median and benchmark index for the one-year period ended December 31, 2019. The
Board noted the Sub-Advisor's discussion of the Funds' performance at the May
11, 2020 meeting.
On the basis of all the information provided on the unitary fee and performance
of each Fund and the ongoing oversight by the Board, the Board concluded that
the unitary fee for each Fund (out of which the Sub-Advisor is compensated)
continues to be reasonable and appropriate in light of the nature, extent and
quality of the services provided by the Advisor and the Sub-Advisor to each Fund
under the Agreements.
The Board considered information and discussed with the Advisor whether there
were any economies of scale in connection with providing advisory services to
the Funds and noted the Advisor's statement that it believes its expenses will
likely increase over the next twelve months as the Advisor continues to hire
personnel and build infrastructure, including technology, to improve the
services to the Funds. 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 considered the revenues and allocated costs (including the
allocation methodology) of the Advisor in serving as investment advisor to each
Fund for the twelve months ended December 31, 2019 and the estimated
profitability level for each Fund calculated by the Advisor based on such data,
as well as complex-wide and product-line profitability data, for the same
period. The Board noted the inherent limitations in the profitability analysis
and concluded that, based on the information provided, the Advisor's
profitability level for each Fund was not unreasonable. 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, and noted that the Advisor does 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.
The Board considered the Sub-Advisor's statements to the effect that it does not
believe there are any economies of scale to be achieved in connection with
providing sub-advisory services to the Funds and that the Sub-Advisor does not
expect that its expenses relating to providing services to the Funds to change
in the next twelve months. The Board did not review the profitability of the
Sub-Advisor with respect to each Fund. The Board noted that the Advisor pays the
Sub-Advisor for each Fund from its unitary fee and its understanding that each
Fund's sub-advisory fee rate was the product of an arm's length negotiation. The
Board concluded that the profitability analysis for the Advisor was more
relevant. The Board considered the potential fall-out benefits to the
Sub-Advisor from being associated with the Advisor and the Funds, and noted the
Sub-Advisor's statement to the effect that it does not believe there will be any
fall-out benefits to the Sub-Advisor from its relationship with the Advisor and
the Funds. The Board concluded that the character and amount of potential
fall-out benefits to 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 continue to be fair and reasonable and that the continuation
of the Agreements is in the best interests of each Fund. No single factor was
determinative in the Board's analysis.
LIQUIDITY RISK MANAGEMENT PROGRAM
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as
amended (the "1940 Act"), the Funds and each other fund in the First Trust Fund
Complex, other than the closed-end funds, have adopted and implemented a
liquidity risk management program (the "Program") reasonably designed to assess
and manage the funds' liquidity risk, i.e., the risk that a fund could not meet
requests to redeem shares issued by the fund without significant dilution of
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remaining investors' interests in the fund. The Board of Trustees of the First
Trust Funds has appointed First Trust Advisors, L.P. (the "Advisor") as the
person designated to administer the Program, and in this capacity the Advisor
performs its duties primarily through the activities and efforts of the First
Trust Liquidity Committee (the "Liquidity Committee").
Pursuant to the Program, the Liquidity Committee classifies the liquidity of
each fund's portfolio investments into one of the four liquidity categories
specified by Rule 22e-4: highly liquid investments, moderately liquid
investments, less liquid investments and illiquid investments. The Liquidity
Committee determines certain of the inputs for this classification process,
including reasonably anticipated trade sizes and significant investor dilution
thresholds. The Liquidity Committee also determines and periodically reviews a
highly liquid investment minimum for certain funds, monitors the funds' holdings
of assets classified as illiquid investments to seek to ensure they do not
exceed 15% of a fund's net assets and establishes policies and procedures
regarding redemptions in kind.
At the May 11, 2020 meeting of the Board of Trustees, as required by Rule 22e-4
and the Program, the Advisor provided the Board with a written report prepared
by the Advisor that addressed the operation of the Program during the period
from June 1, 2019 (the initial compliance date for certain requirements of Rule
22e-4) through the Liquidity Committee's annual meeting held on March 20, 2020
and assessed the Program's adequacy and effectiveness of implementation during
this period, including the operation of the highly liquid investment minimum for
each fund that is required under the Program to have one, and any material
changes to the Program. Note that because the Funds primarily hold assets that
are highly liquid investments, the Funds have not adopted a highly liquid
investment minimum.
As stated in the written report, during the review period, no fund breached the
15% limitation on illiquid investments, no fund with a highly liquid investment
minimum breached that minimum and no fund filed a Form N-LIQUID. The Advisor
concluded that each fund's investment strategy is appropriate for an open-end
fund; that the Program operated effectively in all material respects during the
review period; and that the Program is reasonably designed to assess and manage
the liquidity risk of each fund and to maintain compliance with Rule 22e-4.
Page 34
--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
The following tables identify the Trustees and Officers of the Trust. Unless
otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite
400, Wheaton, IL 60187.
The Trust's statement of additional information includes additional information
about the Trustees and is available, without charge, upon request, by calling
(800) 988-5891.
NUMBER OF OTHER
PORTFOLIOS IN TRUSTEESHIPS OR
TERM OF OFFICE THE FIRST TRUST DIRECTORSHIPS
NAME, AND YEAR FIRST FUND COMPLEX HELD BY TRUSTEE
YEAR OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST
POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
------------------------------------------------------------------------------------------------------------------------------------
Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 185 None
(1951) Limited Partner, Gundersen Real Estate
o Since Inception Limited Partnership (June 1992 to
December 2016); Member, Sportsmed LLC
(April 2007 to November 2015)
Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 185 Director of ADM
(1957) (Futures Commission Merchant) Investor Services,
o Since Inception Inc., ADM
Investor Services
International,
Futures Industry
Association, and
National Futures
Association
Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 185 Director of Trust
(1956) and Management Consulting) Company of
o Since Inception Illinois
Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 185 None
(1954) Managing Director and Chief Operating
o Since Inception Officer (January 2015 to August 2018),
Pelita Harapan Educational Foundation
(Educational Product and Services);
President and Chief Executive Officer
(June 2012 to September 2014), Servant
Interactive LLC (Educational Products
and Services); President and Chief
Executive Officer (June 2012 to
September 2014), Dew Learning LLC
(Educational Products and Services)
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 185 None
Chairman of the Board Advisors L.P. and First Trust
(1955) o Since Inception Portfolios L.P.; Chairman of the
Board of Directors, BondWave LLC
(Software Development Company)
and Stonebridge Advisors LLC
(Investment Advisor)
-----------------------------
(1) Mr. Bowen is deemed an "interested person" of the Trust due to his
position as Chief Executive Officer of First Trust Advisors L.P.,
investment advisor of the Trust.
Page 35
--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
POSITION AND TERM OF OFFICE
NAME OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS
AND YEAR OF BIRTH WITH TRUST SERVICE DURING PAST 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS(2)
------------------------------------------------------------------------------------------------------------------------------------
James M. Dykas President and Chief Executive o Indefinite Term Managing Director and Chief Financial Officer
(1966) Officer (January 2016 to Present), Controller (January 2011
o Since Inception to January 2016), Senior Vice President (April 2007
to January 2016), First Trust Advisors L.P. and First
Trust Portfolios L.P.; Chief Financial Officer
(January 2016 to Present), BondWave LLC
(Software Development Company) and Stonebridge
Advisors LLC (Investment Advisor)
Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President (July 2016 to Present), Vice
(1972) Officer and Chief President (April 2012 to July 2016), First Trust
Accounting Officer o Since Inception Advisors L.P. and First Trust Portfolios L.P.
W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and
(1960) Legal Officer First Trust Portfolios L.P.; Secretary and General
o Since Inception Counsel, BondWave LLC; Secretary, Stonebridge
Advisors LLC
Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and
(1970) First Trust Portfolios L.P.
o Since Inception
Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P.
(1966) and Assistant Secretary and First Trust Portfolios L.P.
o Since Inception
Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
(1966) and First Trust Portfolios L.P.
o Since Inception
Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
(1970) and First Trust Portfolios L.P.
o Since Inception
-----------------------------
(2) The term "officer" means the president, vice president, secretary,
treasurer, controller or any other officer who performs a policy making
function.
Page 36
--------------------------------------------------------------------------------
PRIVACY POLICY
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
PRIVACY POLICY
First Trust values our relationship with you and considers your privacy an
important priority in maintaining that relationship. We are committed to
protecting the security and confidentiality of your personal information.
SOURCES OF INFORMATION
We collect nonpublic personal information about you from the following sources:
o Information we receive from you and your broker-dealer, investment
advisor or financial representative through interviews,
applications, agreements or other forms;
o Information about your transactions with us, our affiliates or
others;
o Information we receive from your inquiries by mail, e-mail or
telephone; and
o Information we collect on our website through the use of "cookies".
For example, we may identify the pages on our website that your
browser requests or visits.
INFORMATION COLLECTED
The type of data we collect may include your name, address, social security
number, age, financial status, assets, income, tax information, retirement and
estate plan information, transaction history, account balance, payment history,
investment objectives, marital status, family relationships and other personal
information.
DISCLOSURE OF INFORMATION
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. In addition to using
this information to verify your identity (as required under law), the permitted
uses may also include the disclosure of such information to unaffiliated
companies for the following reasons:
o In order to provide you with products and services and to effect
transactions that you request or authorize, we may disclose your
personal information as described above to unaffiliated financial
service providers and other companies that perform administrative or
other services on our behalf, such as transfer agents, custodians
and trustees, or that assist us in the distribution of investor
materials such as trustees, banks, financial representatives, proxy
services, solicitors and printers.
o We may release information we have about you if you direct us to do
so, if we are compelled by law to do so, or in other legally limited
circumstances (for example to protect your account from fraud).
In addition, in order to alert you to our other financial products and services,
we may share your personal information within First Trust.
USE OF WEBSITE ANALYTICS
We currently use third party analytics tools, Google Analytics and AddThis, to
gather information for purposes of improving First Trust's website and marketing
our products and services to you. These tools employ cookies, which are small
pieces of text stored in a file by your web browser and sent to websites that
you visit, to collect information, track website usage and viewing trends such
as the number of hits, pages visited, videos and PDFs viewed and the length of
user sessions in order to evaluate website performance and enhance navigation of
the website. We may also collect other anonymous information, which is generally
limited to technical and web navigation information such as the IP address of
your device, internet browser type and operating system for purposes of
analyzing the data to make First Trust's website better and more useful to our
users. The information collected does not include any personal identifiable
information such as your name, address, phone number or email address unless you
provide that information through the website for us to contact you in order to
answer your questions or respond to your requests. To find out how to opt-out of
these services click on: Google Analytics and AddThis.
CONFIDENTIALITY AND SECURITY
With regard to our internal security procedures, First Trust restricts access to
your nonpublic personal information to those First Trust employees who need to
know that information to provide products or services to you. We maintain
physical, electronic and procedural safeguards to protect your nonpublic
personal information.
POLICY UPDATES AND INQUIRIES
As required by federal law, we will notify you of our privacy policy annually.
We reserve the right to modify this policy at any time, however, if we do change
it, we will tell you promptly. For questions about our policy, or for additional
copies of this notice, please go to www.ftportfolios.com, or contact us at
1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust
Advisors).
March 2019
Page 37
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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)
----------------------------
Annual Report
For the Year Ended
August 31, 2020
----------------------------
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
ANNUAL REPORT
AUGUST 31, 2020
Shareholder Letter........................................................... 1
Fund Performance Overview.................................................... 2
Portfolio Commentary......................................................... 4
Understanding Your Fund Expenses............................................. 6
Portfolio of Investments..................................................... 7
Statement of Assets and Liabilities.......................................... 8
Statement of Operations...................................................... 9
Statement of Changes in Net Assets........................................... 10
Financial Highlights......................................................... 11
Notes to Financial Statements................................................ 12
Report of Independent Registered Public Accounting Firm...................... 18
Additional Information....................................................... 19
Board of Trustees and Officers............................................... 24
Privacy Policy............................................................... 26
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.
By reading the portfolio commentary from the portfolio management team of the
Fund, you may obtain an understanding of how the market environment affected the
Fund's performance. The statistical information that follows may help you
understand the Fund's performance compared to that of a relevant market
benchmark.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor are just that: informed opinions. They should not be considered to be
promises or advice. The opinions, like the statistics, cover the period through
the date on the cover of this report. The material risks of investing in the
Fund are spelled out in the prospectus, the statement of additional information,
and other Fund regulatory filings.
--------------------------------------------------------------------------------
SHAREHOLDER LETTER
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
AUGUST 31, 2020
Dear Shareholders:
First Trust is pleased to provide you with the annual report for the First Trust
Low Duration Strategic Focus ETF ("LDSF"), which contains detailed information
about the Fund for the twelve months ended August 31, 2020.
In case you missed the latest big news from the Federal Reserve ("Fed") in
September, it stated that it expects to hold short-term interest rates near zero
until two things happen: (1) the U.S. unemployment rate is back to normal, or
around the 4.0% level; and (2) the inflation rate is at, or above, 2.0%. As of
August 31, 2020, the U.S. unemployment rate stood at 8.4%, according to data
from the Bureau of Labor Statistics. The Fed's top benchmark for inflation (U.S.
Personal Consumption Expenditures Chain Type Price Index) stood at 1.0% on July
31, 2020. Brian Wesbury, Chief Economist at First Trust Advisors L.P., notes
that the Fed does not expect to achieve both goals until 2024.
What does this mean for investors? We believe that one of the Fed's motivations
in promoting a multi-year commitment to a near zero interest rate monetary
policy is to incentivize risk-taking. By holding interest rates artificially low
for an extended period, the Fed is essentially disincentivizing saving. The Fed
wants individuals to invest their capital in risk assets and is offering
valuable guidance on its monetary policy to instill confidence in the markets,
in my opinion.
In his testimony to the House Financial Services Committee on September 22,
2020, Fed Chairman Jerome Powell stated that the U.S. economy has a long road to
a full recovery and needs more financial support. U.S. Treasury Secretary Steven
Mnuchin also testified and said that he and the White House will continue to
push Congress to pass another fiscal relief package to help support American
workers. In pursuing additional fiscal support, the U.S. government is
ultimately looking to buy time until a coronavirus ("COVID-19") vaccine arrives.
With the U.S. Presidential election less than two months away, getting a
trillion dollar or so stimulus package through Congress will be no easy task, in
my opinion. Let us hope they surprise us.
Thanks to the monetary and fiscal support already brought to bear to fight
COVID-19, the securities markets appear to be in relatively good shape, in my
opinion. On September 22, 2020, the S&P 500(R) Index closed a little more than
two percentage points off its pre-COVID-19 high set on February 19, 2020,
according to data from Bloomberg. I find that to be an amazing feat in the
current climate. The combination of low interest rates and low inflation
continues to reward bond investors. Looking ahead, even bond investors are going
to need to assume some additional credit risk to achieve higher returns. Yields
on Treasury notes and bonds are poised at this time to stay low and fairly range
bound. The Fed's pledge to keep its benchmark rate low for up to three years
could lend some stability and reassurance to the debt markets, in my opinion.
We believe the U.S. economy is on its way back. While we have too many workers
still unemployed, I do find it encouraging that U.S. consumers have done such a
terrific job of getting their fiscal houses in order. Consumer spending
typically accounts for roughly 70% of U.S. gross domestic product output each
year. So goes the consumer, so goes the economy. The S&P/Experian Consumer
Credit Default Composite Index stood at 0.67% in August 2020, down from 0.92% in
August 2019 and well below its 1.79% average since its inception in July 2004,
according to S&P Dow Jones Indices. As we previously noted, the near-term
outlook rests on getting one or more FDA-approved vaccines or therapeutics. The
year-end target that has been touted by some, including President Donald J.
Trump, would coincide with the end to the government's moratorium on home
evictions and foreclosures, which is due to expire on December 31, 2020. Keep in
mind that the moratorium has already been extended three times. Things could get
interesting over the next few months. Stay tuned and stay the course.
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
1 Year Ended Inception (1/3/19) Inception (1/3/19)
8/31/20 to 8/31/20 to 8/31/20
FUND PERFORMANCE
NAV 2.09% 4.00% 6.71%
Market Price 1.99% 3.97% 6.66%
INDEX PERFORMANCE
Blended Benchmark(1) 4.68% 6.26% 10.59%
Bloomberg Barclays 1-5 Year Government/Credit Index 4.73% 5.49% 9.26%
---------------------------------------------------------------------------------------------------------------------
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 Blended 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 debt publicly issued in the U.S. domestic
market but caps issuer exposure at 2%. The indexes do not charge
management fees or brokerage expenses, and no such fees or expenses were
deducted from the performance shown. Indexes are unmanaged and an investor
cannot invest directly in an index. The Blended Index returns are
calculated by using the monthly return of the two indices during each
period shown above. At the beginning of each month the two indices are
rebalanced to a 80-20 ratio to account for divergence from that ratio that
occurred during the course of each month. The monthly returns are then
compounded for each period shown above, giving the performance for the
Blended Index for each period shown above.
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 - AUGUST 31, 2020
First Trust Low Duration Blended Bloomberg Barclays 1-5 Year
Strategic Focus ETF Benchmark Government/Credit Index
1/3/19 $10,000 $10,000 $10,000
2/28/19 10,210 10,151 10,037
8/31/19 10,453 10,564 10,433
2/29/20 10,648 10,789 10,675
8/31/20 10,671 11,059 10,926
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 AUGUST 31, 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 August 31, 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 - 8/31/20 183 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%
1/4/19 - 8/31/19 11 0 0 0
9/1/19 - 8/31/20 68 0 0 0
Page 3
--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
ANNUAL REPORT
AUGUST 31, 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 the Fund's
investment portfolio, managing the Fund's business affairs and providing certain
administrative 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
COMMENTARY
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.
MARKET RECAP
Through the fiscal year ended August 31, 2020, short duration investment grade
government and corporate bonds as measured by the Bloomberg Barclays 1-5 Year
Government/Credit Index ("the Benchmark") returned 4.73%.
The fourth quarter of 2019 brought some clarity on two major areas of
geopolitical uncertainty that were overhanging the markets. The U.S. and China
announced an agreement for a Phase One trade deal and Boris Johnson won the
United Kingdom's ("U.K.") general election pledging to definitively take the
U.K. out of the European Union. U.S. treasury yields ended higher with the
10-Year Treasury at 1.92% and the Federal Reserve (the "Fed") was expected to
remain on hold for an extended period with the target range for the federal
funds rate at 1.5% - 1.75%.
Everything changed in March 2020 when markets and economies were overwhelmed by
fears over the coronavirus ("COVID-19") pandemic, bringing an end to the longest
U.S. expansion on record. Governments around the world concurrently shut down
large segments of their economies with billions of people directed to "shelter
in place". The Fed intervened massively to prevent a liquidity crisis from
turning into a credit crisis. During unscheduled meetings on March 3, 2020 and
March 15, 2020, the Fed reduced the target range for the federal funds rate by
0.50% and 1.00% respectively, bringing the target range to 0.00 - 0.25%.
Additionally, policymakers committed trillions of U.S. dollars to support the
repo market, pledged an unlimited amount of quantitative easing and launched
many new credit facilities to backstop bank balance sheets and support money
market funds while lawmakers passed the $2.3 trillion CARES Act stimulus
package. Throughout March, risk assets sold off sharply and investors flocked to
the safety of Treasury and government backed debt. This was followed by a sharp
rebound on optimism that aggressive fiscal and monetary stimulus would result in
a rapid recovery along with a re-opening of the U.S. economy and the economic
backdrop remained largely supportive of financial markets through August 2020.
PERFORMANCE ANALYSIS
For the fiscal year ended August 31, 2020, the net asset value ("NAV") and
market price total return for the Fund were 2.09% and 1.99%, respectively. The
Fund's Benchmark provided a return of 4.73% over the same period therefore, the
Fund's NAV total return lagged the Benchmark by -2.64%.
The primary reason for the underperformance was related to the Fund's exposure
to corporate credit risk during March 2020, while the Benchmark holds roughly
two-thirds in U.S. Treasury or Agency securities which held up well as a flight
to safety during the melt down. In fact, the Fund's Benchmark generated a
positive return in March 2020 while the Fund's NAV total return was -4.16%.
Senior loans, high yield bonds and emerging market debt posted double digit
losses in March on increasing default risk and as emerging market currencies
weakened versus the dollar. Mortgage-backed securities, short-term investment
grade bonds and commercial paper held in the First Trust Low Duration
Opportunities ETF ("LMBS"), the First Trust Enhanced Short Maturity ETF ("FTSM")
and the First Trust TCW Opportunistic Fixed Income ETF ("FIXD") were not immune
as liquidity concerns and spread widening did not spare these markets.
Page 4
--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
ANNUAL REPORT
AUGUST 31, 2020 (UNAUDITED)
The Fund generated outperformance in April through July 2020 but not enough to
make up for the March dislocation. In April, after the Fed pegged short term
rates at zero, the Fund reallocated part of its allocation to FTSM into funds
with more exposure to credit spread opportunities, including investment grade
and high yield bonds. Generally, this aided performance relative to short term
securities apart from June 2020 where the First Trust Tactical High Yield ETF
trailed. The Fund's allocation to FIXD, a core opportunities fund, also provided
meaningful contribution to returns from April through July 2020.
MARKET AND FUND OUTLOOK
During the July and September 2020 meetings, the Fed maintained the target range
for the federal funds rate at 0.00 - 0.25%. At their September meeting, the Fed
introduced its post-pandemic operating procedures whereby the decision framework
for raising short-term rates will be closely linked to the job market recovery,
inflation relative to a 2% target, and whether inflation is on track, to
modestly exceed the target for some time. All seventeen participants continue to
expect no change in the federal funds rate through 2021; while only one expects
an increase in 2022; and still only four expect an increase in 2023. We believe
the front and intermediate parts of the yield curve will remain anchored by the
Fed and long-term rates will be relatively range bound. In the near term, we do
not expect the Fed and Congressional stimulus to be inflationary, however, given
the sharp increases we are observing in the money supply and the weakness in the
U.S. Dollar, we believe the risk to intermediate and long-term inflation is
increasing. We are less constructive on ultra-short securities given the
expectation for short term rates to be anchored for an extended period while we
believe that an improving economic backdrop should support investment grade and
high yield bonds relative to U.S. Treasuries. In our view, mortgage valuations
also appear attractive relative to history while the sector has the support of
the Fed.
Page 5
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
UNDERSTANDING YOUR FUND EXPENSES
AUGUST 31, 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 (12b-1) fees, if any, and
other Fund expenses. This Example is intended to help you understand your
ongoing costs of investing in the Fund and to compare these costs with the
ongoing costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended August 31, 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 six-month
period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as brokerage
commissions. Therefore, the second line in the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
-------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
MARCH 1, 2020 AUGUST 31, 2020 PERIOD (a) PERIOD (a) (b)
-------------------------------------------------------------------------------------------------------------------
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
Actual $1,000.00 $1,002.20 0.20% $1.01
Hypothetical (5% return before expenses) $1,000.00 $1,024.13 0.20% $1.02
(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 (March 1,
2020 through August 31, 2020), multiplied by 184/366 (to reflect the
six-month period).
Page 6
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
EXCHANGE-TRADED FUNDS -- 100.0%
CAPITAL MARKETS -- 100.0%
94,444 First Trust Emerging Markets
Local Currency Bond ETF (a) $ 3,325,789
216,134 First Trust Enhanced Short
Maturity ETF (a) 12,981,008
753,987 First Trust Low Duration
Opportunities ETF (a) 38,996,208
144,366 First Trust Senior Loan Fund (a) 6,685,589
141,882 First Trust Tactical High Yield
ETF (a) 6,753,583
651,576 First Trust TCW Opportunistic
Fixed Income ETF (a) 35,966,995
497,732 iShares 0-5 Year Investment
Grade Corporate Bond ETF 26,006,497
-------------
TOTAL INVESTMENTS -- 100.0% 130,715,669
(Cost $128,811,729) (b)
NET OTHER ASSETS AND
LIABILITIES -- (0.0)% (14,833)
-------------
NET ASSETS -- 100.0% $ 130,700,836
=============
(a) Investment in an affiliated fund.
(b) Aggregate cost for federal income tax purposes is $128,909,619. As of
August 31, 2020, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$2,214,585 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$408,535. The net unrealized appreciation was $1,806,050.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of August 31,
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* $130,715,669 $ -- $ --
===========================================
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 7
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 2020
ASSETS:
Investments, at value - Affiliated........................................ $ 104,709,172
Investments, at value - Unaffiliated...................................... 26,006,497
---------------
Total investments, at value............................................... 130,715,669
Dividends receivable...................................................... 8,308
---------------
Total Assets........................................................... 130,723,977
---------------
LIABILITIES:
Due to custodian.......................................................... 1,109
Investment advisory fees payable.......................................... 22,032
---------------
Total Liabilities...................................................... 23,141
---------------
NET ASSETS................................................................ $ 130,700,836
===============
NET ASSETS CONSIST OF:
Paid-in capital........................................................... $ 131,357,883
Par value................................................................. 64,000
Accumulated distributable earnings (loss)................................. (721,047)
---------------
NET ASSETS................................................................ $ 130,700,836
===============
NET ASSET VALUE, per share................................................ $ 20.42
===============
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share)................................. 6,400,002
===============
Investments, at cost - Affiliated......................................... $ 103,184,361
===============
Investments, at cost - Unaffiliated....................................... $ 25,627,368
===============
Total investments, at cost................................................ $ 128,811,729
===============
Page 8 See Notes to Financial Statements
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 2020
INVESTMENT INCOME:
Dividends - Affiliated.................................................... $ 2,508,265
Dividends - Unaffiliated.................................................. 246,411
---------------
Total investment income................................................ 2,754,676
---------------
EXPENSES:
Investment advisory fees.................................................. 214,935
---------------
Total expenses......................................................... 214,935
---------------
NET INVESTMENT INCOME (LOSS).............................................. 2,539,741
---------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments - Affiliated............................................... (2,694,356)
Investments - Unaffiliated............................................. 2,876
In-kind redemptions - Affiliated....................................... (352,059)
In-kind redemptions - Unaffiliated..................................... 38,135
Distribution of capital gains from investment companies - Affiliated... 111,416
---------------
Net realized gain (loss).................................................. (2,893,988)
---------------
Net change in unrealized appreciation (depreciation) on:
Investments - Affiliated............................................... 1,315,888
Investments - Unaffiliated............................................. 340,883
---------------
Net change in unrealized appreciation (depreciation)...................... 1,656,771
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................... (1,237,217)
---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS........................................................ $ 1,302,524
===============
See Notes to Financial Statements Page 9
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
STATEMENT OF CHANGES IN NET ASSETS
YEAR PERIOD
ENDED ENDED
8/31/2020 8/31/2019 (a)
--------------- ---------------
OPERATIONS:
Net investment income (loss)......................................................... $ 2,539,741 $ 425,301
Net realized gain (loss)............................................................. (2,893,988) (21,140)
Net change in unrealized appreciation (depreciation)................................. 1,656,771 247,169
--------------- ---------------
Net increase (decrease) in net assets resulting from operations...................... 1,302,524 651,330
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations................................................................ (2,633,376) (432,051)
--------------- ---------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold............................................................ 118,598,581 51,029,601
Cost of shares redeemed.............................................................. (36,794,658) (1,021,115)
--------------- ---------------
Net increase (decrease) in net assets resulting from shareholder transactions........ 81,803,923 50,008,486
--------------- ---------------
Total increase (decrease) in net assets.............................................. 80,473,071 50,227,765
NET ASSETS:
Beginning of period.................................................................. 50,227,765 --
--------------- ---------------
End of period........................................................................ $ 130,700,836 $ 50,227,765
=============== ===============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period.............................................. 2,450,002 --
Shares sold.......................................................................... 5,800,000 2,500,002
Shares redeemed...................................................................... (1,850,000) (50,000)
--------------- ---------------
Shares outstanding, end of period.................................................... 6,400,002 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.
Page 10 See Notes to Financial Statements
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR PERIOD
ENDED ENDED
8/31/2020 8/31/2019 (a)
------------ --------------
Net asset value, beginning of period........................... $ 20.50 $ 20.03
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... 0.49 0.43
Net realized and unrealized gain (loss)........................ (0.07) 0.47
---------- ----------
Total from investment operations............................... 0.42 0.90
---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.......................................... (0.50) (0.43)
---------- ----------
Net asset value, end of period................................. $ 20.42 $ 20.50
========== ==========
TOTAL RETURN (b)............................................... 2.09% 4.52%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 130,701 $ 50,228
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets (c).............. 0.20% 0.20% (d)
Ratio of net investment income (loss) to average net assets.... 2.36% 3.16% (d)
Portfolio turnover rate (e).................................... 71% 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.
See Notes to Financial Statements Page 11
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
AUGUST 31, 2020
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 twenty-five funds that are currently 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 12
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
AUGUST 31, 2020
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 August 31, 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 13
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
AUGUST 31, 2020
Amounts related to these investments at August 31, 2020 and for the fiscal year
then ended are as follows:
CHANGE IN
UNREALIZED REALIZED
SHARES AT VALUE AT APPRECIATION GAIN VALUE AT DIVIDEND
SECURITY NAME 8/31/2020 8/31/2019 PURCHASES SALES (DEPRECIATION) (LOSS) 8/31/2020 INCOME
------------------------------------------------------------------------------------------------------------------------------------
First Trust Emerging
Markets Local
Currency Bond ETF 94,444 $ 1,215,799 $ 3,426,874 $ (1,082,952) $ (191,478) $ (42,454) $ 3,325,789 $ 155,406
First Trust Enhanced
Short Maturity ETF 216,134 11,259,941 26,902,841 (24,899,570) (1,661) (280,543) 12,981,008 358,825
First Trust Low
Duration
Opportunities ETF 753,987 20,129,332 46,907,238 (27,522,868) (260,924) (256,570) 38,996,208 922,126
First Trust Senior
Loan Fund 144,366 7,477,145 22,311,556 (21,375,067) 217,324 (1,945,369) 6,685,589 390,051
First Trust Tactical
High Yield ETF 141,882 2,502,346 18,652,500 (13,971,608) 369,448 (799,103) 6,753,583 305,836
First Trust TCW
Opportunistic
Fixed Income ETF 651,576 2,562,596 43,588,446 (11,756,266) 1,183,179 389,040(a) 35,966,995 376,021
------------------------------------------------------------------------------------------------
$45,147,159 $161,789,455 $ (100,608,331) $ 1,315,888 $(2,934,999) $104,709,172 $2,508,265
================================================================================================
(a) Includes $111,416 of capital gain distributions.
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 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 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 by the Fund during the fiscal year ended
August 31, 2020 was as follows:
Distributions paid from:
Ordinary income................................ $ 2,633,376
Capital gains.................................. --
Return of capital.............................. --
The tax character of distributions paid by the Fund 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, 2020, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income.................. $ --
Accumulated capital and other gain (loss)...... (2,527,097)
Net unrealized appreciation (depreciation)..... 1,806,050
Page 14
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
AUGUST 31, 2020
E. INCOME TAXES
The Fund intends to continue to qualify as a regulated investment company by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no
provision has been made for federal and state income taxes. However, due to the
timing and amount of distributions, the Fund may be subject to an excise tax of
4% of the amount by which approximately 98% of the Fund's taxable income exceeds
the distributions from such taxable income for the calendar year.
The Fund is subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. The taxable years ending 2019 and
2020 remain open to federal and state audit. As of August 31, 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.
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, 2020, the
Fund had capital loss carryforwards available for federal income tax purposes of
$2,527,097. 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 year ended August 31, 2020, the Fund had no
net late year ordinary or capital losses.
In order to present paid-in capital and accumulated distributable earnings
(loss) (which consists of accumulated net investment income (loss), accumulated
net realized gain (loss) on investments and net unrealized appreciation
(depreciation) on investments) on the Statement of Assets and Liabilities that
more closely represent their tax character, certain adjustments have been made
to paid-in capital, accumulated net investment income (loss) and accumulated net
realized gain (loss) on investments. These adjustments are primarily due to the
difference between book and tax treatments of income and gains on various
investment securities held by the Fund and in-kind transactions. The results of
operations and net assets were not affected by these adjustments. For the fiscal
year ended August 31, 2020, the adjustments for the Fund were as follows:
Accumulated
Accumulated Net Realized
Net Investment Gain (Loss)
Income (Loss) on Investments Paid-in Capital
-------------- -------------- ---------------
$93,635 $309,701 $(403,336)
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.
Page 15
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
AUGUST 31, 2020
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.
4. PURCHASES AND SALES OF SECURITIES
For the fiscal year ended August 31, 2020, the cost of purchases and proceeds
from sales of investments, excluding short-term investments and in-kind
transactions, were $75,018,338 and $74,878,666, respectively.
For the fiscal year ended August 31, 2020, the cost of in-kind purchases and
proceeds from in-kind sales were $118,503,732 and $36,768,581, respectively.
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, 2021.
Page 16
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
AUGUST 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 Funds
through the date the financial statements were issued, and has determined that
there were the following subsequent events:
On September 21, 2020, FT Cboe Vest U.S. Equity Buffer ETF - September and FT
Cboe Vest U.S. Equity Deep Buffer ETF - September, additional series of the
Trust, began trading under the symbols "FSEP" and "DSEP", respectively, on Cboe
BZX Exchange, Inc.
On October 19, 2020, FT Cboe Vest U.S. Equity Buffer ETF - October and FT Cboe
Vest U.S. Equity Deep Buffer ETF - October, additional series of the Trust,
began trading under the symbols "FOCT" and "DOCT", respectively, on Cboe BZX
Exchange, Inc.
Page 17
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED
FUND VIII:
OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS
We have audited the accompanying statement of assets and liabilities of First
Trust Low Duration Strategic Focus ETF (the "Fund"), a series of the First Trust
Exchange-Traded Fund VIII, including the portfolio of investments, as of August
31, 2020, the related statement of operations for the year then ended, and the
statement of changes in net assets and the financial highlights for the year
ended August 31, 2020 and the period from January 3, 2019 (commencement of
operations) through August 31, 2019, and the related notes. In our opinion, the
financial statements and financial highlights present fairly, in all material
respects, the financial position of the Fund as of August 31, 2020, and the
results of its operations for the year then ended, and changes in its net assets
and financial highlights for the year ended August 31, 2020 and the period from
January 3, 2019 (commencement of operations) through August 31, 2019, in
conformity with accounting principles generally accepted in the United States of
America.
BASIS FOR OPINION
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on the Fund's
financial statements and financial highlights based on our audit. We are a
public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to
the Fund in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement, whether due to error or fraud. The Fund is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. As part of our audit we are required to obtain
an understanding of internal control over financial reporting but not for the
purpose of expressing an opinion on the effectiveness of the Fund's internal
control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material
misstatement of the financial statements and financial highlights, whether due
to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements and financial highlights. Our audit
also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of August 31, 2020, by correspondence with
the custodian and brokers. We believe that our audit provides a reasonable basis
for our opinion.
/s/ Deloitte & Touche LLP
Chicago, Illinois
October 22, 2020
We have served as the auditor of one or more First Trust investment companies
since 2001.
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
AUGUST 31, 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.
FEDERAL TAX INFORMATION
Distributions paid to foreign shareholders for the taxable year ended August 31,
2020 that were properly designated by the Fund as "interest-related dividends"
or "short-term capital gain dividends," may not be subject to federal income tax
provided that the income was earned directly by such foreign shareholders.
Of the ordinary income (including short-term capital gain) distributions made by
LDSF during the Fund's fiscal year ended August 31, 2020, none qualify for the
corporate dividends received deduction available to corporate shareholders or as
qualified dividend income.
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE
APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS
RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW
APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT
IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY
FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE,
RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT
WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO
REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
CONCENTRATION RISK. To the extent that a fund is able to invest a 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
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
AUGUST 31, 2020 (UNAUDITED)
rates, as the cost of capital rises and borrowing costs increase. Equity
securities may decline significantly in price over short or extended periods of
time, and such declines may occur in the equity market as a whole, or they may
occur in only a particular country, company, industry or sector of the market.
ETF RISK. The shares of an ETF trade like common stock and represent an interest
in a portfolio of securities. The risks of owning an ETF generally reflect the
risks of owning the underlying securities, although lack of liquidity in an ETF
could result in it being more volatile and ETFs have management fees that
increase their costs. Shares of an ETF trade on an exchange at market prices
rather than net asset value, which may cause the shares to trade at a price
greater than net asset value (premium) or less than net asset value (discount).
In times of market stress, decisions by market makers to reduce or step away
from their role of providing a market for an ETF's shares, or decisions by an
ETF's authorized participants that they are unable or unwilling to proceed with
creation and/or redemption orders of an ETF's shares, could result in shares of
the ETF trading at a discount to net asset value and in greater than normal
intraday bid-ask spreads.
FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income
securities, the fund will be subject to credit risk, income risk, interest rate
risk, liquidity risk and prepayment risk. Income risk is the risk that income
from a fund's fixed income investments could decline during periods of falling
interest rates. Interest rate risk is the risk that the value of a fund's fixed
income securities will decline because of rising interest rates. Liquidity risk
is the risk that a security cannot be purchased or sold at the time desired, or
cannot be purchased or sold without adversely affecting the price. Prepayment
risk is the risk that the securities will be redeemed or prepaid by the issuer,
resulting in lower interest payments received by the fund. In addition to these
risks, high yield securities, or "junk" bonds, are subject to greater market
fluctuations and risk of loss than securities with higher ratings, and the
market for high yield securities is generally smaller and less liquid than that
for investment grade securities.
INDEX 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 COVID-19 pandemic may last
for an extended period of time and will continue to impact the economy for the
foreseeable future.
Page 20
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
AUGUST 31, 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 CONTINUATION OF INVESTMENT MANAGEMENT AGREEMENT
The Board of Trustees of First Trust Exchange-Traded Fund VIII (the "Trust"),
including the Independent Trustees, unanimously approved the continuation of the
Investment Management Agreement (the "Agreement") with First Trust Advisors L.P.
(the "Advisor"), on behalf of the First Trust Low Duration Strategic Focus ETF
(the "Fund"). The Board approved the continuation of the Agreement for a
one-year period ending June 30, 2021 at a meeting held on June 8, 2020. The
Board determined that the continuation of the Agreement is in the best interests
of the Fund in light of the nature, extent and quality of the services provided
and such other matters as the Board considered to be relevant in the exercise of
its reasonable business judgment.
To reach this determination, the Board considered its duties under the
Investment Company Act of 1940, as amended (the "1940 Act"), as well as under
the general principles of state law, in reviewing and approving advisory
contracts; the requirements of the 1940 Act in such matters; the fiduciary duty
of investment advisors with respect to advisory agreements and compensation; the
standards used by courts in determining whether investment company boards have
fulfilled their duties; and the factors to be considered by the Board in voting
on such agreements. At meetings held on May 11, 2020 and June 8, 2020, the
Board, including the Independent Trustees, reviewed materials provided by the
Advisor responding to requests for information from counsel to the Independent
Trustees, submitted on behalf of the Independent Trustees, that, among other
things, outlined: the services provided by the Advisor to the Fund (including
the relevant personnel responsible for these services and their experience); the
unitary fee rate payable by the Fund as compared to fees charged to a peer group
of funds (the "Expense Group") and a broad peer universe of funds (the "Expense
Universe"), each assembled by Broadridge Financial Solutions, Inc.
("Broadridge"), an independent source, and as compared to fees charged to other
clients of the Advisor, including other exchange-traded funds ("ETFs") managed
by the Advisor; the expense ratio of the Fund as compared to expense ratios of
the funds in the Fund's Expense Group and Expense Universe; performance
information for the Fund, including comparisons of the Fund's performance to
that of one or more relevant benchmark indexes; the nature of expenses incurred
in providing services to the Fund and the potential for the Advisor to realize
economies of scale, if any; profitability and other financial data for the
Advisor; any fall-out benefits to the Advisor and its affiliate, First Trust
Portfolios L.P. ("FTP"); and information on the Advisor's compliance program.
The Board reviewed initial materials with the Advisor at the meeting held on May
11, 2020, prior to which the Independent Trustees and their counsel met
separately to discuss the information provided by the Advisor. Following the May
meeting, counsel to the Independent Trustees, on behalf of the Independent
Trustees, requested certain clarifications and supplements to the materials
provided, and the information provided in response to those requests was
considered at an executive session of the Independent Trustees and their counsel
held prior to the June 8, 2020 meeting, as well as at the meeting held that day.
The Board considered supplemental information provided by the Advisor on the
operations of the Advisor and the performance of the Fund since the onset of the
COVID-19 pandemic. The Board applied its business judgment to determine whether
the arrangement between the Trust and the Advisor continues to be a reasonable
business arrangement from the Fund's perspective. The Board determined that,
given the totality of the information provided with respect to the Agreement,
the Board had received sufficient information to renew the Agreement. The Board
considered that shareholders chose to invest or remain invested in the Fund
knowing that the Advisor manages the Fund and knowing the Fund's unitary fee.
In reviewing the Agreement, the Board considered the nature, extent and quality
of the services provided by the Advisor under the Agreement. The Board
considered that the Advisor is responsible for the overall management and
administration of the Trust and the Fund and reviewed all of the services
provided by the Advisor to the Fund, as well as the background and experience of
the persons responsible for such services. The Board noted that the Fund is an
actively-managed ETF and noted that the Advisor's Investment Committee is
responsible for the day-to-day management of the Fund's investments. In addition
to materials provided by the Advisor, at the May 11, 2020 meeting, the Board
also received a presentation from members of the Investment Committee discussing
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
AUGUST 31, 2020 (UNAUDITED)
the services that the Investment Committee provides to the Fund, including the
Investment Committee's day-to-day management of the Fund's investments. In
considering the Investment Committee's management of the Fund, the Board noted
the background and experience of the members of the Investment Committee. In
reviewing the services provided, the Board noted the compliance program that had
been developed by the Advisor and considered that it includes a robust program
for monitoring the Advisor's and the Fund's compliance with the 1940 Act, as
well as the Fund's compliance with its investment objectives, policies and
restrictions. The Board also considered a report from the Advisor with respect
to its risk management functions related to the operation of the Fund. Finally,
as part of the Board's consideration of the Advisor's services, the Advisor, in
its written materials and at the May 11, 2020 meeting, described to the Board
the scope of its ongoing investment in additional infrastructure and personnel
to maintain and improve the quality of services provided to the Fund and the
other funds in the First Trust Fund Complex. In light of the information
presented and the considerations made, the Board concluded that the nature,
extent and quality of the services provided to the Trust and the Fund by the
Advisor under the Agreement have been and are expected to remain satisfactory
and that the Advisor has managed the Fund consistent with its investment
objectives, policies and restrictions.
The Board considered the unitary fee rate payable by the Fund under the
Agreement for the services provided. The Board considered that as part of the
unitary fee the Advisor is responsible for the Fund's expenses, including the
cost of transfer agency, custody, fund administration, legal, audit and other
services and license fees, if any, but excluding the fee payment under the
Agreement and interest, taxes, acquired fund fees and expenses, if any,
brokerage commissions and other expenses connected with the execution of
portfolio transactions, distribution and service fees pursuant to a Rule 12b-1
plan, if any, and extraordinary expenses, if any. The Board noted that, because
the Fund invests in underlying ETFs, including ETFs in the First Trust Fund
Complex, the Fund incurs acquired fund fees and expenses, which are not payable
out of the unitary fee, and that such acquired fund fees and expenses will
change over time as assets are reallocated among the underlying ETFs. The Board
received and reviewed information showing the advisory or unitary fee rates and
expense ratios of the peer funds in the Expense Group, as well as advisory and
unitary fee rates charged by the Advisor to other fund (including ETFs) and
non-fund clients, as applicable. Because the Fund pays a unitary fee, the Board
determined that expense ratios were the most relevant comparative data point.
Based on the information provided, the Board noted that the unitary fee rate for
the Fund was below the median total (net) expense ratio (excluding acquired fund
fees and expenses, as applicable) of the peer funds in its Expense Group. The
Board also noted that the Fund's total (net) expense ratio (including acquired
fund fees and expenses) was above the median total (net) expense ratio
(including acquired fund fees and expenses, as applicable) of the peer funds in
the Expense Group. With respect to the Expense Group, the Board, at the May 11,
2020 meeting, discussed with Broadridge its methodology for assembling peer
groups and discussed with the Advisor limitations in creating peer groups for
actively-managed ETFs, including that the Expense Group contained both
actively-managed ETFs and open-end mutual funds, and different business models
that may affect the pricing of services among ETF sponsors. The Board took these
limitations and differences into account in considering the peer data. With
respect to fees charged to other non-ETF clients, the Board considered
differences between the Fund and other non-ETF clients that limited their
comparability. In considering the unitary fee rate overall, the Board also
considered the Advisor's statement that it seeks to meet investor needs through
innovative and value-added investment solutions and the Advisor's demonstrated
long-term commitment to the Fund and the other funds in the First Trust Fund
Complex.
The Board considered performance information for the Fund. The Board noted the
process it has established for monitoring the Fund's performance and portfolio
risk on an ongoing basis, which includes quarterly performance reporting from
the Advisor for the Fund. The Board determined that this process continues to be
effective for reviewing the Fund's performance. Because the Fund commenced
operations on January 3, 2019 and therefore has a limited performance history,
comparative performance information for the Fund was not considered.
On the basis of all the information provided on the unitary fee for the Fund and
the ongoing oversight by the Board, the Board concluded that the unitary fee for
the Fund continues to be reasonable and appropriate in light of the nature,
extent and quality of the services provided by the Advisor to the Fund under the
Agreement.
The Board considered information and discussed with the Advisor whether there
were any economies of scale in connection with providing advisory services to
the Fund and noted the Advisor's statement that it believes its expenses will
likely increase over the next twelve months as the Advisor continues to hire
personnel and build infrastructure, including technology, to improve the
services to the Fund. The Board noted that any reduction in fixed costs
associated with the management of the Fund would benefit the Advisor, but that
the unitary fee structure provides a level of certainty in expenses for the
Fund. The Board considered the revenues and allocated costs (including the
allocation methodology) of the Advisor in serving as investment advisor to the
Fund for the period from inception through December 31, 2019 and the estimated
profitability level for the Fund calculated by the Advisor based on such data,
as well as complex-wide and product-line profitability data, for the twelve
months ended December 31, 2019. The Board noted the inherent limitations in the
profitability analysis and concluded that, based on the information provided,
the Advisor's profitability level for the Fund was not unreasonable. In
addition, the Board considered fall-out benefits described by the Advisor that
may be realized from its relationship with the Fund. 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 Fund, may
Page 22
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
AUGUST 31, 2020 (UNAUDITED)
have had no dealings with the Advisor or FTP, and noted that the Advisor does
not utilize soft dollars in connection with the Fund. In addition, the Board
considered that the Advisor, as the investment advisor to certain of the
underlying ETFs in which the Fund invests, will recognize additional revenue
from such underlying ETFs if investment by the Fund causes the assets of the
underlying ETFs to grow 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 continue to be fair and reasonable and that the continuation of
the Agreement is in the best interests of the Fund. No single factor was
determinative in the Board's analysis.
LIQUIDITY RISK MANAGEMENT PROGRAM
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as
amended (the "1940 Act"), the Fund and each other fund in the First Trust Fund
Complex, other than the closed-end funds, have adopted and implemented a
liquidity risk management program (the "Program") reasonably designed to assess
and manage the funds' liquidity risk, i.e., the risk that a fund could not meet
requests to redeem shares issued by the fund without significant dilution of
remaining investors' interests in the fund. The Board of Trustees of the First
Trust Funds has appointed First Trust Advisors, L.P. (the "Advisor") as the
person designated to administer the Program, and in this capacity the Advisor
performs its duties primarily through the activities and efforts of the First
Trust Liquidity Committee (the "Liquidity Committee").
Pursuant to the Program, the Liquidity Committee classifies the liquidity of
each fund's portfolio investments into one of the four liquidity categories
specified by Rule 22e-4: highly liquid investments, moderately liquid
investments, less liquid investments and illiquid investments. The Liquidity
Committee determines certain of the inputs for this classification process,
including reasonably anticipated trade sizes and significant investor dilution
thresholds. The Liquidity Committee also determines and periodically reviews a
highly liquid investment minimum for certain funds, monitors the funds' holdings
of assets classified as illiquid investments to seek to ensure they do not
exceed 15% of a fund's net assets and establishes policies and procedures
regarding redemptions in kind.
At the May 11, 2020 meeting of the Board of Trustees, as required by Rule 22e-4
and the Program, the Advisor provided the Board with a written report prepared
by the Advisor that addressed the operation of the Program during the period
from June 1, 2019 (the initial compliance date for certain requirements of Rule
22e-4) through the Liquidity Committee's annual meeting held on March 20, 2020
and assessed the Program's adequacy and effectiveness of implementation during
this period, including the operation of the highly liquid investment minimum for
each fund that is required under the Program to have one, and any material
changes to the Program. Note that because the Fund primarily holds assets that
are highly liquid investments, the Fund has not adopted a highly liquid
investment minimum.
As stated in the written report, during the review period, no fund breached the
15% limitation on illiquid investments, no fund with a highly liquid investment
minimum breached that minimum and no fund filed a Form N-LIQUID. The Advisor
concluded that each fund's investment strategy is appropriate for an open-end
fund; that the Program operated effectively in all material respects during the
review period; and that the Program is reasonably designed to assess and manage
the liquidity risk of each fund and to maintain compliance with Rule 22e-4.
Page 23
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BOARD OF TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
AUGUST 31, 2020 (UNAUDITED)
The following tables identify the Trustees and Officers of the Trust. Unless
otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite
400, Wheaton, IL 60187.
The Trust's statement of additional information includes additional information
about the Trustees and is available, without charge, upon request, by calling
(800) 988-5891.
NUMBER OF OTHER
PORTFOLIOS IN TRUSTEESHIPS OR
TERM OF OFFICE THE FIRST TRUST DIRECTORSHIPS
NAME, AND YEAR FIRST FUND COMPLEX HELD BY TRUSTEE
YEAR OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST
POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
------------------------------------------------------------------------------------------------------------------------------------
Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 185 None
(1951) Limited Partner, Gundersen Real Estate
o Since Inception Limited Partnership (June 1992 to
December 2016); Member, Sportsmed LLC
(April 2007 to November 2015)
Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 185 Director of ADM
(1957) (Futures Commission Merchant) Investor Services,
o Since Inception Inc., ADM
Investor Services
International,
Futures Industry
Association, and
National Futures
Association
Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 185 Director of Trust
(1956) and Management Consulting) Company of
o Since Inception Illinois
Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 185 None
(1954) Managing Director and Chief Operating
o Since Inception Officer (January 2015 to August 2018),
Pelita Harapan Educational Foundation
(Educational Product and Services);
President and Chief Executive Officer
(June 2012 to September 2014), Servant
Interactive LLC (Educational Products
and Services); President and Chief
Executive Officer (June 2012 to
September 2014), Dew Learning LLC
(Educational Products and Services)
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 185 None
Chairman of the Board Advisors L.P. and First Trust
(1955) o Since Inception Portfolios L.P.; Chairman of the
Board of Directors, BondWave LLC
(Software Development Company)
and Stonebridge Advisors LLC
(Investment Advisor)
-----------------------------
(1) Mr. Bowen is deemed an "interested person" of the Trust due to his
position as Chief Executive Officer of First Trust Advisors L.P.,
investment advisor of the Trust.
Page 24
--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
AUGUST 31, 2020 (UNAUDITED)
POSITION AND TERM OF OFFICE
NAME OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS
AND YEAR OF BIRTH WITH TRUST SERVICE DURING PAST 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS(2)
------------------------------------------------------------------------------------------------------------------------------------
James M. Dykas President and Chief Executive o Indefinite Term Managing Director and Chief Financial Officer
(1966) Officer (January 2016 to Present), Controller (January 2011
o Since Inception to January 2016), Senior Vice President (April 2007
to January 2016), First Trust Advisors L.P. and First
Trust Portfolios L.P.; Chief Financial Officer
(January 2016 to Present), BondWave LLC
(Software Development Company) and Stonebridge
Advisors LLC (Investment Advisor)
Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President (July 2016 to Present), Vice
(1972) Officer and Chief President (April 2012 to July 2016), First Trust
Accounting Officer o Since Inception Advisors L.P. and First Trust Portfolios L.P.
W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and
(1960) Legal Officer First Trust Portfolios L.P.; Secretary and General
o Since Inception Counsel, BondWave LLC; Secretary, Stonebridge
Advisors LLC
Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and
(1970) First Trust Portfolios L.P.
o Since Inception
Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P.
(1966) and Assistant Secretary and First Trust Portfolios L.P.
o Since Inception
Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
(1966) and First Trust Portfolios L.P.
o Since Inception
Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
(1970) and First Trust Portfolios L.P.
o Since Inception
-----------------------------
(2) The term "officer" means the president, vice president, secretary,
treasurer, controller or any other officer who performs a policy making
function.
Page 25
--------------------------------------------------------------------------------
PRIVACY POLICY
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
AUGUST 31, 2020 (UNAUDITED)
PRIVACY POLICY
First Trust values our relationship with you and considers your privacy an
important priority in maintaining that relationship. We are committed to
protecting the security and confidentiality of your personal information.
SOURCES OF INFORMATION
We collect nonpublic personal information about you from the following sources:
o Information we receive from you and your broker-dealer, investment
advisor or financial representative through interviews,
applications, agreements or other forms;
o Information about your transactions with us, our affiliates or
others;
o Information we receive from your inquiries by mail, e-mail or
telephone; and
o Information we collect on our website through the use of "cookies".
For example, we may identify the pages on our website that your
browser requests or visits.
INFORMATION COLLECTED
The type of data we collect may include your name, address, social security
number, age, financial status, assets, income, tax information, retirement and
estate plan information, transaction history, account balance, payment history,
investment objectives, marital status, family relationships and other personal
information.
DISCLOSURE OF INFORMATION
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. In addition to using
this information to verify your identity (as required under law), the permitted
uses may also include the disclosure of such information to unaffiliated
companies for the following reasons:
o In order to provide you with products and services and to effect
transactions that you request or authorize, we may disclose your
personal information as described above to unaffiliated financial
service providers and other companies that perform administrative or
other services on our behalf, such as transfer agents, custodians
and trustees, or that assist us in the distribution of investor
materials such as trustees, banks, financial representatives, proxy
services, solicitors and printers.
o We may release information we have about you if you direct us to do
so, if we are compelled by law to do so, or in other legally limited
circumstances (for example to protect your account from fraud).
In addition, in order to alert you to our other financial products and services,
we may share your personal information within First Trust.
USE OF WEBSITE ANALYTICS
We currently use third party analytics tools, Google Analytics and AddThis, to
gather information for purposes of improving First Trust's website and marketing
our products and services to you. These tools employ cookies, which are small
pieces of text stored in a file by your web browser and sent to websites that
you visit, to collect information, track website usage and viewing trends such
as the number of hits, pages visited, videos and PDFs viewed and the length of
user sessions in order to evaluate website performance and enhance navigation of
the website. We may also collect other anonymous information, which is generally
limited to technical and web navigation information such as the IP address of
your device, internet browser type and operating system for purposes of
analyzing the data to make First Trust's website better and more useful to our
users. The information collected does not include any personal identifiable
information such as your name, address, phone number or email address unless you
provide that information through the website for us to contact you in order to
answer your questions or respond to your requests. To find out how to opt-out of
these services click on: Google Analytics and AddThis.
CONFIDENTIALITY AND SECURITY
With regard to our internal security procedures, First Trust restricts access to
your nonpublic personal information to those First Trust employees who need to
know that information to provide products or services to you. We maintain
physical, electronic and procedural safeguards to protect your nonpublic
personal information.
POLICY UPDATES AND INQUIRES
As required by federal law, we will notify you of our privacy policy annually.
We reserve the right to modify this policy at any time, however, if we do change
it, we will tell you promptly. For questions about our policy, or for additional
copies of this notice, please go to www.ftportfolios.com, or contact us at
1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust
Advisors).
March 2019
Page 26
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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)
FT Cboe Vest U.S. Equity Buffer ETF - May (FMAY)
FT Cboe Vest U.S. Equity Deep Buffer ETF - May (DMAY)
FT Cboe Vest U.S. Equity Buffer ETF - June (FJUN)
FT Cboe Vest U.S. Equity Deep Buffer ETF - June (DJUN)
FT Cboe Vest U.S. Equity Buffer ETF - July (FJUL)
FT Cboe Vest U.S. Equity Deep Buffer ETF - July (DJUL)
FT Cboe Vest Fund of Buffer ETFs (BUFR)
----------------------------
Annual Report
For the Period Ended
August 31, 2020
----------------------------
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
ANNUAL REPORT
AUGUST 31, 2020
Shareholder Letter.......................................................... 2
Fund Performance Overview
FT Cboe Vest U.S. Equity Buffer ETF - August (FAUG)...................... 3
FT Cboe Vest U.S. Equity Deep Buffer ETF - August (DAUG)................. 5
FT Cboe Vest U.S. Equity Buffer ETF - November (FNOV).................... 7
FT Cboe Vest U.S. Equity Deep Buffer ETF - November (DNOV)............... 9
FT Cboe Vest U.S. Equity Buffer ETF - February (FFEB).................... 11
FT Cboe Vest U.S. Equity Deep Buffer ETF - February (DFEB)............... 13
FT Cboe Vest U.S. Equity Buffer ETF - May (FMAY)......................... 15
FT Cboe Vest U.S. Equity Deep Buffer ETF - May (DMAY).................... 17
FT Cboe Vest U.S. Equity Buffer ETF - June (FJUN)........................ 19
FT Cboe Vest U.S. Equity Deep Buffer ETF - June (DJUN)................... 21
FT Cboe Vest U.S. Equity Buffer ETF - July (FJUL)........................ 23
FT Cboe Vest U.S. Equity Deep Buffer ETF - July (DJUL)................... 25
FT Cboe Vest Fund of Buffer ETFs (BUFR).................................. 27
Notes to Fund Performance Overview.......................................... 29
Portfolio Commentary........................................................ 30
Understanding Your Fund Expenses............................................ 33
Portfolio of Investments
FT Cboe Vest U.S. Equity Buffer ETF - August (FAUG)...................... 35
FT Cboe Vest U.S. Equity Deep Buffer ETF - August (DAUG)................. 37
FT Cboe Vest U.S. Equity Buffer ETF - November (FNOV).................... 39
FT Cboe Vest U.S. Equity Deep Buffer ETF - November (DNOV)............... 41
FT Cboe Vest U.S. Equity Buffer ETF - February (FFEB).................... 43
FT Cboe Vest U.S. Equity Deep Buffer ETF - February (DFEB)............... 45
FT Cboe Vest U.S. Equity Buffer ETF - May (FMAY)......................... 47
FT Cboe Vest U.S. Equity Deep Buffer ETF - May (DMAY).................... 49
FT Cboe Vest U.S. Equity Buffer ETF - June (FJUN)........................ 51
FT Cboe Vest U.S. Equity Deep Buffer ETF - June (DJUN)................... 53
FT Cboe Vest U.S. Equity Buffer ETF - July (FJUL)........................ 55
FT Cboe Vest U.S. Equity Deep Buffer ETF - July (DJUL)................... 57
FT Cboe Vest Fund of Buffer ETFs (BUFR).................................. 59
Statements of Assets and Liabilities........................................ 60
Statements of Operations.................................................... 64
Statements of Changes in Net Assets......................................... 68
Financial Highlights........................................................ 72
Notes to Financial Statements............................................... 79
Report of Independent Registered Public Accounting Firm..................... 90
Additional Information...................................................... 92
Board of Trustees and Officers.............................................. 102
Privacy Policy.............................................................. 104
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
ANNUAL REPORT
AUGUST 31, 2020
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and/or Cboe Vest(SM) Financial LLC ("Cboe Vest" or the
"Sub-Advisor") and their respective representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the series of First Trust Exchange-Traded Fund 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's shares may therefore be less than what you paid
for them. Accordingly, you can lose money investing in a Fund. See "Risk
Considerations" in the Additional Information section of this report for a
discussion of 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.
By reading the portfolio commentary from the portfolio management team of the
Funds, you may obtain an understanding of how the market environment affected
each Fund's performance. 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.
Page 1
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SHAREHOLDER LETTER
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
AUGUST 31, 2020
Dear Shareholders:
First Trust is pleased to provide you with the 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 covering each Fund's
respective inception date through August 31, 2020.
In case you missed the latest big news from the Federal Reserve ("Fed") in
September, it stated that it expects to hold short-term interest rates near zero
until two things happen: (1) the U.S. unemployment rate is back to normal, or
around the 4.0% level; and (2) the inflation rate is at, or above, 2.0%. As of
August 31, 2020, the U.S. unemployment rate stood at 8.4%, according to data
from the Bureau of Labor Statistics. The Fed's top benchmark for inflation (U.S.
Personal Consumption Expenditures Chain Type Price Index) stood at 1.0% on July
31, 2020. Brian Wesbury, Chief Economist at First Trust Advisors L.P., notes
that the Fed does not expect to achieve both goals until 2024.
What does this mean for investors? We believe that one of the Fed's motivations
in promoting a multi-year commitment to a near zero interest rate monetary
policy is to incentivize risk-taking. By holding interest rates artificially low
for an extended period, the Fed is essentially disincentivizing saving. The Fed
wants individuals to invest their capital in risk assets and is offering
valuable guidance on its monetary policy to instill confidence in the markets,
in my opinion.
In his testimony to the House Financial Services Committee on September 22,
2020, Fed Chairman Jerome Powell stated that the U.S. economy has a long road to
a full recovery and needs more financial support. U.S. Treasury Secretary Steven
Mnuchin also testified and said that he and the White House will continue to
push Congress to pass another fiscal relief package to help support American
workers. In pursuing additional fiscal support, the U.S. government is
ultimately looking to buy time until a coronavirus ("COVID-19") vaccine arrives.
With the U.S. Presidential election less than two months away, getting a
trillion dollar or so stimulus package through Congress will be no easy task, in
my opinion. Let us hope they surprise us.
Thanks to the monetary and fiscal support already brought to bear to fight
COVID-19, the securities markets appear to be in relatively good shape, in my
opinion. On September 22, 2020, the S&P 500(R) Index closed a little more than
two percentage points off its pre-COVID-19 high set on February 19, 2020,
according to data from Bloomberg. I find that to be an amazing feat in the
current climate. The combination of low interest rates and low inflation
continues to reward bond investors. Looking ahead, even bond investors are going
to need to assume some additional credit risk to achieve higher returns. Yields
on Treasury notes and bonds are poised at this time to stay low and fairly range
bound. The Fed's pledge to keep its benchmark rate low for up to three years
could lend some stability and reassurance to the debt markets, in my opinion.
We believe the U.S. economy is on its way back. While we have too many workers
still unemployed, I do find it encouraging that U.S. consumers have done such a
terrific job of getting their fiscal houses in order. Consumer spending
typically accounts for roughly 70% of U.S. gross domestic product output each
year. So goes the consumer, so goes the economy. The S&P/Experian Consumer
Credit Default Composite Index stood at 0.67% in August 2020, down from 0.92% in
August 2019 and well below its 1.79% average since its inception in July 2004,
according to S&P Dow Jones Indices. As we previously noted, the near-term
outlook rests on getting one or more FDA-approved vaccines or therapeutics. The
year-end target that has been touted by some, including President Donald J.
Trump, would coincide with the end to the government's moratorium on home
evictions and foreclosures, which is due to expire on December 31, 2020. Keep in
mind that the moratorium has already been extended three times. Things could get
interesting over the next few months. Stay tuned and stay the course.
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 2
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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 14.71% (before fees, expenses and taxes) and 13.86%
(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 August 24, 2020 to August 20, 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
"FAUG".
---------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURNS
Inception
(11/6/19)
to 8/31/20
FUND PERFORMANCE
NAV 9.47%
Market Price 9.50%
INDEX PERFORMANCE
S&P 500(R) Index 13.77%
---------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 29.)
-----------------------------
* Prior to August 24, 2020, the Fund's investment objective included an
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 including the Fund's management fee) and an
Outcome Period of November 7, 2019 to August 21, 2020.
Page 3
--------------------------------------------------------------------------------
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 - AUGUST 31, 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
8/31/20 10,947 11,377
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 AUGUST 31, 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 August 31, 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 - 8/31/20 90 4 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 - 8/31/20 108 1 1 0
Page 4
--------------------------------------------------------------------------------
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 8.63% (before fees, expenses and taxes) and 7.78%
(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 August 24, 2020 to August 20,
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
"DAUG".
---------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURNS
Inception
(11/6/19)
to 8/31/20
FUND PERFORMANCE
NAV 6.81%
Market Price 6.81%
INDEX PERFORMANCE
S&P 500(R) Index 13.77%
---------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 29.)
-----------------------------
* Prior to August 24, 2020, the Fund's investment objective included an
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 including the Fund's management fee) and an
Outcome Period of November 7, 2019 to August 21, 2020.
Page 5
--------------------------------------------------------------------------------
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 - AUGUST 31, 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
8/31/20 10,681 11,377
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 AUGUST 31, 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 August 31, 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 - 8/31/20 110 15 4 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 - 8/31/20 76 0 0 0
Page 6
--------------------------------------------------------------------------------
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 8/31/20
FUND PERFORMANCE
NAV 7.62%
Market Price 7.79%
INDEX PERFORMANCE
S&P 500(R) Index 12.17%
---------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 29.)
Page 7
--------------------------------------------------------------------------------
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 - AUGUST 31, 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
8/31/20 10,762 11,217
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 AUGUST 31, 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 August 31, 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 - 8/31/20 114 12 2 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 - 8/31/20 66 3 0 1
Page 8
--------------------------------------------------------------------------------
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 8/31/20
FUND PERFORMANCE
NAV 5.04%
Market Price 5.04%
INDEX PERFORMANCE
S&P 500(R) Index 12.17%
---------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 29.)
Page 9
--------------------------------------------------------------------------------
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 - AUGUST 31, 2020
FT Cboe Vest U.S.
Equity Deep Buffer S&P 500(R)
ETF - November Index
11/15/19 $10,000 $10,000
2/29/20 9,705 9,467
8/31/20 10,504 11,217
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 AUGUST 31, 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 August 31, 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 - 8/31/20 83 39 4 2
--------------------------------------------------------------------------------
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 - 8/31/20 70 0 0 0
Page 10
--------------------------------------------------------------------------------
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 8/31/20
FUND PERFORMANCE
NAV 2.61%
Market Price 2.77%
INDEX PERFORMANCE
S&P 500(R) Index 4.87%
---------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 29.)
Page 11
--------------------------------------------------------------------------------
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 - AUGUST 31, 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
8/31/20 10,261 10,487
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 AUGUST 31, 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 August 31, 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 - 8/31/20 50 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 - 8/31/20 58 24 0 0
Page 12
--------------------------------------------------------------------------------
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 8/31/20
FUND PERFORMANCE
NAV 1.83%
Market Price 2.09%
INDEX PERFORMANCE
S&P 500(R) Index 4.87%
---------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 29.)
Page 13
--------------------------------------------------------------------------------
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 - AUGUST 31, 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
8/31/20 10,183 10,487
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 AUGUST 31, 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 August 31, 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 - 8/31/20 79 4 4 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 - 8/31/20 30 15 1 0
Page 14
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST U.S. EQUITY BUFFER ETF - MAY (FMAY)
The FT Cboe Vest U.S. Equity Buffer ETF - May (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 17.07% (before fees, expenses and taxes) and 16.21%
(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 May 18, 2020 to May 21, 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
"FMAY".
---------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURNS
Inception
(5/15/20)
to 8/31/20
FUND PERFORMANCE
NAV 10.32%
Market Price 9.89%
INDEX PERFORMANCE
S&P 500(R) Index 22.23%
---------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 29.)
Page 15
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST U.S. EQUITY BUFFER ETF - MAY (FMAY) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MAY 15, 2020 - AUGUST 31, 2020
FT Cboe Vest U.S. Equity S&P 500(R)
Buffer ETF - May Index
5/15/20 $10,000 $10,000
8/31/20 11,032 12,223
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 AUGUST 31, 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 May 18, 2020 (commencement of
trading) through August 31, 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%
5/18/20 - 8/31/20 41 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%
5/18/20 - 8/31/20 33 0 0 0
Page 16
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - MAY (DMAY)
The FT Cboe Vest U.S. Equity Deep Buffer ETF - May (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 9.95% (before fees, expenses and taxes) and 9.09%
(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 May 18, 2020 to May 21, 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
"DMAY".
---------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURNS
Inception
(5/15/20)
to 8/31/20
FUND PERFORMANCE
NAV 5.96%
Market Price 5.50%
INDEX PERFORMANCE
S&P 500(R) Index 22.23%
---------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 29.)
Page 17
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - MAY (DMAY) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MAY 15, 2020 - AUGUST 31, 2020
FT Cboe Vest U.S. Equity S&P 500(R)
Deep Buffer ETF - May Index
5/15/20 $10,000 $10,000
8/31/20 10,596 12,223
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 AUGUST 31, 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 May 18, 2020 (commencement of
trading) through August 31, 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%
5/18/20 - 8/31/20 2 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%
5/18/20 - 8/31/20 72 0 0 0
Page 18
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST U.S. EQUITY BUFFER ETF - JUNE (FJUN)
The FT Cboe Vest U.S. Equity Buffer ETF - June (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 17.72% (before fees, expenses and taxes) and 16.87%
(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 June 22, 2020 to June 18, 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
"FJUN".
---------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURNS
Inception
(6/19/20)
to 8/31/20
FUND PERFORMANCE
NAV 7.64%
Market Price 7.64%
INDEX PERFORMANCE
S&P 500(R) Index 13.00%
---------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 29.)
Page 19
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST U.S. EQUITY BUFFER ETF - JUNE (FJUN) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JUNE 19, 2020 - AUGUST 31, 2020
FT Cboe Vest U.S. Equity S&P 500(R)
Buffer ETF - June Index
6/19/20 $10,000 $10,000
8/31/20 10,764 11,300
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 AUGUST 31, 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 22, 2020 (commencement
of trading) through August 31, 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%
6/22/20 - 8/31/20 47 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%
6/22/20 - 8/31/20 3 0 0 0
Page 20
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - JUNE (DJUN)
The FT Cboe Vest U.S. Equity Deep Buffer ETF - June (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 10.28% (before fees, expenses and taxes) and 9.43%
(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 June 22, 2020 to June 18, 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
"DJUN".
---------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURNS
Inception
(6/19/20)
to 8/31/20
FUND PERFORMANCE
NAV 4.53%
Market Price 4.26%
INDEX PERFORMANCE
S&P 500(R) Index 13.00%
---------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 29.)
Page 21
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - JUNE (DJUN) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JUNE 19, 2020 - AUGUST 31, 2020
FT Cboe Vest U.S. Equity S&P 500(R)
Deep Buffer ETF - June Index
6/19/20 $10,000 $10,000
8/31/20 10,453 11,300
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 AUGUST 31, 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 22, 2020 (commencement
of trading) through August 31, 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%
6/22/20 - 8/31/20 38 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%
6/22/20 - 8/31/20 12 0 0 0
Page 22
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST U.S. EQUITY BUFFER ETF - JULY (FJUL)
The FT Cboe Vest U.S. Equity Buffer ETF - July (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 14.95% (before fees, expenses and taxes) and 14.10%
(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 July 20, 2020 to July 16, 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
"FJUL".
---------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURNS
Inception
(7/17/20)
to 8/31/20
FUND PERFORMANCE
NAV 4.53%
Market Price 4.23%
INDEX PERFORMANCE
S&P 500(R) Index 8.55%
---------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 29.)
Page 23
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST U.S. EQUITY BUFFER ETF - JULY (FJUL) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JULY 17, 2020 - AUGUST 31, 2020
FT Cboe Vest U.S. Equity S&P 500(R)
Buffer ETF - July Index
7/17/20 $10,000 $10,000
8/31/20 10,453 10,855
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 AUGUST 31, 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 July 20, 2020 (commencement
of trading) through August 31, 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%
7/20/20 - 8/31/20 9 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%
7/20/20 - 8/31/20 22 0 0 0
Page 24
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - JULY (DJUL)
The FT Cboe Vest U.S. Equity Deep Buffer ETF - July (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 8.40% (before fees, expenses and taxes) and 7.55%
(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 July 20, 2020 to July 16, 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
"DJUL".
---------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURNS
Inception
(7/17/20)
to 8/31/20
FUND PERFORMANCE
NAV 2.38%
Market Price 2.25%
INDEX PERFORMANCE
S&P 500(R) Index 8.55%
---------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 29.)
Page 25
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - JULY (DJUL) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JULY 17, 2020 - AUGUST 31, 2020
FT Cboe Vest U.S. Equity S&P 500(R)
Deep Buffer ETF - July Index
7/17/20 $10,000 $10,000
8/31/20 10,238 10,855
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 AUGUST 31, 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 July 20, 2020 (commencement
of trading) through August 31, 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%
7/20/20 - 8/31/20 27 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%
7/20/20 - 8/31/20 4 0 0 0
Page 26
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST FUND OF BUFFER ETFS (BUFR)
The FT Cboe Vest Fund of Buffer ETFs (the "Fund") seeks to provide investors
with capital appreciation. The Fund seeks to achieve its investment objective by
providing investors with US large cap equity market exposure while limiting
downside risk through a laddered portfolio of four FT Cboe Vest U.S. Equity
Buffer ETFs ("Underlying ETFs"). Under normal market conditions the Fund will
invest substantially all of its assets in the Underlying ETFs , which seek to
provide investors with returns (before fees, expenses and taxes) that match the
price return of the SPDR(R) S&P(R) 500 ETF Trust ("SPY"), up to a predetermined
upside cap, while providing a buffer against the first 10% (before fees,
expenses and taxes) of SPY losses, over a defined period of approximately one
year. 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 "BUFR".
---------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURNS
Inception
(8/10/20)
to 8/31/20
FUND PERFORMANCE
NAV 1.80%
Market Price 1.70%
INDEX PERFORMANCE
S&P 500(R) Index 4.16%
---------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 29.)
Page 27
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST FUND OF BUFFER ETFS (BUFR) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
AUGUST 10, 2020 - AUGUST 31, 2020
FT Cboe Vest Fund S&P 500(R)
of Buffer ETFs Index
8/10/20 $10,000 $10,000
8/31/20 10,180 10,416
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 AUGUST 31, 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 August 11, 2020 (commencement
of trading) through August 31, 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%
8/11/20 - 8/31/20 13 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%
8/11/20 - 8/31/20 2 0 0 0
Page 28
--------------------------------------------------------------------------------
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 29
--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
ANNUAL REPORT
AUGUST 31, 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"), FT Cboe Vest U.S. Equity Buffer
ETF - May ("FMAY"), FT Cboe Vest U.S. Equity Deep Buffer ETF - May ("DMAY"), FT
Cboe Vest U.S. Equity Buffer ETF - June ("FJUN"), FT Cboe Vest U.S. Equity Deep
Buffer ETF - June ("DJUN"), FT Cboe Vest U.S. Equity Buffer ETF - July ("FJUL"),
FT Cboe Vest U.S. Equity Deep Buffer ETF - July ("DJUL") and FT Cboe Vest Fund
of Buffer ETFs ("BUFR") (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 $1.8 billion under management or committed to management as of
August 31, 2020.
PORTFOLIO MANAGEMENT TEAM
KARAN SOOD, MANAGING DIRECTOR OF CBOE VEST
HOWARD RUBIN, MANAGING DIRECTOR OF CBOE VEST
COMMENTARY
MARKET RECAP
Each of the monthly FT Cboe Vest Funds seeks 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" or "SPY"), up to a predetermined upside cap (after
fees and expenses, excluding brokerage commissions, trading fees, taxes and
extraordinary expenses not included in each Fund's management fee), while
providing a buffer against a specific level (before fees, expenses and taxes) of
losses in the Underlying ETF, over a specified time period. BUFR seeks to
provide investors with capital appreciation by providing investors with US
large-cap equity market exposure while limiting downside risk through a laddered
portfolio of four FT Cboe Vest U.S. Equity Buffer ETFs. For this reason, the
scope of this annual recap will be constrained to market commentary pertinent
primarily to SPY and, therefore, the S&P 500(R) Index.
During the twelve-month period ended August 31, 2020 financial markets saw the
most dramatic swings and volatility since the Financial Crisis of 2008, brought
on by the coronavirus ("COVID-19") pandemic which roiled almost every market
beginning in February 2020. As economic activity plunged and uncertainty about
the potential length and severity of the economic downturn grew, stock markets
across the globe fell sharply. The S&P 500(R) Index, the well-known measure of
U.S. large-cap stocks, which was up over 15% for the period from September 1,
2019, through mid-February 2020, fell more than 33% in just over one month.
Other U.S. benchmark indices fared worse, including the S&P Midcap 400(R) Index
and the Russell 2000(R) Small Cap Index, which each fell more than 40%, as many
smaller companies fought for survival.
Just as remarkable as the downturn was, the market recovery was just as
surprising. From the March 23, 2020 market low, the primary stock indices began
to rally sharply, albeit not as rapid as the February-to-March decline. The
ensuing rally has been due, in part, to the realization that the initial fears
may have been overblown, strong government and central bank intervention, and
better than expected financials being reported by U.S. companies over the summer
months.
By August 2020, the S&P 500(R) Index had completely recovered its early 2020
losses, and ended the one-year period up 21.9%, significantly outpacing the S&P
Midcap 400(R) Index (up 4.2%) and the Russell 2000(R) Index (up 6.0%), as well
as the broad foreign market indices such as the MSCI EAFE Index (up 6.7%) and
the MSCI Emerging Markets Index (up 14.9%).
Within the S&P 500(R) Index, the various market sectors saw dramatic differences
in their fortunes. The Information Technology sector was up a stunning 57.9% for
the twelve-month period ended August 31, 2020, as the "Work from Home" component
of the economy exploded amid government-mandated shutdowns. At the other end of
the spectrum, the Energy sector was crushed, falling about 60% early in 2020,
and ending the same period down 33.5%.
Page 30
--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
ANNUAL REPORT
AUGUST 31, 2020 (UNAUDITED)
Throughout the COVID-19 crisis, governments across the globe moved quickly and
forcefully, providing their economies support in the way of monetary and fiscal
easing. While it remains to be seen what the long-term costs of these actions
will be, the short-term benefits of propping up wide swaths of the economy has
helped to lessen the economic damage caused by COVID-19.
U.S. economic data whipsawed along with the financial markets. Gross domestic
product growth in the second quarter of 2020 fell at an (seasonally adjusted)
annualized rate of 32% and is projected to increase by 25% in the third quarter
of 2020, according to a Bloomberg consensus forecast of economists. The U.S.
unemployment rate, which had been sitting at a 50-year low of 3.5% in February
2020, shot up to 14.7% by April. This rate then began to reverse course and has
tapered down to 8.4% as of August.
U.S inflation levels fell in the spring as expected by the weakening economy,
and then began to recover by late summer, albeit not to the pre-COVID-19 levels.
MARKET AND FUND OUTLOOK
We expect U.S. equity markets to continue to have higher than normal volatility
over the coming year. The CBOE S&P 500 1-Year Volatility Index, which is derived
from option prices, estimates the market's expectation of the S&P 500 volatility
for the next twelve months. This index, which peaked this year at 46% on March
18, 2020, was still at a very elevated level of 34% as of the end the
twelve-month period ended August 31, 2020. For comparison purposes, this index
averaged 19% during the first five months of the period, which preceded the
market's reaction to the virus.
The FT Cboe Vest Funds are designed to protect investors against varying levels
of downside movements in SPY, an ETF that seeks to track the S&P 500(R) Index,
while limiting the investor's participation in larger upside moves in SPY. Thus,
we see these ETFs as important investment options for one's portfolio during
periods of potentially higher market volatility.
PERFORMANCE ANALYSIS
The following table provides information pertaining to recent caps and
performance for the period ended August 31, 2020 for each FT Cboe Vest Fund, as
well as an attribution analysis that estimates the impact of various factors on
each Fund's performance.
Each Fund's cap is reset at the Fund's annual reset date. The table shows the
caps that were in effect both at the beginning of the period and after the
annual reset date that occurred within the period. Both of these caps are shown
pre and post expenses. Funds that were launched within the period do not yet
have new caps, as they have not yet reached their first annual reset date.
Each Fund's performance may be impacted by a number of factors. These factors
include changes in each of: the level of SPY, SPY dividends, interest rates,
implied volatility, and time to option expiration. Generally, changes in the
level of SPY is the primary factor, but the other factors can also contribute
significantly to Fund performance. Additionally, expenses will impact Fund
performance.
The impact from these factors for the period from each Fund's inception date
through August 31, 2020 are shown in the table under "Estimated Performance
Attribution."
Page 31
--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
ANNUAL REPORT
AUGUST 31, 2020 (UNAUDITED)
FUND TICKER FAUG DAUG FNOV DNOV FFEB DFEB FMAY DMAY FJUN DJUN FJUL DJUL BUFR
Annual Expense
Ratio 0.85% 0.85% 0.85% 0.85% 0.85% 0.85% 0.85% 0.85% 0.85% 0.85% 0.85% 0.85% 1.05%
Reporting
Period
Start Date
(close of
Seed Date) 11/6/19 11/6/19 11/15/19 11/15/19 2/21/20 2/21/20 5/15/20 5/15/20 6/19/20 6/19/20 7/17/20 7/17/20 8/10/20
Reporting
Period End
Date (close
of Period) 8/31/20 8/31/20 8/31/20 8/31/20 8/31/20 8/31/20 8/31/20 8/31/20 8/31/20 8/31/20 8/31/20 8/31/20 8/31/20
CAP INFORMATION:
Cap Prior to
Annual
Reset (pre-
expenses) 8.60% 6.58% 12.36% 8.12% 10.75% 7.50% 17.07% 9.95% 17.72% 10.28% 14.95% 8.40% NA
Cap Prior to
Annual
Reset (post
-expenses) 7.93% 5.91% 11.50% 7.26% 9.90% 6.65% 16.21% 9.09% 16.87% 9.43% 14.10% 7.55% NA
Reset Date
(prior to
8/31/20) 8/21/20 8/21/20 None None None None None None None None None None NA
New Cap on
Annual Reset
Date (pre-
expenses) 14.71% 8.63% None None None None None None None None None None NA
New Cap on
Annual Reset
Date (post-
expenses) 13.86% 7.78% None None None None None None None None None None NA
PERFORMANCE (CLOSE OF SEED DATE TO 8/31/20):
Fund Perform-
ance (using
NAVs) 9.47% 6.81% 7.62% 5.04% 2.61% 1.83% 10.32% 5.96% 7.64% 4.53% 4.53% 2.38% 1.80%
Fund Perform-
ance (using
Market
Price) 9.50% 6.81% 7.79% 5.04% 2.77% 2.09% 9.89% 5.50% 7.64% 4.26% 4.23% 2.25% 1.70%
SPY Price
Return 13.74% 13.74% 12.03% 12.03% 4.75% 4.75% 22.02% 22.02% 13.18% 13.18% 8.58% 8.58% 4.09%
ESTIMATED PERFORMANCE ATTRIBUTION
Fund NAV Performance Attributed to:
a) Changes in
SPY 6.93% 5.21% 7.41% 4.72% 3.19% 2.08% 10.10% 5.98% 7.54% 4.51% 4.71% 2.82% 1.88%
b) Changes in
other
Variables* 3.24% 2.30% 0.89% 1.00% -0.13% 0.20% 0.47% 0.23% 0.27% 0.19% -0.08% -0.34% -0.02%
c) Expenses
(pro-rated
annual exp-
ense ratio) -0.70% -0.70% -0.68% -0.68% -0.45% -0.45% -0.25% -0.25% -0.17% -0.17% -0.10% -0.10% -0.06%
Attribution
TOTAL 9.47% 6.81% 7.62% 5.04% 2.61% 1.83% 10.32% 5.96% 7.64% 4.53% 4.53% 2.38% 1.80%
* Includes changes in a) SPY dividends, b) interest rates, c) implied
volatility, and d) time to option expiration
Page 32
FIRST TRUST EXCHANGE-TRADED FUND VIII
UNDERSTANDING YOUR FUND EXPENSES
AUGUST 31, 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, FT Cboe Vest U.S. Equity Deep Buffer ETF -
February, FT Cboe Vest U.S. Equity Buffer ETF - May, FT Cboe Vest U.S. Equity
Deep Buffer ETF - May, FT Cboe Vest U.S. Equity Buffer ETF - June, FT Cboe Vest
U.S. Equity Deep Buffer ETF - June, FT Cboe Vest U.S. Equity Buffer ETF - July,
FT Cboe Vest U.S. Equity Deep Buffer ETF - July or FT Cboe Vest Fund of Buffer
ETFs (each a "Fund" and collectively, the "Funds"), you incur two types of
costs: (1) transaction costs; and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, if any, and other Fund expenses. This
Example is intended to help you understand your ongoing costs of investing in
the Funds and to compare these costs with the ongoing costs of investing in
other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period (or since inception) and held through the six-month (or shorter) period
ended August 31, 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 six-month (or
shorter) 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 NUMBER OF DAYS SIX-MONTH
MARCH 1, 2020 AUGUST 31, 2020 IN THE PERIOD PERIOD (a)
-------------------------------------------------------------------------------------------------------------------------
FT CBOE VEST U.S. EQUITY BUFFER ETF - AUGUST (FAUG)
Actual $1,000.00 $1,121.10 0.85% $4.53
Hypothetical (5% return before expenses) $1,000.00 $1,020.86 0.85% $4.32
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - AUGUST (DAUG)
Actual $1,000.00 $1,089.50 0.85% $4.46
Hypothetical (5% return before expenses) $1,000.00 $1,020.86 0.85% $4.32
FT CBOE VEST U.S. EQUITY BUFFER ETF - NOVEMBER (FNOV)
Actual $1,000.00 $1,108.90 0.85% $4.51
Hypothetical (5% return before expenses) $1,000.00 $1,020.86 0.85% $4.32
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - NOVEMBER (DNOV)
Actual $1,000.00 $1,082.30 0.85% $4.45
Hypothetical (5% return before expenses) $1,000.00 $1,020.86 0.85% $4.32
FT CBOE VEST U.S. EQUITY BUFFER ETF - FEBRUARY (FFEB)
Actual $1,000.00 $1,113.50 0.85% $4.52
Hypothetical (5% return before expenses) $1,000.00 $1,020.86 0.85% $4.32
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - FEBRUARY (DFEB)
Actual $1,000.00 $1,076.10 0.85% $4.44
Hypothetical (5% return before expenses) $1,000.00 $1,020.86 0.85% $4.32
Page 33
FIRST TRUST EXCHANGE-TRADED FUND VIII
UNDERSTANDING YOUR FUND EXPENSES (CONTINUED)
AUGUST 31, 2020 (UNAUDITED)
-----------------------------------------------------------------------------------------------------------------------------------
ANNUALIZED EXPENSES PAID
EXPENSE RATIO DURING THE PERIOD
BEGINNING ENDING BASED ON THE MAY 15, 2020 (b)
ACCOUNT VALUE ACCOUNT VALUE NUMBER OF DAYS TO
MAY 15, 2020 (b) AUGUST 31, 2020 IN THE PERIOD AUGUST 31, 2020 (c)
-----------------------------------------------------------------------------------------------------------------------------------
FT CBOE VEST U.S. EQUITY BUFFER ETF - MAY (FMAY)
Actual $1,000.00 $1,103.20 0.85% $2.66
Hypothetical (5% return before expenses) $1,000.00 $1,020.86 0.85% $4.32
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - MAY (DMAY)
Actual $1,000.00 $1,059.60 0.85% $2.61
Hypothetical (5% return before expenses) $1,000.00 $1,020.86 0.85% $4.32
-----------------------------------------------------------------------------------------------------------------------------------
ANNUALIZED EXPENSES PAID
EXPENSE RATIO DURING THE PERIOD
BEGINNING ENDING BASED ON THE JUNE 19, 2020 (b)
ACCOUNT VALUE ACCOUNT VALUE NUMBER OF DAYS TO
JUNE 19, 2020 (b) AUGUST 31, 2020 IN THE PERIOD AUGUST 31, 2020 (d)
-----------------------------------------------------------------------------------------------------------------------------------
FT CBOE VEST U.S. EQUITY BUFFER ETF - JUNE (FJUN)
Actual $1,000.00 $1,076.40 0.85% $1.78
Hypothetical (5% return before expenses) $1,000.00 $1,020.86 0.85% $4.32
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - JUNE (DJUN)
Actual $1,000.00 $1,045.30 0.85% $1.76
Hypothetical (5% return before expenses) $1,000.00 $1,020.86 0.85% $4.32
-----------------------------------------------------------------------------------------------------------------------------------
ANNUALIZED EXPENSES PAID
EXPENSE RATIO DURING THE PERIOD
BEGINNING ENDING BASED ON THE JULY 17, 2020 (b)
ACCOUNT VALUE ACCOUNT VALUE NUMBER OF DAYS TO
JULY 17, 2020 (b) AUGUST 31, 2020 IN THE PERIOD AUGUST 31, 2020 (e)
-----------------------------------------------------------------------------------------------------------------------------------
FT CBOE VEST U.S. EQUITY BUFFER ETF - JULY (FJUL)
Actual $1,000.00 $1,045.30 0.85% $1.09
Hypothetical (5% return before expenses) $1,000.00 $1,020.86 0.85% $4.32
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - JULY (DJUL)
Actual $1,000.00 $1,023.80 0.85% $1.08
Hypothetical (5% return before expenses) $1,000.00 $1,020.86 0.85% $4.32
-----------------------------------------------------------------------------------------------------------------------------------
ANNUALIZED EXPENSES PAID
EXPENSE RATIO DURING THE PERIOD
BEGINNING ENDING BASED ON THE AUGUST 10, 2020 (b)
ACCOUNT VALUE ACCOUNT VALUE NUMBER OF DAYS TO
AUGUST 10, 2020 (b) AUGUST 31, 2020 IN THE PERIOD (f) AUGUST 31, 2020 (f) (g)
-----------------------------------------------------------------------------------------------------------------------------------
FT CBOE VEST FUND OF BUFFER ETFS (BUFR)
Actual $1,000.00 $1,018.00 0.20% $0.12
Hypothetical (5% return before expenses) $1,000.00 $1,024.13 0.20% $1.02
(a) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (March 1,
2020 through August 31, 2020), multiplied by 184/366 (to reflect the
six-month period).
(b) Inception date.
(c) Actual expenses are equal to the annualized expense ratio as indicated in
the table multiplied by the average account value over the period (May 15,
2020 through August 31, 2020), multiplied by 109/366. 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 (June
19, 2020 through August 31, 2020), multiplied by 74/366. Hypothetical
expenses are assumed for the most recent six-month period.
(e) Actual expenses are equal to the annualized expense ratio as indicated in
the table multiplied by the average account value over the period (July
17, 2020 through August 31, 2020), multiplied by 46/366. Hypothetical
expenses are assumed for the most recent six-month period.
(f) Annualized expense ratio and expenses paid during the period do not
include fees and expenses of the underlying funds in which the Fund
invests.
(g) Actual expenses are equal to the annualized expense ratio as indicated in
the table multiplied by the average account value over the period (August
10, 2020 through August 31, 2020), multiplied by 22/366. Hypothetical
expenses are assumed for the most recent six-month period.
Page 34
FT CBOE VEST U.S. EQUITY BUFFER ETF - AUGUST (FAUG)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
-------------- ----------------------------------------------------------------------------------------------- --------------
MONEY MARKET FUNDS -- 1.2%
417,525 Dreyfus Government Cash Management Fund, Institutional Shares - 0.04% (a)...................... $ 417,525
(Cost $417,525) --------------
TOTAL INVESTMENTS -- 1.2%...................................................................... 417,525
(Cost $417,525) (b) --------------
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
-------------- --------------------------------------------------- ------------- ----------- ---------- --------------
PURCHASED OPTIONS -- 107.4%
CALL OPTIONS PURCHASED -- 98.8%
1,054 SPDR(R) S&P 500(R) ETF Trust....................... $ 36,817,274 $ 3.39 08/20/21 35,821,244
(Cost $34,975,742) --------------
PUT OPTIONS PURCHASED -- 8.6%
1,054 SPDR(R) S&P 500(R) ETF Trust....................... 36,817,274 339.48 08/20/21 3,115,624
(Cost $3,383,030) --------------
TOTAL PURCHASED OPTIONS........................................................................ 38,936,868
(Cost $38,358,772) --------------
WRITTEN OPTIONS -- (8.6)%
CALL OPTIONS WRITTEN -- (2.9)%
(1,054) SPDR(R) S&P 500(R) ETF Trust....................... (36,817,274) 389.42 08/20/21 (1,057,162)
(Premiums received $768,364) --------------
PUT OPTIONS WRITTEN -- (5.7)%
(1,054) SPDR(R) S&P 500(R) ETF Trust....................... (36,817,274) 305.53 08/20/21 (2,047,922)
(Premiums received $2,139,435) --------------
TOTAL WRITTEN OPTIONS.......................................................................... (3,105,084)
(Premiums received $2,907,799) --------------
NET OTHER ASSETS AND LIABILITIES -- (0.0)%..................................................... (2,831)
--------------
NET ASSETS -- 100.0%........................................................................... $ 36,246,478
==============
-----------------------------
(a) Rate shown reflects yield as of August 31, 2020.
(b) Aggregate cost for federal income tax purposes is $35,868,498. As of
August 31, 2020, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$943,319 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$562,508. The net unrealized appreciation was $380,811. The amounts
presented are inclusive of derivative contracts.
See Notes to Financial Statements Page 35
FT CBOE VEST U.S. EQUITY BUFFER ETF - AUGUST (FAUG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of August 31,
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
8/31/2020 PRICES INPUTS INPUTS
-------------- ------------- ------------- -------------
Money Market Funds.............................. $ 417,525 $ 417,525 $ -- $ --
-------------- ------------- ------------- -------------
Total Investments............................... 417,525 417,515 -- --
Call Options Purchased.......................... 35,821,244 -- 35,821,244 --
Put Options Purchased........................... 3,115,624 -- 3,115,624 --
-------------- ------------- ------------- -------------
Total........................................... $ 39,354,393 $ 417,525 $ 38,936,868 $ --
============== ============= ============= =============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
8/31/2020 PRICES INPUTS INPUTS
-------------- ------------- ------------- -------------
Call Options Written............................ $ (1,057,162) $ -- $ (1,057,162) $ --
Put Options Written............................. (2,047,922) -- (2,047,922) --
-------------- ------------- ------------- -------------
Total........................................... $ (3,105,084) $ -- $ (3,105,084) $ --
============== ============= ============= =============
Page 36 See Notes to Financial Statements
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - AUGUST (DAUG)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
-------------- ----------------------------------------------------------------------------------------------- --------------
MONEY MARKET FUNDS -- 1.2%
1,642,501 Dreyfus Government Cash Management Fund, Institutional Shares - 0.04% (a)...................... $ 1,642,501
(Cost $1,642,501) --------------
TOTAL INVESTMENTS -- 1.2%...................................................................... 1,642,501
(Cost $1,642,501) (b) --------------
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
-------------- --------------------------------------------------- ------------- ----------- ---------- --------------
PURCHASED OPTIONS -- 106.5%
CALL OPTIONS PURCHASED -- 99.5%
3,899 SPDR(R) S&P 500(R) ETF Trust....................... $ 136,195,969 $ 3.38 08/20/21 132,792,142
(Cost $128,930,660) --------------
PUT OPTIONS PURCHASED -- 7.0%
3,899 SPDR(R) S&P 500(R) ETF Trust....................... 136,195,969 322.51 08/20/21 9,295,216
(Cost $10,635,284) --------------
TOTAL PURCHASED OPTIONS........................................................................ 142,087,358
(Cost $139,565,944) --------------
WRITTEN OPTIONS -- (7.6)%
CALL OPTIONS WRITTEN -- (5.4)%
(3,899) SPDR(R) S&P 500(R) ETF Trust....................... (136,195,969) 368.78 08/20/21 (7,205,352)
(Premiums received $5,753,422) --------------
PUT OPTIONS WRITTEN -- (2.2)%
(3,899) SPDR(R) S&P 500(R) ETF Trust....................... (136,195,969) 237.64 08/20/21 (2,939,846)
(Premiums received $2,917,440) --------------
TOTAL WRITTEN OPTIONS.......................................................................... (10,145,198)
(Premiums received $8,670,862) --------------
NET OTHER ASSETS AND LIABILITIES -- (0.1)%..................................................... (153,170)
--------------
NET ASSETS -- 100.0%........................................................................... $ 133,431,491
==============
-----------------------------
(a) Rate shown reflects yield as of August 31, 2020.
(b) Aggregate cost for federal income tax purposes is $132,537,583. As of
August 31, 2020, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$3,861,482 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$2,814,404. The net unrealized appreciation was $1,047,078. The amounts
presented are inclusive of derivative contracts.
See Notes to Financial Statements Page 37
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - AUGUST (DAUG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of August 31,
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
8/31/2020 PRICES INPUTS INPUTS
-------------- ------------- ------------- -------------
Money Market Funds.............................. $ 1,642,501 $ 1,642,501 $ -- $ --
-------------- ------------- ------------- -------------
Total Investments............................... 1,642,501 1,642,501 -- --
Call Options Purchased.......................... 132,792,142 -- 132,792,142 --
Put Options Purchased........................... 9,295,216 -- 9,295,216 --
-------------- ------------- ------------- -------------
Total........................................... $ 143,729,859 $ 1,642,501 $ 142,087,358 $ --
============== ============= ============= =============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
8/31/2020 PRICES INPUTS INPUTS
-------------- ------------- ------------- -------------
Call Options Written............................ $ (7,205,352) $ -- $ (7,205,352) $ --
Put Options Written............................. (2,939,846) -- (2,939,846) --
-------------- ------------- ------------- -------------
Total........................................... $ (10,145,198) $ -- $ (10,145,198) $ --
============== ============= ============= =============
Page 38 See Notes to Financial Statements
FT CBOE VEST U.S. EQUITY BUFFER ETF - NOVEMBER (FNOV)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
-------------- ----------------------------------------------------------------------------------------------- --------------
MONEY MARKET FUNDS -- 0.6%
765,760 Dreyfus Government Cash Management Fund, Institutional Shares - 0.04% (a)...................... $ 765,760
(Cost $765,760) --------------
TOTAL INVESTMENTS -- 0.6%...................................................................... 765,760
(Cost $765,760) (b) --------------
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
-------------- --------------------------------------------------- ------------- ----------- ---------- --------------
PURCHASED OPTIONS -- 104.7%
CALL OPTIONS PURCHASED -- 102.7%
4,116 SPDR(R) S&P 500(R) ETF Trust....................... $ 143,775,996 $ 3.12 11/20/20 141,899,100
(Cost $123,353,130) --------------
PUT OPTIONS PURCHASED -- 2.0%
4,116 SPDR(R) S&P 500(R) ETF Trust....................... 143,775,996 311.79 11/20/20 2,831,808
(Cost $8,870,583) --------------
TOTAL PURCHASED OPTIONS........................................................................ 144,730,908
(Cost $132,223,713) --------------
WRITTEN OPTIONS -- (5.2)%
CALL OPTIONS WRITTEN -- (4.2)%
(4,116) SPDR(R) S&P 500(R) ETF Trust....................... (143,775,996) 350.33 11/20/20 (5,861,184)
(Premiums received $1,548,951) --------------
PUT OPTIONS WRITTEN -- (1.0)%
(4,116) SPDR(R) S&P 500(R) ETF Trust....................... (143,775,996) 280.61 11/20/20 (1,415,904)
(Premiums received $6,140,533) --------------
TOTAL WRITTEN OPTIONS.......................................................................... (7,277,088)
(Premiums received $7,689,484) --------------
NET OTHER ASSETS AND LIABILITIES -- (0.1)%..................................................... (86,626)
--------------
NET ASSETS -- 100.0%........................................................................... $ 138,132,954
==============
-----------------------------
(a) Rate shown reflects yield as of August 31, 2020.
(b) Aggregate cost for federal income tax purposes is $129,122,488. As of
August 31, 2020, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$22,897,096 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$13,800,004. The net unrealized appreciation was $9,097,092. The amounts
presented are inclusive of derivative contracts.
See Notes to Financial Statements Page 39
FT CBOE VEST U.S. EQUITY BUFFER ETF - NOVEMBER (FNOV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of August 31,
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
8/31/2020 PRICES INPUTS INPUTS
-------------- ------------- ------------- -------------
Money Market Funds.............................. $ 765,760 $ 765,760 $ -- $ --
-------------- ------------- ------------- -------------
Total Investments............................... 765,760 765,760 -- --
Call Options Purchased.......................... 141,899,100 -- 141,899,100 --
Put Options Purchased........................... 2,831,808 -- 2,831,808 --
-------------- ------------- ------------- -------------
Total........................................... $ 145,496,668 $ 765,760 $ 144,730,908 $ --
============== ============= ============= =============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
8/31/2020 PRICES INPUTS INPUTS
-------------- ------------- ------------- -------------
Call Options Written............................ $ (5,861,184) $ -- $ (5,861,184) $ --
Put Options Written............................. (1,415,904) -- (1,415,904) --
-------------- ------------- ------------- -------------
Total........................................... $ (7,277,088) $ -- $ (7,277,088) $ --
============== ============= ============= =============
Page 40 See Notes to Financial Statements
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - NOVEMBER (DNOV)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
-------------- ----------------------------------------------------------------------------------------------- --------------
MONEY MARKET FUNDS -- 0.5%
710,607 Dreyfus Government Cash Management Fund, Institutional Shares - 0.04% (a)...................... $ 710,607
(Cost $710,607) --------------
TOTAL INVESTMENTS -- 0.5%...................................................................... 710,607
(Cost $710,607) (b) --------------
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
-------------- --------------------------------------------------- ------------- ----------- ---------- --------------
PURCHASED OPTIONS -- 107.0%
CALL OPTIONS PURCHASED -- 105.6%
4,459 SPDR(R) S&P 500(R) ETF Trust....................... $ 155,757,329 $ 3.13 11/20/20 154,162,426
(Cost $119,862,479) --------------
PUT OPTIONS PURCHASED -- 1.4%
4,459 SPDR(R) S&P 500(R) ETF Trust....................... 155,757,329 296.20 11/20/20 2,015,151
(Cost $15,153,990) --------------
TOTAL PURCHASED OPTIONS........................................................................ 156,177,577
(Cost $135,016,469) --------------
WRITTEN OPTIONS -- (7.4)%
CALL OPTIONS WRITTEN -- (7.1)%
(4,459) SPDR(R) S&P 500(R) ETF Trust....................... (155,757,329) 337.11 11/20/20 (10,342,131)
(Premiums received $1,889,856) --------------
PUT OPTIONS WRITTEN -- (0.3)%
(4,459) SPDR(R) S&P 500(R) ETF Trust....................... (155,757,329) 218.25 11/20/20 (432,640)
(Premiums received $5,946,889) --------------
TOTAL WRITTEN OPTIONS.......................................................................... (10,774,771)
(Premiums received $7,836,745) --------------
NET OTHER ASSETS AND LIABILITIES -- (0.1)%..................................................... (100,968)
--------------
NET ASSETS -- 100.0%........................................................................... $ 146,012,445
==============
-----------------------------
(a) Rate shown reflects yield as of August 31, 2020.
(b) Aggregate cost for federal income tax purposes is $131,396,208. As of
August 31, 2020, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$38,465,903 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$23,748,698. The net unrealized appreciation was $14,717,205. The amounts
presented are inclusive of derivative contracts.
See Notes to Financial Statements Page 41
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - NOVEMBER (DNOV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of August 31,
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
8/31/2020 PRICES INPUTS INPUTS
-------------- ------------- ------------- -------------
Money Market Funds.............................. $ 710,607 $ 710,607 $ -- $ --
-------------- ------------- ------------- -------------
Total Investments............................... 710,607 710,607 -- --
Call Options Purchased.......................... 154,162,426 -- 154,162,426 --
Put Options Purchased........................... 2,015,151 -- 2,015,151 --
-------------- ------------- ------------- -------------
Total........................................... $ 156,888,184 $ 710,607 $ 156,177,577 $ --
============== ============= ============= =============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
8/31/2020 PRICES INPUTS INPUTS
-------------- ------------- ------------- -------------
Call Options Written............................ $ (10,342,131) $ -- $ (10,342,131) $ --
Put Options Written............................. (432,640) -- (432,640) --
-------------- ------------- ------------- -------------
Total........................................... $ (10,774,771) $ -- $ (10,774,771) $ --
============== ============= ============= =============
Page 42 See Notes to Financial Statements
FT CBOE VEST U.S. EQUITY BUFFER ETF - FEBRUARY (FFEB)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
-------------- ----------------------------------------------------------------------------------------------- --------------
MONEY MARKET FUNDS -- 0.8%
1,657,743 Dreyfus Government Cash Management Fund, Institutional Shares - 0.04% (a)...................... $ 1,657,743
(Cost $1,657,743) --------------
TOTAL INVESTMENTS -- 0.8%...................................................................... 1,657,743
(Cost $1,657,743) (b) --------------
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
-------------- --------------------------------------------------- ------------- ----------- ---------- --------------
PURCHASED OPTIONS -- 105.6%
CALL OPTIONS PURCHASED -- 100.3%
6,164 SPDR(R) S&P 500(R) ETF Trust....................... $ 215,314,684 $ 3.33 02/19/21 211,425,200
(Cost $188,454,291) --------------
PUT OPTIONS PURCHASED -- 5.3%
6,164 SPDR(R) S&P 500(R) ETF Trust....................... 215,314,684 333.48 02/19/21 11,249,300
(Cost $19,785,588) --------------
TOTAL PURCHASED OPTIONS........................................................................ 222,674,500
(Cost $208,239,879) --------------
WRITTEN OPTIONS -- (6.3)%
CALL OPTIONS WRITTEN -- (3.2)%
(6,164) SPDR(R) S&P 500(R) ETF Trust....................... (215,314,684) 369.33 02/19/21 (6,700,268)
(Premiums received $1,749,231) --------------
PUT OPTIONS WRITTEN -- (3.1)%
(6,164) SPDR(R) S&P 500(R) ETF Trust....................... (215,314,684) 300.13 02/19/21 (6,589,316)
(Premiums received $12,945,246) --------------
TOTAL WRITTEN OPTIONS.......................................................................... (13,289,584)
(Premiums received $14,694,477) --------------
NET OTHER ASSETS AND LIABILITIES -- (0.1)%..................................................... (117,242)
--------------
NET ASSETS -- 100.0%........................................................................... $ 210,925,417
==============
-----------------------------
(a) Rate shown reflects yield as of August 31, 2020.
(b) Aggregate cost for federal income tax purposes is $200,192,112. As of
August 31, 2020, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$29,268,393 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$18,417,846. The net unrealized appreciation was $10,850,547. The amounts
presented are inclusive of derivative contracts.
See Notes to Financial Statements Page 43
FT CBOE VEST U.S. EQUITY BUFFER ETF - FEBRUARY (FFEB)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of August 31,
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
8/31/2020 PRICES INPUTS INPUTS
-------------- ------------- ------------- -------------
Money Market Funds.............................. $ 1,657,743 $ 1,657,743 $ -- $ --
-------------- ------------- ------------- -------------
Total Investments............................... 1,657,743 1,657,743 -- --
Call Options Purchased.......................... 211,425,200 -- 211,425,200 --
Put Options Purchased........................... 11,249,300 -- 11,249,300 --
-------------- ------------- ------------- -------------
Total........................................... $ 224,332,243 $ 1,657,743 $ 222,674,500 $ --
============== ============= ============= =============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
8/31/2020 PRICES INPUTS INPUTS
-------------- ------------- ------------- -------------
Call Options Written............................ $ (6,700,268) $ -- $ (6,700,268) $ --
Put Options Written............................. (6,589,316) -- (6,589,316) --
-------------- ------------- ------------- -------------
Total........................................... $ (13,289,584) $ -- $ (13,289,584) $ --
============== ============= ============= =============
Page 44 See Notes to Financial Statements
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - FEBRUARY (DFEB)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
-------------- ----------------------------------------------------------------------------------------------- --------------
MONEY MARKET FUNDS -- 0.8%
4,097,553 Dreyfus Government Cash Management Fund, Institutional Shares - 0.04% (a)...................... $ 4,097,553
(Cost $4,097,553) --------------
TOTAL INVESTMENTS -- 0.8%...................................................................... 4,097,553
(Cost $4,097,553) (b) --------------
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
-------------- --------------------------------------------------- ------------- ----------- ---------- --------------
PURCHASED OPTIONS -- 105.5%
CALL OPTIONS PURCHASED -- 101.4%
15,732 SPDR(R) S&P 500(R) ETF Trust....................... $ 549,534,492 $ 3.32 02/19/21 541,563,393
(Cost $443,768,486) --------------
PUT OPTIONS PURCHASED -- 4.1%
15,732 SPDR(R) S&P 500(R) ETF Trust....................... 549,534,492 316.81 02/19/21 22,110,835
(Cost $56,484,107) --------------
TOTAL PURCHASED OPTIONS........................................................................ 563,674,228
(Cost $500,252,593) --------------
WRITTEN OPTIONS -- (6.2)%
CALL OPTIONS WRITTEN -- (5.1)%
(15,732) SPDR(R) S&P 500(R) ETF Trust....................... (549,534,492) 358.49 02/19/21 (27,234,779)
(Premiums received $3,901,769) --------------
PUT OPTIONS WRITTEN -- (1.1)%
(15,732) SPDR(R) S&P 500(R) ETF Trust....................... (549,534,492) 233.44 02/19/21 (5,885,064)
(Premiums received $19,987,546) --------------
TOTAL WRITTEN OPTIONS.......................................................................... (33,119,843)
(Premiums received $23,889,315) --------------
NET OTHER ASSETS AND LIABILITIES -- (0.1)%..................................................... (376,299)
--------------
NET ASSETS -- 100.0%........................................................................... $ 534,275,639
==============
-----------------------------
(a) Rate shown reflects yield as of August 31, 2020.
(b) Aggregate cost for federal income tax purposes is $494,647,351. As of
August 31, 2020, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$104,376,525 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$64,371,938. The net unrealized appreciation was $40,004,587. The amounts
presented are inclusive of derivative contracts.
See Notes to Financial Statements Page 45
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - FEBRUARY (DFEB)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of August 31,
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
8/31/2020 PRICES INPUTS INPUTS
-------------- ------------- ------------- -------------
Money Market Funds.............................. $ 4,097,553 $ 4,097,553 $ -- $ --
-------------- ------------- ------------- -------------
Total Investments............................... 4,097,553 4,097,553 -- --
Call Options Purchased.......................... 541,563,393 -- 541,563,393 --
Put Options Purchased........................... 22,110,835 -- 22,110,835 --
-------------- ------------- ------------- -------------
Total........................................... $ 567,771,781 $ 4,097,553 $ 563,674,228 $ --
============== ============= ============= =============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
8/31/2020 PRICES INPUTS INPUTS
-------------- ------------- ------------- -------------
Call Options Written............................ $ (27,234,779) $ -- $ (27,234,779) $ --
Put Options Written............................. (5,885,064) -- (5,885,064) --
-------------- ------------- ------------- -------------
Total........................................... $ (33,119,843) $ -- $ (33,119,843) $ --
============== ============= ============= =============
Page 46 See Notes to Financial Statements
FT CBOE VEST U.S. EQUITY BUFFER ETF - MAY (FMAY)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
-------------- ----------------------------------------------------------------------------------------------- --------------
MONEY MARKET FUNDS -- 0.9%
365,235 Dreyfus Government Cash Management Fund, Institutional Shares - 0.04% (a)...................... $ 365,235
(Cost $365,235) --------------
TOTAL INVESTMENTS -- 0.9%...................................................................... 365,235
(Cost $365,235) (b) --------------
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
-------------- --------------------------------------------------- ------------- ----------- ---------- --------------
PURCHASED OPTIONS -- 113.1%
CALL OPTIONS PURCHASED -- 109.5%
1,219 SPDR(R) S&P 500(R) ETF Trust....................... $ 42,580,889 $ 2.86 05/21/21 42,136,189
(Cost $35,656,874) --------------
PUT OPTIONS PURCHASED -- 3.6%
1,219 SPDR(R) S&P 500(R) ETF Trust....................... 42,580,889 286.28 05/21/21 1,379,638
(Cost $3,224,527) --------------
TOTAL PURCHASED OPTIONS........................................................................ 43,515,827
(Cost $38,881,401) --------------
WRITTEN OPTIONS -- (13.9)%
CALL OPTIONS WRITTEN -- (11.6)%
(1,219) SPDR(R) S&P 500(R) ETF Trust....................... (42,580,889) 335.15 05/21/21 (4,468,696)
(Premiums received $1,299,486) --------------
PUT OPTIONS WRITTEN -- (2.3)%
(1,219) SPDR(R) S&P 500(R) ETF Trust....................... (42,580,889) 257.65 05/21/21 (898,412)
(Premiums received $2,157,275) --------------
TOTAL WRITTEN OPTIONS.......................................................................... (5,367,108)
(Premiums received $3,456,761) --------------
NET OTHER ASSETS AND LIABILITIES -- (0.1)%..................................................... (27,024)
--------------
NET ASSETS -- 100.0%........................................................................... $ 38,486,930
==============
-----------------------------
(a) Rate shown reflects yield as of August 31, 2020.
(b) Aggregate cost for federal income tax purposes is $35,789,875. As of
August 31, 2020, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$7,738,179 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$5,014,100. The net unrealized appreciation was $2,724,079. The amounts
presented are inclusive of derivative contracts.
See Notes to Financial Statements Page 47
FT CBOE VEST U.S. EQUITY BUFFER ETF - MAY (FMAY)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of August 31,
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
8/31/2020 PRICES INPUTS INPUTS
-------------- ------------- ------------- -------------
Money Market Funds.............................. $ 365,235 $ 365,235 $ -- $ --
-------------- ------------- ------------- -------------
Total Investments............................... 365,235 365,235 -- --
Call Options Purchased.......................... 42,136,189 -- 42,136,189 --
Put Options Purchased........................... 1,379,638 -- 1,379,638 --
-------------- ------------- ------------- -------------
Total........................................... $ 43,881,062 $ 365,235 $ 43,515,827 $ --
============== ============= ============= =============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
8/31/2020 PRICES INPUTS INPUTS
-------------- ------------- ------------- -------------
Call Options Written............................ $ (4,468,696) $ -- $ (4,468,696) $ --
Put Options Written............................. (898,412) -- (898,412) --
-------------- ------------- ------------- -------------
Total........................................... $ (5,367,108) $ -- $ (5,367,108) $ --
============== ============= ============= =============
Page 48 See Notes to Financial Statements
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - MAY (DMAY)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
-------------- ----------------------------------------------------------------------------------------------- --------------
MONEY MARKET FUNDS -- 0.9%
104,990 Dreyfus Government Cash Management Fund, Institutional Shares - 0.04% (a)...................... $ 104,990
(Cost $104,990) --------------
TOTAL INVESTMENTS -- 0.9%...................................................................... 104,990
(Cost $104,990) (b) --------------
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
-------------- --------------------------------------------------- ------------- ----------- ---------- --------------
PURCHASED OPTIONS -- 117.0%
CALL OPTIONS PURCHASED -- 114.0%
371 SPDR(R) S&P 500(R) ETF Trust....................... $ 12,959,401 $ 2.85 05/21/21 12,824,428
(Cost $10,757,299) --------------
PUT OPTIONS PURCHASED -- 3.0%
371 SPDR(R) S&P 500(R) ETF Trust....................... 12,959,401 271.97 05/21/21 339,302
(Cost $862,946) --------------
TOTAL PURCHASED OPTIONS........................................................................ 13,163,730
(Cost $11,620,245) --------------
WRITTEN OPTIONS -- (17.8)%
CALL OPTIONS WRITTEN -- (16.8)%
(371) SPDR(R) S&P 500(R) ETF Trust....................... (12,959,401) 314.76 05/21/21 (1,895,802)
(Premiums received $685,366) --------------
PUT OPTIONS WRITTEN -- (1.0)%
(371) SPDR(R) S&P 500(R) ETF Trust....................... (12,959,401) 200.40 05/21/21 (110,606)
(Premiums received $277,859) --------------
TOTAL WRITTEN OPTIONS.......................................................................... (2,006,408)
(Premiums received $963,225) --------------
NET OTHER ASSETS AND LIABILITIES -- (0.1)%..................................................... (7,721)
--------------
NET ASSETS -- 100.0%........................................................................... $ 11,254,591
==============
-----------------------------
(a) Rate shown reflects yield as of August 31, 2020.
(b) Aggregate cost for federal income tax purposes is $10,762,010. As of
August 31, 2020, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$2,234,383 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$1,734,081. The net unrealized appreciation was $500,302. The amounts
presented are inclusive of derivative contracts.
See Notes to Financial Statements Page 49
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - MAY (DMAY)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of August 31,
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
8/31/2020 PRICES INPUTS INPUTS
-------------- ------------- ------------- -------------
Money Market Funds.............................. $ 104,990 $ 104,990 $ -- $ --
-------------- ------------- ------------- -------------
Total Investments............................... 104,990 104,990 -- --
Call Options Purchased.......................... 12,824,428 -- 12,824,428 --
Put Options Purchased........................... 339,302 -- 339,302 --
-------------- ------------- ------------- -------------
Total........................................... $ 13,268,720 $ 104,990 $ 13,163,730 $ --
============== ============= ============= =============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
8/31/2020 PRICES INPUTS INPUTS
-------------- ------------- ------------- -------------
Call Options Written............................ $ (1,895,802) $ -- $ (1,895,802) $ --
Put Options Written............................. (110,606) -- (110,606) --
-------------- ------------- ------------- -------------
Total........................................... $ (2,006,408) $ -- $ (2,006,408) $ --
============== ============= ============= =============
Page 50 See Notes to Financial Statements
FT CBOE VEST U.S. EQUITY BUFFER ETF - JUNE (FJUN)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
-------------- ----------------------------------------------------------------------------------------------- --------------
MONEY MARKET FUNDS -- 1.1%
519,655 Dreyfus Government Cash Management Fund, Institutional Shares - 0.04% (a)...................... $ 519,655
(Cost $519,655) --------------
TOTAL INVESTMENTS -- 1.1%...................................................................... 519,655
(Cost $519,655) (b) --------------
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
-------------- --------------------------------------------------- ------------- ----------- ---------- --------------
PURCHASED OPTIONS -- 108.4%
CALL OPTIONS PURCHASED -- 103.2%
1,470 SPDR(R) S&P 500(R) ETF Trust....................... $ 51,348,570 $ 3.09 06/18/21 50,388,804
(Cost $44,208,940) --------------
PUT OPTIONS PURCHASED -- 5.2%
1,470 SPDR(R) S&P 500(R) ETF Trust....................... 51,348,570 308.64 06/18/21 2,551,265
(Cost $4,752,569) --------------
TOTAL PURCHASED OPTIONS........................................................................ 52,940,069
(Cost $48,961,509) --------------
WRITTEN OPTIONS -- (9.4)%
CALL OPTIONS WRITTEN -- (6.1)%
(1,470) SPDR(R) S&P 500(R) ETF Trust....................... (51,348,570) 363.33 06/18/21 (2,950,279)
(Premiums received $764,074) --------------
PUT OPTIONS WRITTEN -- (3.3)%
(1,470) SPDR(R) S&P 500(R) ETF Trust....................... (51,348,570) 277.78 06/18/21 (1,630,087)
(Premiums received $3,164,609) --------------
TOTAL WRITTEN OPTIONS.......................................................................... (4,580,366)
(Premiums received $3,928,683) --------------
NET OTHER ASSETS AND LIABILITIES -- (0.1)%..................................................... (34,651)
--------------
NET ASSETS -- 100.0%........................................................................... $ 48,844,707
==============
-----------------------------
(a) Rate shown reflects yield as of August 31, 2020.
(b) Aggregate cost for federal income tax purposes is $45,552,481. As of
August 31, 2020, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$7,714,385 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$4,387,508. The net unrealized appreciation was $3,326,877. The amounts
presented are inclusive of derivative contracts.
See Notes to Financial Statements Page 51
FT CBOE VEST U.S. EQUITY BUFFER ETF - JUNE (FJUN)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of August 31,
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
8/31/2020 PRICES INPUTS INPUTS
-------------- ------------- ------------- -------------
Money Market Funds.............................. $ 519,655 $ 519,655 $ -- $ --
-------------- ------------- ------------- -------------
Total Investments............................... 519,655 519,655 -- --
Call Options Purchased.......................... 50,388,804 -- 50,388,804 --
Put Options Purchased........................... 2,551,265 -- 2,551,265 --
-------------- ------------- ------------- -------------
Total........................................... $ 53,459,724 $ 519,655 $ 52,940,069 $ --
============== ============= ============= =============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
8/31/2020 PRICES INPUTS INPUTS
-------------- ------------- ------------- -------------
Call Options Written............................ $ (2,950,279) $ -- $ (2,950,279) $ --
Put Options Written............................. (1,630,087) -- (1,630,087) --
-------------- ------------- ------------- -------------
Total........................................... $ (4,580,366) $ -- $ (4,580,366) $ --
============== ============= ============= =============
Page 52 See Notes to Financial Statements
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - JUNE (DJUN)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
-------------- ----------------------------------------------------------------------------------------------- --------------
MONEY MARKET FUNDS -- 1.0%
211,192 Dreyfus Government Cash Management Fund, Institutional Shares - 0.04% (a)...................... $ 211,192
(Cost $211,192) --------------
TOTAL INVESTMENTS -- 1.0%...................................................................... 211,192
(Cost $211,192) (b) --------------
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
-------------- --------------------------------------------------- ------------- ----------- ---------- --------------
PURCHASED OPTIONS -- 110.6%
CALL OPTIONS PURCHASED -- 106.3%
637 SPDR(R) S&P 500(R) ETF Trust....................... $ 22,251,047 $ 3.08 06/18/21 21,835,785
(Cost $19,191,777) --------------
PUT OPTIONS PURCHASED -- 4.3%
637 SPDR(R) S&P 500(R) ETF Trust....................... 22,251,047 293.21 06/18/21 885,037
(Cost $1,673,958) --------------
TOTAL PURCHASED OPTIONS........................................................................ 22,720,822
(Cost $20,865,735) --------------
WRITTEN OPTIONS -- (11.5)%
CALL OPTIONS WRITTEN -- (10.2)%
(637) SPDR(R) S&P 500(R) ETF Trust....................... (22,251,047) 340.37 06/18/21 (2,092,917)
(Premiums received $785,495) --------------
PUT OPTIONS WRITTEN -- (1.3)%
(637) SPDR(R) S&P 500(R) ETF Trust....................... (22,251,047) 216.05 06/18/21 (274,143)
(Premiums received $522,838) --------------
TOTAL WRITTEN OPTIONS.......................................................................... (2,367,060)
(Premiums received $1,308,333) --------------
NET OTHER ASSETS AND LIABILITIES -- (0.1)%..................................................... (14,274)
--------------
NET ASSETS -- 100.0%........................................................................... $ 20,550,680
==============
-----------------------------
(a) Rate shown reflects yield as of August 31, 2020.
(b) Aggregate cost for federal income tax purposes is $19,768,594. As of
August 31, 2020, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$2,892,703 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$2,096,343. The net unrealized appreciation was $796,360 The amounts
presented are inclusive of derivative contracts.
See Notes to Financial Statements Page 53
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - JUNE (DJUN)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of August 31,
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
8/31/2020 PRICES INPUTS INPUTS
-------------- ------------- ------------- -------------
Money Market Funds.............................. $ 211,192 $ 211,192 $ -- $ --
-------------- ------------- ------------- -------------
Total Investments............................... 211,192 211,192 -- --
Call Options Purchased.......................... 21,835,785 -- 21,835,785 --
Put Options Purchased........................... 885,037 -- 885,037 --
-------------- ------------- ------------- -------------
Total........................................... $ 22,932,014 $ 211,192 $ 22,720,822 $ --
============== ============= ============= =============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
8/31/2020 PRICES INPUTS INPUTS
-------------- ------------- ------------- -------------
Call Options Written............................ $ (2,092,917) $ -- $ (2,092,917) $ --
Put Options Written............................. (274,143) -- (274,143) --
-------------- ------------- ------------- -------------
Total........................................... $ (2,367,060) $ -- $ 2,367,060) $ --
============== ============= ============= =============
Page 54 See Notes to Financial Statements
FT CBOE VEST U.S. EQUITY BUFFER ETF - JULY (FJUL)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
-------------- ----------------------------------------------------------------------------------------------- --------------
MONEY MARKET FUNDS -- 1.1%
375,044 Dreyfus Government Cash Management Fund, Institutional Shares - 0.04% (a)...................... $ 375,044
(Cost $375,044) --------------
TOTAL INVESTMENTS -- 1.1%...................................................................... 375,044
(Cost $375,044) (b) --------------
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
-------------- --------------------------------------------------- ------------- ----------- ---------- --------------
PURCHASED OPTIONS -- 108.6%
CALL OPTIONS PURCHASED -- 102.1%
987 SPDR(R) S&P 500(R) ETF Trust....................... $ 34,476,897 $ 3.22 07/16/21 33,881,435
(Cost $31,778,155) --------------
PUT OPTIONS PURCHASED -- 6.5%
987 SPDR(R) S&P 500(R) ETF Trust....................... 34,476,897 321.72 07/16/21 2,158,022
(Cost $2,725,687) --------------
TOTAL PURCHASED OPTIONS........................................................................ 36,039,457
(Cost $34,503,842) --------------
WRITTEN OPTIONS -- (9.6)%
CALL OPTIONS WRITTEN -- (5.5)%
(987) SPDR(R) S&P 500(R) ETF Trust....................... (34,476,897) 369.82 07/16/21 (1,821,174)
(Premiums received $842,867) --------------
PUT OPTIONS WRITTEN -- (4.1)%
(987) SPDR(R) S&P 500(R) ETF Trust....................... (34,476,897) 289.55 07/16/21 (1,382,047)
(Premiums received $1,751,748) --------------
TOTAL WRITTEN OPTIONS.......................................................................... (3,203,221)
(Premiums received $2,594,615) --------------
NET OTHER ASSETS AND LIABILITIES -- (0.1)%..................................................... (16,841)
--------------
NET ASSETS -- 100.0%........................................................................... $ 33,194,439
==============
-----------------------------
(a) Rate shown reflects yield as of August 31, 2020.
(b) Aggregate cost for federal income tax purposes is $32,284,271. As of
August 31, 2020, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$2,477,031 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$1,550,022. The net unrealized appreciation was $927,009. The amounts
presented are inclusive of derivative contracts.
See Notes to Financial Statements Page 55
FT CBOE VEST U.S. EQUITY BUFFER ETF - JULY (FJUL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of August 31,
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
8/31/2020 PRICES INPUTS INPUTS
-------------- ------------- ------------- -------------
Money Market Funds.............................. $ 375,044 $ 375,044 $ -- $ --
-------------- ------------- ------------- -------------
Total Investments............................... 375,044 375,044 -- --
Call Options Purchased.......................... 33,881,435 -- 33,881,435 --
Put Options Purchased........................... 2,158,022 -- 2,158,022 --
-------------- ------------- ------------- -------------
Total........................................... $ 36,414,501 $ 375,044 $ 36,039,457 $ --
============== ============= ============= =============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
8/31/2020 PRICES INPUTS INPUTS
-------------- ------------- ------------- -------------
Call Options Written............................ $ (1,821,174) $ -- $ (1,821,174) $ --
Put Options Written............................. (1,382,047) -- (1,382,047) --
-------------- ------------- ------------- -------------
Total........................................... $ (3,203,221) $ -- $ (3,203,221) $ --
============== ============= ============= =============
Page 56 See Notes to Financial Statements
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - JULY (DJUL)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
-------------- ----------------------------------------------------------------------------------------------- --------------
MONEY MARKET FUNDS -- 1.1%
136,868 Dreyfus Government Cash Management Fund, Institutional Shares - 0.04% (a)...................... $ 136,868
(Cost $136,868) --------------
TOTAL INVESTMENTS -- 1.1%...................................................................... 136,868
(Cost $136,868) (b) --------------
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
-------------- --------------------------------------------------- ------------- ----------- ---------- --------------
PURCHASED OPTIONS -- 109.6%
CALL OPTIONS PURCHASED -- 104.3%
376 SPDR(R) S&P 500(R) ETF Trust....................... $ 13,134,056 $ 3.21 07/16/21 12,907,589
(Cost $12,043,375) --------------
PUT OPTIONS PURCHASED -- 5.3%
376 SPDR(R) S&P 500(R) ETF Trust....................... 13,134,056 305.63 07/16/21 658,889
(Cost $855,859) --------------
TOTAL PURCHASED OPTIONS........................................................................ 13,566,478
(Cost $12,899,234) --------------
WRITTEN OPTIONS -- (10.6)%
CALL OPTIONS WRITTEN -- (8.9)%
(376) SPDR(R) S&P 500(R) ETF Trust....................... (13,134,056) 348.74 07/16/21 (1,106,339)
(Premiums received $602,543) --------------
PUT OPTIONS WRITTEN -- (1.7)%
(376) SPDR(R) S&P 500(R) ETF Trust....................... (13,134,056) 225.20 07/16/21 (205,273)
(Premiums received $256,577) --------------
TOTAL WRITTEN OPTIONS.......................................................................... (1,311,612)
(Premiums received $859,120) --------------
NET OTHER ASSETS AND LIABILITIES -- (0.1)%..................................................... (7,490)
--------------
NET ASSETS -- 100.0%........................................................................... $ 12,384,244
==============
-----------------------------
(a) Rate shown reflects yield as of August 31, 2020.
(b) Aggregate cost for federal income tax purposes is $12,176,982. As of
August 31, 2020, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$915,518 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$700,766. The net unrealized appreciation was $214,752. The amounts
presented are inclusive of derivative contracts.
See Notes to Financial Statements Page 57
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - JULY (DJUL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of August 31,
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
8/31/2020 PRICES INPUTS INPUTS
-------------- ------------- ------------- -------------
Money Market Funds.............................. $ 136,868 $ 136,868 $ -- $ --
-------------- ------------- ------------- -------------
Total Investments............................... 136,868 136,868 -- --
Call Options Purchased.......................... 12,907,589 -- 12,907,589 --
Put Options Purchased........................... 658,889 -- 658,889 --
-------------- ------------- ------------- -------------
Total........................................... $ 13,703,346 $ 136,868 $ 13,566,478 $ --
============== ============= ============= =============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
8/31/2020 PRICES INPUTS INPUTS
-------------- ------------- ------------- -------------
Call Options Written............................ $ (1,106,339) $ -- $ (1,106,339) $ --
Put Options Written............................. (205,273) -- (205,273) --
-------------- ------------- ------------- -------------
Total........................................... $ (1,311,612) $ -- $ (1,311,612) $ --
============== ============= ============= =============
Page 58 See Notes to Financial Statements
FT CBOE VEST FUND OF BUFFER ETFS (BUFR)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
-------------- --------------------------------- --------------
EXCHANGE-TRADED FUNDS -- 100.0%
CAPITAL MARKETS -- 100.0%
46,656 FT Cboe Vest U.S. Equity Buffer
ETF - August (a) (b) $ 1,542,042
48,666 FT Cboe Vest U.S. Equity Buffer
ETF - February (a) (b) 1,537,359
45,462 FT Cboe Vest U.S. Equity Buffer
ETF - May (a) (b) 1,516,012
46,458 FT Cboe Vest U.S. Equity Buffer
ETF - November (a) (b) 1,528,468
--------------
TOTAL EXCHANGE-TRADED FUNDS
-- 100.0% 6,123,881
(Cost $6,069,106) --------------
MONEY MARKET FUNDS -- 0.0%
406 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class - 0.01% (c) 406
(Cost $406) --------------
TOTAL INVESTMENTS -- 100.0% 6,124,287
(Cost $6,069,512) (d)
NET OTHER ASSETS AND
LIABILITIES -- (0.0)% (398)
--------------
NET ASSETS -- 100.0% $ 6,123,889
==============
-----------------------------
(a) Investment in an affiliated fund.
(b) Non-income producing security.
(c) Rate shown reflects yield as of August 31, 2020.
(d) Aggregate cost for federal income tax purposes is $6,069,512. As of August
31, 2020, the aggregate gross unrealized appreciation for all investments
in which there was an excess of value over tax cost was $54,775 and the
aggregate gross unrealized depreciation for all investments in which there
was an excess of tax cost over value was $0. The net unrealized
appreciation was $54,775.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of August 31,
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* $ 6,123,881 $ -- $ --
Money Market Funds 406 -- --
-------------------------------------------
Total Investments $ 6,124,287 $ -- $ --
===========================================
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 59
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF ASSETS AND LIABILITIES
AUGUST 31, 2020
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 - Unaffiliated..................................... $ 417,525 $ 1,642,501
Investments, at value - Affiliated....................................... -- --
----------------- ------------------
Total investments, at value........................................... 417,525 1,642,501
----------------- ------------------
Options contracts purchased, at value.................................... 38,936,868 142,087,358
Cash..................................................................... 1,653 --
Receivables:
Investment securities sold............................................ 141,228 5,220,944
Dividends............................................................. 18 205
Capital shares sold................................................... 1,647,846 1,608,753
----------------- ------------------
Total Assets.......................................................... 41,145,138 150,559,761
----------------- ------------------
LIABILITIES:
Options contracts written, at value...................................... 3,105,084 10,145,198
Due to custodian......................................................... -- 87
Payables:
Investment securities purchased....................................... 1,773,392 2,041,128
Investment advisory fees.............................................. 20,184 119,030
Capital shares purchased.............................................. -- 4,822,827
----------------- ------------------
Total Liabilities..................................................... 4,898,660 17,128,270
----------------- ------------------
NET ASSETS............................................................... $ 36,246,478 $ 133,431,491
================= ==================
NET ASSETS CONSIST OF:
Paid-in capital.......................................................... $ 36,758,879 $ 144,961,300
Par value................................................................ 11,000 41,500
Accumulated distributable earnings (loss)................................ (523,401) (11,571,309)
----------------- ------------------
NET ASSETS............................................................... $ 36,246,478 $ 133,431,491
================= ==================
NET ASSET VALUE, per share............................................... $ 32.95 $ 32.15
================= ==================
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share)................................ 1,100,002 4,150,002
================= ==================
Investments, at cost - Unaffiliated...................................... $ 417,525 $ 1,642,501
================= ==================
Investments, at cost - Affiliated........................................ $ -- $ --
================= ==================
Total investments, at cost............................................... $ 417,525 $ 1,642,501
================= ==================
Premiums paid on options contracts purchased............................. $ 38,358,772 $ 139,565,944
================= ==================
Premiums received on options contracts written........................... $ 2,907,799 $ 8,670,862
================= ==================
Page 60 See Notes to Financial Statements
FT CBOE VEST FT CBOE VEST FT CBOE VEST FT CBOE VEST FT CBOE VEST FT CBOE VEST
U.S. EQUITY U.S. EQUITY U.S. EQUITY U.S. EQUITY U.S. EQUITY U.S. EQUITY
BUFFER ETF - DEEP BUFFER ETF - BUFFER ETF - DEEP BUFFER ETF - BUFFER ETF - DEEP BUFFER ETF -
NOVEMBER NOVEMBER FEBRUARY FEBRUARY MAY MAY
(FNOV) (DNOV) (FFEB) (DFEB) (FMAY) (DMAY)
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
$ 765,760 $ 710,607 $ 1,657,743 $ 4,097,553 $ 365,235 $ 104,990
-- -- -- -- -- --
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
765,760 710,607 1,657,743 4,097,553 365,235 104,990
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
144,730,908 156,177,577 222,674,500 563,674,228 43,515,827 13,163,730
-- 3,183,425 204 -- -- --
86,450 -- 99,005 -- -- --
37 50 78 251 20 5
1,644,802 991 1,574,409 -- -- --
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
147,227,957 160,072,650 226,005,939 567,772,032 43,881,082 13,268,725
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
7,277,088 10,774,771 13,289,584 33,119,843 5,367,108 2,006,408
28 -- -- 235 -- --
1,723,167 -- 1,661,919 -- -- --
94,720 101,018 129,019 376,315 27,044 7,726
-- 3,184,416 -- -- -- --
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
9,095,003 14,060,205 15,080,522 33,496,393 5,394,152 2,014,134
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
$ 138,132,954 $ 146,012,445 $ 210,925,417 $ 534,275,639 $ 38,486,930 $ 11,254,591
================= ================= ================= ================= ================= =================
$ 129,064,629 $ 132,624,561 $ 199,696,175 $ 495,053,626 $ 35,848,441 $ 10,656,791
42,000 45,500 67,000 171,000 11,500 3,500
9,026,325 13,342,384 11,162,242 39,051,013 2,626,989 594,300
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
$ 138,132,954 $ 146,012,445 $ 210,925,417 $ 534,275,639 $ 38,486,930 $ 11,254,591
================= ================= ================= ================= ================= =================
$ 32.89 $ 32.09 $ 31.48 $ 31.24 $ 33.47 $ 32.16
================= ================= ================= ================= ================= =================
4,200,002 4,550,002 6,700,002 17,100,002 1,150,002 350,002
================= ================= ================= ================= ================= =================
$ 765,760 $ 710,607 $ 1,657,743 $ 4,097,553 $ 365,235 $ 104,990
================= ================= ================= ================= ================= =================
$ -- $ -- $ -- $ -- $ -- $ --
================= ================= ================= ================= ================= =================
$ 765,760 $ 710,607 $ 1,657,743 $ 4,097,553 $ 365,235 $ 104,990
================= ================= ================= ================= ================= =================
$ 132,223,713 $ 135,016,469 $ 208,239,879 $ 500,252,593 $ 38,881,401 $ 11,620,245
================= ================= ================= ================= ================= =================
$ 7,689,484 $ 7,836,745 $ 14,694,477 $ 23,889,315 $ 3,456,761 $ 963,225
================= ================= ================= ================= ================= =================
See Notes to Financial Statements Page 61
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
AUGUST 31, 2020
FT CBOE VEST FT CBOE VEST
U.S. EQUITY U.S. EQUITY
BUFFER ETF - DEEP BUFFER ETF -
JUNE JUNE
(FJUN) (DJUN)
----------------- ------------------
ASSETS:
Investments, at value - Unaffiliated..................................... $ 519,655 $ 211,192
Investments, at value - Affiliated....................................... -- --
----------------- ------------------
Total investments, at value........................................... 519,655 211,192
----------------- ------------------
Options contracts purchased, at value.................................... 52,940,069 22,720,822
Cash..................................................................... -- --
Receivables:
Investment securities sold............................................ -- --
Dividends............................................................. 26 10
Capital shares sold................................................... -- --
----------------- ------------------
Total Assets.......................................................... 53,459,750 22,932,024
----------------- ------------------
LIABILITIES:
Options contracts written, at value...................................... 4,580,366 2,367,060
Due to custodian......................................................... -- --
Payables:
Investment securities purchased....................................... -- --
Investment advisory fees.............................................. 34,677 14,284
Capital shares purchased.............................................. -- --
----------------- ------------------
Total Liabilities..................................................... 4,615,043 2,381,344
----------------- ------------------
NET ASSETS............................................................... $ 48,844,707 $ 20,550,680
================= ==================
NET ASSETS CONSIST OF:
Paid-in capital.......................................................... $ 45,567,933 $ 19,773,946
Par value................................................................ 15,000 6,500
Accumulated distributable earnings (loss)................................ 3,261,774 770,234
----------------- ------------------
NET ASSETS............................................................... $ 48,844,707 $ 20,550,680
================= ==================
NET ASSET VALUE, per share............................................... $ 32.56 $ 31.62
================= ==================
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share)................................ 1,500,002 650,002
================= ==================
Investments, at cost - Unaffiliated...................................... $ 519,655 $ 211,192
================= ==================
Investments, at cost - Affiliated........................................ $ -- $ --
================= ==================
Total investments, at cost............................................... $ 519,655 $ 211,192
================= ==================
Premiums paid on options contracts purchased............................. $ 48,961,509 $ 20,865,735
================= ==================
Premiums received on options contracts written........................... $ 3,928,683 $ 1,308,333
================= ==================
Page 62 See Notes to Financial Statements
FT CBOE VEST FT CBOE VEST
U.S. EQUITY U.S. EQUITY FT CBOE VEST
BUFFER ETF - DEEP BUFFER ETF - FUND OF
JULY JULY BUFFER ETFS
(FJUL) (DJUL) (BUFR)
----------------- ----------------- -----------------
$ 375,044 $ 136,868 $ 406
-- -- 6,123,881
----------------- ----------------- -----------------
375,044 136,868 6,124,287
----------------- ----------------- -----------------
36,039,457 13,566,478 --
-- -- --
-- -- --
13 6 --
-- -- --
----------------- ----------------- -----------------
36,414,514 13,703,352 6,124,287
----------------- ----------------- -----------------
3,203,221 1,311,612 --
-- -- --
-- -- --
16,854 7,496 398
-- -- --
----------------- ----------------- -----------------
3,220,075 1,319,108 398
----------------- ----------------- -----------------
$ 33,194,439 $ 12,384,244 $ 6,123,889
================= ================= =================
$ 32,273,772 $ 12,172,982 $ 6,066,114
10,500 4,000 3,000
910,167 207,262 54,775
----------------- ----------------- -----------------
$ 33,194,439 $ 12,384,244 $ 6,123,889
================= ================= =================
$ 31.61 $ 30.96 $ 20.41
================= ================= =================
1,050,002 400,002 300,002
================= ================= =================
$ 375,044 $ 136,868 $ 406
================= ================= =================
$ -- $ -- $ 6,069,106
================= ================= =================
$ 375,044 $ 136,868 $ 6,069,512
================= ================= =================
$ 34,503,842 $ 12,899,234 $ --
================= ================= =================
$ 2,594,615 $ 859,120 $ --
================= ================= =================
See Notes to Financial Statements Page 63
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED AUGUST 31, 2020
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................................................................ $ 2,378 $ 1,520
----------------- ------------------
Total investment income............................................... 2,378 1,520
----------------- ------------------
EXPENSES:
Investment advisory fees................................................. 95,585 808,493
----------------- ------------------
Total expenses........................................................ 95,585 808,493
----------------- ------------------
NET INVESTMENT INCOME (LOSS)............................................. (93,207) (806,973)
----------------- ------------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Purchased options contracts........................................... (1,253,292) (11,637,033)
Written options contracts............................................. (259,781) (3,329,814)
In-kind redemptions - Purchased options contracts..................... 3,014,282 38,590,572
In-kind redemptions - Written options contracts....................... 1,362,268 7,896,693
----------------- ------------------
Net realized gain (loss)................................................. 2,863,477 31,520,418
----------------- ------------------
Net change in unrealized appreciation (depreciation) on:
Investments - Affiliated.............................................. -- --
Purchased options contracts........................................... 578,096 2,521,414
Written options contracts............................................. (197,285) (1,474,336)
----------------- ------------------
Net change in unrealized appreciation (depreciation)..................... 380,811 1,047,078
----------------- ------------------
NET REALIZED AND UNREALIZED GAIN (LOSS).................................. 3,244,288 32,567,496
----------------- ------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS....................................................... $ 3,151,081 $ 31,760,523
================= ==================
(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.
(d) Inception date is May 15, 2020, which is consistent with the commencement
of investment operations and is the date the initial creation units were
established.
Page 64 See Notes to Financial Statements
FT CBOE VEST FT CBOE VEST FT CBOE VEST FT CBOE VEST FT CBOE VEST FT CBOE VEST
U.S. EQUITY U.S. EQUITY U.S. EQUITY U.S. EQUITY U.S. EQUITY U.S. EQUITY
BUFFER ETF - DEEP BUFFER ETF - BUFFER ETF - DEEP BUFFER ETF - BUFFER ETF - DEEP BUFFER ETF -
NOVEMBER NOVEMBER FEBRUARY FEBRUARY MAY MAY
(FNOV) (b) (DNOV) (b) (FFEB) (c) (DFEB) (c) (FMAY) (d) (DMAY) (d)
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
$ 1,895 $ 1,191 $ 1,995 $ 4,671 $ 84 $ 31
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
1,895 1,191 1,995 4,671 84 31
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
440,452 476,231 528,562 1,901,068 77,843 25,953
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
440,452 476,231 528,562 1,901,068 77,843 25,953
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
(438,557) (475,040) (526,567) (1,896,397) (77,759) (25,922)
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
(2,198,607) (3,639,669) (2,172,308) (10,535,870) (27,764) 39,481
(1,257,669) (766,914) (1,985,482) (2,714,566) 2,761 (34,579)
-- -- -- -- -- 208,706
-- -- -- -- -- (97,478)
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
(3,456,276) (4,406,583) (4,157,790) (13,250,436) (25,003) 116,130
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
-- -- -- -- -- --
12,507,195 21,161,108 14,434,621 63,421,635 4,634,426 1,543,485
412,396 (2,938,026) 1,404,893 (9,230,528) (1,910,347) (1,043,183)
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
12,919,591 18,223,082 15,839,514 54,191,107 2,724,079 500,302
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
9,463,315 13,816,499 11,681,724 40,940,671 2,699,076 616,432
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
$ 9,024,758 $ 13,341,459 $ 11,155,157 $ 39,044,274 $ 2,621,317 $ 590,510
================= ================= ================= ================= ================= =================
See Notes to Financial Statements Page 65
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE PERIOD ENDED AUGUST 31, 2020
FT CBOE VEST FT CBOE VEST
U.S. EQUITY U.S. EQUITY
BUFFER ETF - DEEP BUFFER ETF -
JUNE JUNE
(FJUN) (e) (DJUN) (e)
----------------- ------------------
INVESTMENT INCOME:
Dividends................................................................ $ 64 $ 24
----------------- ------------------
Total investment income............................................... 64 24
----------------- ------------------
EXPENSES:
Investment advisory fees................................................. 68,251 27,099
----------------- ------------------
Total expenses........................................................ 68,251 27,099
----------------- ------------------
NET INVESTMENT INCOME (LOSS)............................................. (68,187) (27,075)
----------------- ------------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Purchased options contracts........................................... -- --
Written options contracts............................................. -- --
In-kind redemptions - Purchased options contracts..................... -- --
In-kind redemptions - Written options contracts....................... -- --
----------------- ------------------
Net realized gain (loss)................................................. -- --
----------------- ------------------
Net change in unrealized appreciation (depreciation) on:
Investments - Affiliated.............................................. -- --
Purchased options contracts........................................... 3,978,560 1,855,087
Written options contracts............................................. (651,683) (1,058,727)
----------------- ------------------
Net change in unrealized appreciation (depreciation)..................... 3,326,877 796,360
----------------- ------------------
NET REALIZED AND UNREALIZED GAIN (LOSS).................................. 3,326,877 796,360
----------------- ------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS....................................................... $ 3,258,690 $ 769,285
================= ==================
(e) Inception date is June 19, 2020, which is consistent with the commencement
of investment operations and is the date the initial creation units were
established.
(f) Inception date is July 17, 2020, which is consistent with the commencement
of investment operations and is the date the initial creation units were
established.
(g) Inception date is August 10, 2020, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
Page 66 See Notes to Financial Statements
FT CBOE VEST FT CBOE VEST
U.S. EQUITY U.S. EQUITY FT CBOE VEST
BUFFER ETF - DEEP BUFFER ETF - FUND OF
JULY JULY BUFFER ETFS
(FJUL) (f) (DJUL) (f) (BUFR) (g)
----------------- ----------------- -----------------
$ 15 $ 7 $ --
----------------- ----------------- -----------------
15 7 --
----------------- ----------------- -----------------
19,786 8,903 398
----------------- ----------------- -----------------
19,786 8,903 398
----------------- ----------------- -----------------
(19,771) (8,896) (398)
----------------- ----------------- -----------------
-- -- --
-- -- --
-- -- --
-- -- --
----------------- ----------------- -----------------
-- -- --
----------------- ----------------- -----------------
-- -- 54,775
1,535,615 667,244 --
(608,606) (452,492) --
----------------- ----------------- -----------------
927,009 214,752 54,775
----------------- ----------------- -----------------
927,009 214,752 54,775
----------------- ----------------- -----------------
$ 907,238 $ 205,856 $ 54,377
================= ================= =================
See Notes to Financial Statements Page 67
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
8/31/20 (a) 8/31/20 (a)
----------------- ------------------
OPERATIONS:
Net investment income (loss)............................................. $ (93,207) $ (806,973)
Net realized gain (loss)................................................. 2,863,477 31,520,418
Net change in unrealized appreciation (depreciation)..................... 380,811 1,047,078
----------------- ------------------
Net increase (decrease) in net assets resulting from operations.......... 3,151,081 31,760,523
----------------- ------------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................................ 72,344,580 390,554,446
Cost of shares redeemed.................................................. (39,249,183) (288,883,478)
----------------- ------------------
Net increase (decrease) in net assets resulting from shareholder
transactions.......................................................... 33,095,397 101,670,968
----------------- ------------------
Total increase (decrease) in net assets.................................. 36,246,478 133,431,491
NET ASSETS:
Beginning of period...................................................... -- --
----------------- ------------------
End of period............................................................ $ 36,246,478 $ 133,431,491
================= ==================
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period.................................. -- --
Shares sold.............................................................. 2,350,002 13,350,002
Shares redeemed.......................................................... (1,250,000) (9,200,000)
----------------- ------------------
Shares outstanding, end of period........................................ 1,100,002 4,150,002
================= ==================
(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.
(d) Inception date is May 15, 2020, which is consistent with the commencement
of investment operations and is the date the initial creation units were
established.
Page 68 See Notes to Financial Statements
FT CBOE VEST FT CBOE VEST FT CBOE VEST FT CBOE VEST FT CBOE VEST FT CBOE VEST
U.S. EQUITY U.S. EQUITY U.S. EQUITY U.S. EQUITY U.S. EQUITY U.S. EQUITY
BUFFER ETF - DEEP BUFFER ETF - BUFFER ETF - DEEP BUFFER ETF - BUFFER ETF - DEEP BUFFER ETF -
NOVEMBER NOVEMBER FEBRUARY FEBRUARY MAY MAY
(FNOV) (DNOV) (FFEB) (DFEB) (FMAY) (DMAY)
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
8/31/20 (b) 8/31/20 (b) 8/31/20 (c) 8/31/20 (c) 8/31/20 (d) 8/31/20 (d)
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
$ (438,557) $ (475,040) $ (526,567) $ (1,896,397) $ (77,759) $ (25,922)
(3,456,276) (4,406,583) (4,157,790) (13,250,436) (25,003) 116,130
12,919,591 18,223,082 15,839,514 54,191,107 2,724,079 500,302
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
9,024,758 13,341,459 11,155,157 39,044,274 2,621,317 590,510
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
138,591,713 154,588,117 216,560,571 596,427,291 39,122,756 15,326,498
(9,483,517) (21,917,131) (16,790,311) (101,195,926) (3,257,143) (4,662,417)
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
129,108,196 132,670,986 199,770,260 495,231,365 35,865,613 10,664,081
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
138,132,954 146,012,445 210,925,417 534,275,639 38,486,930 11,254,591
-- -- -- -- -- --
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
$ 138,132,954 $ 146,012,445 $ 210,925,417 $ 534,275,639 $ 38,486,930 $ 11,254,591
================= ================= ================= ================= ================= =================
-- -- -- -- -- --
4,550,002 5,300,002 7,350,002 20,550,002 1,250,002 500,002
(350,000) (750,000) (650,000) (3,450,000) (100,000) (150,000)
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
4,200,002 4,550,002 6,700,002 17,100,002 1,150,002 350,002
================= ================= ================= ================= ================= =================
See Notes to Financial Statements Page 69
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FT CBOE VEST FT CBOE VEST
U.S. EQUITY U.S. EQUITY
BUFFER ETF - DEEP BUFFER ETF -
JUNE JUNE
(FJUN) (DJUN)
----------------- ------------------
PERIOD ENDED PERIOD ENDED
8/31/20 (e) 8/31/20 (e)
----------------- ------------------
OPERATIONS:
Net investment income (loss)............................................. $ (68,187) $ (27,075)
Net realized gain (loss)................................................. -- --
Net change in unrealized appreciation (depreciation)..................... 3,326,877 796,360
----------------- ------------------
Net increase (decrease) in net assets resulting from operations.......... 3,258,690 769,285
----------------- ------------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................................ 45,586,017 19,781,395
Cost of shares redeemed.................................................. -- --
----------------- ------------------
Net increase (decrease) in net assets resulting from shareholder
transactions.......................................................... 45,586,017 19,781,395
----------------- ------------------
Total increase (decrease) in net assets.................................. 48,844,707 20,550,680
NET ASSETS:
Beginning of period...................................................... -- --
----------------- ------------------
End of period............................................................ $ 48,844,707 $ 20,550,680
================= ==================
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period.................................. -- --
Shares sold.............................................................. 1,500,002 650,002
Shares redeemed.......................................................... - --
----------------- ------------------
Shares outstanding, end of period........................................ 1,500,002 650,002
================= ==================
(e) Inception date is June 19, 2020, which is consistent with the commencement
of investment operations and is the date the initial creation units were
established.
(f) Inception date is July 17, 2020, which is consistent with the commencement
of investment operations and is the date the initial creation units were
established.
(g) Inception date is August 10, 2020, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
Page 70 See Notes to Financial Statements
FT CBOE VEST FT CBOE VEST
U.S. EQUITY U.S. EQUITY FT CBOE VEST
BUFFER ETF - DEEP BUFFER ETF - FUND OF
JULY JULY BUFFER ETFS
(FJUL) (DJUL) (BUFR)
----------------- ----------------- -----------------
PERIOD ENDED PERIOD ENDED PERIOD ENDED
8/31/20 (f) 8/31/20 (f) 8/31/20 (g)
----------------- ----------------- -----------------
$ (19,771) $ (8,896) $ (398)
-- -- --
927,009 214,752 54,775
----------------- ----------------- -----------------
907,238 205,856 54,377
----------------- ----------------- -----------------
32,287,201 12,178,388 6,069,512
-- -- --
----------------- ----------------- -----------------
32,287,201 12,178,388 6,069,512
----------------- ----------------- -----------------
33,194,439 12,384,244 6,123,889
-- -- --
----------------- ----------------- -----------------
$ 33,194,439 $ 12,384,244 $ 6,123,889
================= ================= =================
-- -- --
1,050,002 400,002 300,002
-- -- --
----------------- ----------------- -----------------
1,050,002 400,002 300,002
================= ================= =================
See Notes to Financial Statements Page 71
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
8/31/2020 (a)
--------------
Net asset value, beginning of period........................... $ 30.10
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... (0.08)
Net realized and unrealized gain (loss)........................ 2.93
--------
Total from investment operations............................... 2.85
--------
Net asset value, end of period................................. $ 32.95
========
TOTAL RETURN (b)............................................... 9.47%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 36,246
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 - AUGUST (DAUG)
PERIOD
ENDED
8/31/2020 (a)
--------------
Net asset value, beginning of period........................... $ 30.10
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... (0.19)
Net realized and unrealized gain (loss)........................ 2.24
--------
Total from investment operations............................... 2.05
--------
Net asset value, end of period................................. $ 32.15
========
TOTAL RETURN (b)............................................... 6.81%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $133,431
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.... (0.85)% (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 72 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
8/31/2020 (a)
--------------
Net asset value, beginning of period........................... $ 30.56
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... (0.10)
Net realized and unrealized gain (loss)........................ 2.43
--------
Total from investment operations............................... 2.33
--------
Net asset value, end of period................................. $ 32.89
========
TOTAL RETURN (b)............................................... 7.62%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $138,133
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.... (0.85)% (c)
Portfolio turnover rate (d).................................... 0%
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - NOVEMBER (DNOV)
PERIOD
ENDED
8/31/2020 (a)
--------------
Net asset value, beginning of period........................... $ 30.55
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... (0.10)
Net realized and unrealized gain (loss)........................ 1.64
--------
Total from investment operations............................... 1.54
--------
Net asset value, end of period................................. $ 32.09
========
TOTAL RETURN (b)............................................... 5.04%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $146,012
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.... (0.85)% (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 73
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
8/31/2020 (a)
--------------
Net asset value, beginning of period........................... $ 30.68
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... (0.08)
Net realized and unrealized gain (loss)........................ 0.88
--------
Total from investment operations............................... 0.80
--------
Net asset value, end of period................................. $ 31.48
========
TOTAL RETURN (b)............................................... 2.61%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $210,925
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.... (0.85)% (c)
Portfolio turnover rate (d).................................... 0%
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - FEBRUARY (DFEB)
PERIOD
ENDED
8/31/2020 (a)
--------------
Net asset value, beginning of period........................... $ 30.68
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... (0.11)
Net realized and unrealized gain (loss)........................ 0.67
--------
Total from investment operations............................... 0.56
--------
Net asset value, end of period................................. $ 31.24
========
TOTAL RETURN (b)............................................... 1.83%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $534,276
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.... (0.85)% (c)
Portfolio turnover rate (d).................................... 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) 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 74 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 - MAY (FMAY)
PERIOD
ENDED
8/31/2020 (a)
--------------
Net asset value, beginning of period........................... $ 30.34
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... (0.07)
Net realized and unrealized gain (loss)........................ 3.20
--------
Total from investment operations............................... 3.13
--------
Net asset value, end of period................................. $ 33.47
========
TOTAL RETURN (b)............................................... 10.32%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 38,487
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.... (0.85)% (c)
Portfolio turnover rate (d).................................... 0%
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - MAY (DMAY)
PERIOD
ENDED
8/31/2020 (a)
--------------
Net asset value, beginning of period........................... $ 30.35
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... (0.07)
Net realized and unrealized gain (loss)........................ 1.88
--------
Total from investment operations............................... 1.81
--------
Net asset value, end of period................................. $ 32.16
========
TOTAL RETURN (b)............................................... 5.96%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 11,255
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.... (0.85)% (c)
Portfolio turnover rate (d).................................... 0%
(a) Inception date is May 15, 2020, 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 75
FIRST TRUST EXCHANGE-TRADED FUND VIII
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FT CBOE VEST U.S. EQUITY BUFFER ETF - JUNE (FJUN)
PERIOD
ENDED
8/31/2020 (a)
--------------
Net asset value, beginning of period........................... $ 30.25
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... (0.05)
Net realized and unrealized gain (loss)........................ 2.36
--------
Total from investment operations............................... 2.31
--------
Net asset value, end of period................................. $ 32.56
========
TOTAL RETURN (b)............................................... 7.64%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 48,845
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.... (0.85)% (c)
Portfolio turnover rate (d).................................... 0%
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - JUNE (DJUN)
PERIOD
ENDED
8/31/2020 (a)
--------------
Net asset value, beginning of period........................... $ 30.25
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... (0.04)
Net realized and unrealized gain (loss)........................ 1.41
--------
Total from investment operations............................... 1.37
--------
Net asset value, end of period................................. $ 31.62
========
TOTAL RETURN (b)............................................... 4.53%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 20,551
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.... (0.85)% (c)
Portfolio turnover rate (d).................................... 0%
(a) Inception date is June 19, 2020, 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 76 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 - JULY (FJUL)
PERIOD
ENDED
8/31/2020 (a)
--------------
Net asset value, beginning of period........................... $ 30.24
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... (0.02)
Net realized and unrealized gain (loss)........................ 1.39
--------
Total from investment operations............................... 1.37
--------
Net asset value, end of period................................. $ 31.61
========
TOTAL RETURN (b)............................................... 4.53%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 33,194
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.... (0.85)% (c)
Portfolio turnover rate (d).................................... 0%
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - JULY (DJUL)
PERIOD
ENDED
8/31/2020 (a)
--------------
Net asset value, beginning of period........................... $ 30.24
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... (0.02)
Net realized and unrealized gain (loss)........................ 0.74
--------
Total from investment operations............................... 0.72
--------
Net asset value, end of period................................. $ 30.96
========
TOTAL RETURN (b)............................................... 2.38%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 12,384
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.... (0.85)% (c)
Portfolio turnover rate (d).................................... 0%
(a) Inception date is July 17, 2020, 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 77
FIRST TRUST EXCHANGE-TRADED FUND VIII
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FT CBOE VEST FUND OF BUFFER ETFS (BUFR)
PERIOD
ENDED
8/31/2020 (a)
--------------
Net asset value, beginning of period........................... $ 20.05
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... --
Net realized and unrealized gain (loss)........................ 0.36
--------
Total from investment operations............................... 0.36
--------
Net asset value, end of period................................. $ 20.41
========
TOTAL RETURN (b)............................................... 1.80%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 6,124
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets (c).............. 0.20% (d)
Ratio of net investment income (loss) to average net assets.... (0.20)% (d)
Portfolio turnover rate (e).................................... 0%
(a) Inception date is August 10, 2020, 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) The Fund indirectly bears its proportionate share of fees and expenses
incurred by the underlying funds in which the Fund invests. The 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 78 See Notes to Financial Statements
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
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 twenty-five funds that are offering shares. This
report covers the thirteen 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)
FT Cboe Vest U.S. Equity Buffer ETF - May - (Cboe BZX ticker "FMAY")(4)
FT Cboe Vest U.S. Equity Deep Buffer ETF - May - (Cboe BZX ticker
"DMAY")(4)
FT Cboe Vest U.S. Equity Buffer ETF - June - (Cboe BZX ticker "FJUN")(5)
FT Cboe Vest U.S. Equity Deep Buffer ETF - June - (Cboe BZX ticker
"DFUN")(5)
FT Cboe Vest U.S. Equity Buffer ETF - July - (Cboe BZX ticker "FJUL")(6)
FT Cboe Vest U.S. Equity Deep Buffer ETF - July - (Cboe BZX ticker
"DJUL")(6)
FT Cboe Vest Fund of Buffer ETFs - (Cboe BZX ticker BUFR")(7)
(1) Commenced investment operations on November 6, 2019.
(2) Commenced investment operations on November 15, 2019.
(3) Commenced investment operations on February 21, 2020.
(4) Commenced investment operations on May 15, 2020.
(5) Commenced investment operations on June 19, 2020.
(6) Commenced investment operations on July 17, 2020.
(7) Commenced investment operations on August 10, 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, 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.
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 14.71% (before
fees, expenses and taxes) and 13.86% (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 August 24, 2020 to August 20, 2021. Prior to August 24, 2020, the
Fund's investment objective included an 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) and an Outcome Period of 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 8.63% (before fees, expenses and taxes) and 7.78%
(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 August 24, 2020 to August 20,
2021. Prior to August 24, 2020, the Fund's investment objective included an
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) and an Outcome Period of
November 7, 2019 to August 21, 2020.
Page 79
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 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.
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.
The investment objective of FMAY 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 17.07% (before fees, expenses and
taxes) and 16.21% (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 May 18, 2020
to May 21, 2021.
The investment objective of DMAY 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 9.95% (before fees, expenses and taxes)
and 9.09% (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 May 18, 2020 to May
21, 2021.
The investment objective of FJUN 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 17.72% (before fees, expenses and
taxes) and 16.87% (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 June 22, 2020
to June 18, 2021.
The investment objective of DJUN 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 10.28% (before fees, expenses and
taxes) and 9.43% (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 June 22,
2020 to June 18, 2021.
The investment objective of FJUL 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 14.95% (before fees, expenses and
taxes) and 14.10% (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 July 20, 2020
to July 16, 2021.
The investment objective of DJUL 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 8.40% (before fees, expenses and taxes)
and 7.55% (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 July 20, 2020 to
July 16, 2021.
Page 80
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
Under normal market conditions, each Fund, except BUFR, will invest
substantially all of its assets in FLexible EXchange(R) Options ("FLEX Options")
that reference the performance of the Underlying ETF.
The investment objective of BUFR is to seek to provide investors with capital
appreciation. BUFR seeks to achieve its investment objective by providing
investors with US large cap equity market exposure while limiting downside risk
through a laddered portfolio of four FT Cboe Vest U.S. Equity Buffer ETFs ("FT
ETFs"). Under normal market conditions BUFR will invest substantially all of its
assets in the FT ETFs, which seek 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 ("SPY"), up to a predetermined upside cap, while providing a buffer
against the first 10% (before fees, expenses and taxes) of SPY losses. The
buffer is only provided by the FT ETFs. BUFR itself does not provide any buffer
against losses. BUFR simply seeks to provide diversified exposure to all the FT
ETFs in a single investment. In order to understand BUFR's strategy and risks,
it is important to understand the strategies and risks of the FT ETFs.
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.
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.
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
Page 81
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
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 August 31, 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. AFFILIATED TRANSACTIONS
BUFR invests in securities of affiliated funds. BUFR'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 82
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
Amounts related to these investments at August 31, 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 8/31/2020 8/10/2020 PURCHASES SALES (DEPRECIATION) (LOSS) 8/31/2020 INCOME
----------------------------------------------------------------------------------------------------------------------------------
FT Cboe Vest U.S. Equity
Buffer ETF - August 46,656 $ -- $ 1,522,111 $ -- $ 19,931 $ -- $ 1,542,042 $ --
FT Cboe Vest U.S. Equity
Buffer ETF - February 48,666 -- 1,518,459 -- 18,900 -- 1,537,359 --
FT Cboe Vest U.S. Equity
Buffer ETF - May 45,462 -- 1,510,820 -- 5,192 -- 1,516,012 --
FT Cboe Vest U.S. Equity
Buffer ETF - November 46,458 -- 1,517,716 -- 10,752 -- 1,528,468 --
----------------------------------------------------------------------------------------
$ -- $ 6,069,106 $ -- $ 54,775 $ -- $ 6,123,881 $ --
========================================================================================
E. 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 significantly modified portfolio securities
held by the Funds and have no impact on net assets or NAV per share. Temporary
differences, which arise from recognizing certain items of income, expense and
gain/loss in different periods for financial statement and tax purposes, will
reverse at some time in the future. During their applicable taxable period, none
of the Funds paid a distribution.
As of August 31, 2020, 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)
------------- ------------- --------------
FT Cboe Vest U.S. Equity Buffer ETF - August $ (85,833) $ (818,379) $ 380,811
FT Cboe Vest U.S. Equity Deep Buffer ETF - August (803,124) (11,815,263) 1,047,078
FT Cboe Vest U.S. Equity Buffer ETF - November (436,990) 366,223 9,097,092
FT Cboe Vest U.S. Equity Deep Buffer ETF - November (474,115) (900,706) 14,717,205
FT Cboe Vest U.S. Equity Buffer ETF - February 311,695 -- 10,850,547
FT Cboe Vest U.S. Equity Deep Buffer ETF - February (1,889,658) 936,084 40,004,587
FT Cboe Vest U.S. Equity Buffer ETF - May (72,087) (25,003) 2,724,079
FT Cboe Vest U.S. Equity Deep Buffer ETF - May (22,132) 116,130 500,302
FT Cboe Vest U.S. Equity Buffer ETF - June (65,103) -- 3,326,877
FT Cboe Vest U.S. Equity Deep Buffer ETF - June (26,126) -- 796,360
FT Cboe Vest U.S. Equity Buffer ETF - July (16,842) -- 927,009
FT Cboe Vest U.S. Equity Deep Buffer ETF - July (7,490) -- 214,752
FT Cboe Vest Fund of Buffer ETFs -- -- 54,775
Page 83
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
F. 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. The taxable year ending 2020
remains open to federal and state audit. As of August 31, 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 each Fund's applicable
taxable year end, for federal income tax purposes, the Funds 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 the Funds' shareholders.
Non-Expiring
Taxable Capital Loss
Year End Carryforwards
------------------ ------------------
FT Cboe Vest U.S. Equity Buffer ETF - August 31-Aug-20 $ 818,379
FT Cboe Vest U.S. Equity Deep Buffer ETF - August 31-Aug-20 11,815,263
FT Cboe Vest U.S. Equity Buffer ETF - November 30-Nov-19 --
FT Cboe Vest U.S. Equity Deep Buffer ETF - November 30-Nov-19 --
FT Cboe Vest U.S. Equity Buffer ETF - February 29-Feb-20 --
FT Cboe Vest U.S. Equity Deep Buffer ETF - February 29-Feb-20 --
FT Cboe Vest U.S. Equity Buffer ETF - May 31-May-20 --
FT Cboe Vest U.S. Equity Deep Buffer ETF - May 31-May-20 --
FT Cboe Vest U.S. Equity Buffer ETF - June 30-Jun-20 --
FT Cboe Vest U.S. Equity Deep Buffer ETF - June 30-Jun-20 --
FT Cboe Vest U.S. Equity Buffer ETF - July 31-Jul-20 --
FT Cboe Vest U.S. Equity Deep Buffer ETF - July 31-Jul-20 --
FT Cboe Vest Fund of Buffer ETFs 31-Aug-20 --
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 taxable period ended August 31, 2020, the following
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
-------------------- --------------------
FT Cboe Vest U.S. Equity Buffer ETF - August $ 85,833 $ --
FT Cboe Vest U.S. Equity Deep Buffer ETF - August 803,124 --
In order to present paid-in capital and accumulated distributable earnings
(loss) (which consists of accumulated net investment income (loss), accumulated
net realized gain (loss) on investments and net unrealized appreciation
(depreciation) on investments) on the Statements of Assets and Liabilities that
more closely represent their tax character, certain adjustments have been made
to paid-in capital, accumulated net investment income (loss) and accumulated net
realized gain (loss) on investments. These adjustments are primarily due to the
difference between book and tax treatments of income and gains on various
investment securities held by the Funds and in-kind transactions. The results of
operations and net assets were not affected by these adjustments. For each
Fund's applicable taxable period the adjustments were as follows:
Page 84
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
Accumulated
Accumulated Net Realized
Taxable Net Investment Gain (Loss) Paid-in
Year End Income (Loss) on Investments Capital
-------------- -------------- -------------- --------------
FT Cboe Vest U.S. Equity Buffer ETF - August 31-Aug-20 $ 7,374 $ (3,681,856) $ 3,674,482
FT Cboe Vest U.S. Equity Deep Buffer ETF - August 31-Aug-20 3,849 (43,335,681) 43,331,832
FT Cboe Vest U.S. Equity Buffer ETF - November 30-Nov-19 1,567 -- (1,567)
FT Cboe Vest U.S. Equity Deep Buffer ETF - November 30-Nov-19 925 -- (925)
FT Cboe Vest U.S. Equity Buffer ETF - February 29-Feb-20 7,085 -- (7,085)
FT Cboe Vest U.S. Equity Deep Buffer ETF - February 29-Feb-20 6,739 -- (6,739)
FT Cboe Vest U.S. Equity Buffer ETF - May 31-May-20 5,672 -- (5,672)
FT Cboe Vest U.S. Equity Deep Buffer ETF - May 31-May-20 3,790 -- (3,790)
FT Cboe Vest U.S. Equity Buffer ETF - June 30-Jun-20 3,084 -- (3,084)
FT Cboe Vest U.S. Equity Deep Buffer ETF - June 30-Jun-20 949 -- (949)
FT Cboe Vest U.S. Equity Buffer ETF - July 31-Jul-20 2,929 -- (2,929)
FT Cboe Vest U.S. Equity Deep Buffer ETF - July 31-Jul-20 1,406 -- (1,406)
FT Cboe Vest Fund of Buffer ETFs 31-Aug-20 398 -- (398)
G. 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.
First Trust is paid an annual unitary management fee of 0.85% of each Fund's
average daily net assets except BUFR which pays an annual unitary management fee
of 0.20%.
First Trust is 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.
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 a sub-advisory fee equal to 50% of any remaining monthly
unitary management fee paid to the Advisor after the average Fund's expenses
accrued during the most recent twelve months (or shorter period during the first
eleven months of the Investment Sub-Advisory Agreement) are subtracted from the
unitary management fee for that month.
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.
Page 85
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
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 fiscal period ended August 31, 2020, the Funds had no purchases or sales
of investments, excluding short-term investments and in-kind transactions. Each
Fund, except BUFR, holds options for a target outcome period of approximately
one year based on the expiration date of the options, which occurs on the third
Friday of the month corresponding to the month in each Fund name. For securities
transactions purposes, the options are considered short-term investments.
For the fiscal period ended August 31, 2020, the cost of in-kind purchases and
proceeds from in-kind sales for each Fund were as follows:
Purchases Sales
-------------- --------------
FT Cboe Vest U.S. Equity Buffer ETF - August $ 5,286,445 $ 18,278,237
FT Cboe Vest U.S. Equity Deep Buffer ETF - August 3,363,534 128,072,385
FT Cboe Vest U.S. Equity Buffer ETF - November 6,841,021 --
FT Cboe Vest U.S. Equity Deep Buffer ETF - November 1,585,284 --
FT Cboe Vest U.S. Equity Buffer ETF - February 18,763,284 --
FT Cboe Vest U.S. Equity Deep Buffer ETF - February 33,929,137 --
FT Cboe Vest U.S. Equity Buffer ETF - May 5,775,309 --
FT Cboe Vest U.S. Equity Deep Buffer ETF - May 3,848,448 3,476,370
FT Cboe Vest U.S. Equity Buffer ETF - June 28,151,947 --
FT Cboe Vest U.S. Equity Deep Buffer ETF - June 6,847,575 --
FT Cboe Vest U.S. Equity Buffer ETF - July 12,446,901 --
FT Cboe Vest U.S. Equity Deep Buffer ETF - July 8,626,431 --
FT Cboe Vest Fund of Buffer ETFs 6,069,106 --
Page 86
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
5. DERIVATIVE TRANSACTIONS
The following table presents the types of derivatives held by each Fund at
August 31, 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 $ 38,936,868 written, at value $ 3,105,084
DAUG
Options contracts Options contracts
Options Equity Risk purchased, at value 142,087,358 written, at value 10,145,198
FNOV
Options contracts Options contracts
Options Equity Risk purchased, at value 144,730,908 written, at value 7,277,088
DNOV
Options contracts Options contracts
Options Equity Risk purchased, at value 156,177,577 written, at value 10,774,771
FFEB
Options contracts Options contracts
Options Equity Risk purchased, at value 222,674,500 written, at value 13,289,584
DFEB
Options contracts Options contracts
Options Equity Risk purchased, at value 563,674,228 written, at value 33,119,843
FMAY
Options contracts Options contracts
Options Equity Risk purchased, at value 43,515,827 written, at value 5,367,108
DMAY
Options contracts Options contracts
Options Equity Risk purchased, at value 13,163,730 written, at value 2,006,408
FJUN
Options contracts Options contracts
Options Equity Risk purchased, at value 52,940,069 written, at value 4,580,366
DJUN
Options contracts Options contracts
Options Equity Risk purchased, at value 22,720,822 written, at value 2,367,060
FJUL
Options contracts Options contracts
Options Equity Risk purchased, at value 36,039,457 written, at value 3,203,221
DJUL
Options contracts Options contracts
Options Equity Risk purchased, at value 13,566,478 written, at value 1,311,612
Page 87
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
The following table presents the amount of net realized gain (loss) and change
in net unrealized appreciation (depreciation) recognized for the fiscal period
ended August 31, 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 $ 1,760,990 $26,953,539 $ (2,198,607) $ (3,639,669) $ (2,172,308) $ (10,535,870)
Written options contracts 1,102,487 4,566,879 (1,257,669) (766,914) (1,985,482) (2,714,566)
Net change in unrealized appreciation
(depreciation) on:
Purchased options contracts 578,096 2,521,414 12,507,195 21,161,108 14,434,621 63,421,635
Written options contracts (197,285) (1,474,336) 412,396 (2,938,026) 1,404,893 (9,230,528)
EQUITY RISK
---------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS LOCATION FMAY DMAY FJUN DJUN FJUL DJUL
------------------------------------- ---------------------------------------------------------------------------------
Net realized gain (loss) on:
Purchased options contracts $ (27,764) $ 248,187 $ -- $ -- $ -- $ --
Written options contracts 2,761 (132,057) -- -- -- --
Net change in unrealized appreciation
(depreciation) on:
Purchased options contracts 4,634,426 1,543,485 3,978,560 1,855,087 1,535,615 667,244
Written options contracts (1,910,347) (1,043,183) (651,683) (1,058,727) (608,606) (452,492)
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.
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 fiscal period ended August 31,
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 $ 99,991,934 $ 61,633,162 $ 5,601,896 $ 2,694,097
DAUG 557,854,394 418,288,450 26,600,966 17,930,104
FNOV 145,289,897 13,066,184 7,909,400 219,916
DNOV 161,624,905 26,608,436 8,289,799 453,054
FFEB 224,126,678 15,886,799 15,304,186 609,709
DFEB 605,501,029 105,248,436 25,737,932 1,848,617
FMAY 42,467,858 3,586,457 3,793,919 337,158
DMAY 16,492,909 4,872,664 1,339,619 376,394
FJUN 48,961,509 -- 3,928,683 --
DJUN 20,865,735 -- 1,308,333 --
FJUL 34,503,842 -- 2,594,615 --
DJUL 12,899,234 -- 859,120 --
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
Page 88
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
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, February 1, 2022 for FFEB and DFEB, May 10, 2022 for
FMAY and DMAY, June 1, 2022 for FJUN, DJUN and BUFR, and July 1, 2022 for FJUL
and DJUL.
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 were the following subsequent events:
On September 21, 2020, FT Cboe Vest U.S. Equity Buffer ETF - September and FT
Cboe Vest U.S. Equity Deep Buffer ETF - September, additional series of the
Trust, began trading under the symbols "FSEP" and "DSEP", respectively, on Cboe
BZX Exchange, Inc.
On October 19, 2020, FT Cboe Vest U.S. Equity Buffer ETF - October and FT Cboe
Vest U.S. Equity Deep Buffer ETF - October, additional series of the Trust,
began trading under the symbols "FOCT" and "DOCT", respectively, on Cboe BZX
Exchange, Inc.
Page 89
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED FUND
VIII:
OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS
We have audited the accompanying statements of assets and liabilities 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, FT
Cboe Vest U.S. Equity Deep Buffer ETF - February, FT Cboe Vest U.S. Equity
Buffer ETF - May, FT Cboe Vest U.S. Equity Deep Buffer ETF - May, FT Cboe Vest
U.S. Equity Buffer - June, FT Cboe Vest U.S. Equity Deep Buffer ETF - June, FT
Cboe Vest U.S. Equity Buffer ETF - July, FT Cboe Vest U.S. Equity Deep Buffer
ETF - July, and FT Cboe Vest Fund of Buffer ETFs (the "Funds"), each a series of
the First Trust Exchange-Traded Fund VIII, including the portfolios of
investments, as of August 31, 2020, the related statements of operations, the
changes in net assets, and the financial highlights for the periods indicated in
the table below, and the related notes. In our opinion, the financial statements
and financial highlights present fairly, in all material respects, the financial
position of the Funds as of August 31, 2020, and the results of their
operations, the changes in their net assets, and the financial highlights for
the periods listed in the table below, in conformity with accounting principles
generally accepted in the United States of America.
INDIVIDUAL FUNDS STATEMENTS OF STATEMENTS OF FINANCIAL
INCLUDED IN THE TRUST OPERATIONS CHANGES IN NET ASSETS HIGHLIGHTS
-------------------------------------------------------------------------------------------------------------------------
FT Cboe Vest U.S. Equity Buffer For the period from November 6, 2019 (commencement of operations) through
ETF - August August 31, 2020
FT Cboe Vest U.S. Equity Deep
Buffer ETF - August
FT Cboe Vest U.S. Equity Buffer For the period from November 15, 2019 (commencement of operations) through
ETF - November August 31, 2020
FT Cboe Vest U.S. Equity Deep
Buffer ETF - November
FT Cboe Vest U.S. Equity Buffer For the period from February 21, 2020 (commencement of operations) through
ETF - February August 31, 2020
FT Cboe Vest U.S. Equity Deep
Buffer ETF - February
FT Cboe Vest U.S. Equity Buffer For the period from May 15, 2020 (commencement of operations) through
ETF - May August 31, 2020
FT Cboe Vest U.S. Equity Deep
Buffer ETF - May
FT Cboe Vest U.S. Equity Buffer For the period from June 19, 2020 (commencement of operations) through
ETF - June August 31, 2020
FT Cboe Vest U.S. Equity Deep
Buffer ETF - June
FT Cboe Vest U.S. Equity Buffer For the period from July 17, 2020 (commencement of operations) through
ETF - July August 31, 2020
FT Cboe Vest U.S. Equity Deep
Buffer ETF - July
FT Cboe Vest Fund of Buffer For the period from August 10, 2020 (commencement of operations) through
ETFs August 31, 2020
-------------------------------------------------------------------------------------------------------------------------
BASIS FOR OPINION
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on the Funds'
financial statements and financial highlights based on our audits. We are a
public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to
the Funds in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
Page 90
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (CONTINUED)
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We conducted our audits in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement, whether due to error or fraud. The Funds are not
required to have, nor were we engaged to perform, an audit of their internal
control over financial reporting. As part of our audits we are required to
obtain an understanding of internal control over financial reporting but not for
the purpose of expressing an opinion on the effectiveness of the Funds' internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material
misstatement of the financial statements and financial highlights, whether due
to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements and financial highlights. Our audits
also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of August 31, 2020, by correspondence with
the custodian, agent banks, and brokers; when replies were not received from
brokers, we performed other auditing procedures. We believe that our audits
provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Chicago, Illinois
October 23, 2020
We have served as the auditor of one or more First Trust investment companies
since 2001.
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 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.
FEDERAL TAX INFORMATION
There were no distributions made by each Fund during their applicable taxable
period; therefore, no analysis for the corporate dividends received deduction
and qualified dividend income were completed.
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.
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 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 COVID-19 pandemic may last
for an extended period of time and will continue to impact the economy for the
foreseeable future.
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 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.
ADDITIONAL RISK CONSIDERATIONS FOR THE FT CBOE VEST U.S. EQUITY
BUFFER ETFS AND FT CBOE VEST U.S. EQUITY DEEP BUFFER ETFS
ABSENCE OF AN ACTIVE MARKET RISK. The Funds face numerous market trading risks,
including the potential lack of an active market for Fund shares due to a
limited number of market markers or authorized participants. A Fund may rely on
a small number of third-party market makers to provide a market for the purchase
and sale of shares and market makers are under no obligation to make a market in
the Fund's shares. Additionally, only a limited number of institutions act as
authorized participants for a Fund and only an authorized participant may engage
in creation or redemption transactions directly with the Funds and are not
obligated to submit purchase or redemption orders for Creation Units. Decisions
by market makers or authorized participants to reduce their role or step away
from these activities in times of market stress could inhibit the effectiveness
of the arbitrage process in maintaining the relationship between the underlying
values of the Fund's portfolio securities and the Fund's market price. Any
trading halt or other problem relating to the trading activity of these market
makers or any issues disrupting the authorized participants' ability to proceed
with creation and/or redemption orders could result in a dramatic change in the
spread between a Fund's net asset value and the price at which the Fund's shares
are trading on the Exchange, which could result in a decrease in value of the
Fund's shares. This reduced effectiveness could result in Fund shares trading at
a premium or discount to net asset value and also in greater than normal
intraday bid-ask spreads for Fund shares.
BUFFERED LOSS RISK. There can be no guarantee that a 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 price return of 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.
CAP CHANGE RISK. A new cap is established at the beginning of each Target
Outcome Period and is dependent on prevailing market conditions. As a result,
the cap may rise or fall from one Target Outcome Period to the next and is
unlikely to remain the same for consecutive Target Outcome Periods.
CAPPED UPSIDE RISK. The Funds' strategies seek 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 Fund shares for an
entire Target Outcome Period, the returns realized by that investor may not
match those that the Fund seeks to achieve. If the Underlying ETF experiences
gains during a Target Outcome Period, a 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.
FLEX OPTIONS RISK. Trading FLEX Options involves risks different from, or
possibly greater than, the risks associated with investing directly in
securities. A Fund may experience substantial downside from specific FLEX Option
positions and certain FLEX Option positions may expire worthless. 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. 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. The trading in FLEX Options may be
less deep and liquid than the market for certain other exchange-traded options,
non-customized options or other securities.
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
Transactions in FLEX Options are required to be centrally cleared. In a
transaction involving FLEX Options, the Fund's counterparty is the OCC, rather
than a bank or broker. Since the Fund is not a member of the OCC and only
members ("clearing members") can participate directly in the OCC, the Fund will
hold its FLEX Options through accounts at clearing members. Although clearing
members guarantee performance of their clients' obligations to the OCC, there is
a risk that the assets of a Fund might not be fully protected in the event of a
clearing member's bankruptcy, as the Fund would be limited to recovering only a
pro rata share of all available funds segregated on behalf of the clearing
member's customers for the relevant account class. Additionally, the OCC may be
unable or unwilling to perform its obligations under the FLEX Options contracts.
FLEX OPTIONS VALUATION RISK. The FLEX Options held by the Funds 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 does not increase or decrease at the same rate as the Underlying
ETF (although they generally move in the same direction) or its underlying
securities and FLEX Option prices may be highly volatile and may fluctuate
substantially during a short period of time. The value of the FLEX Options prior
to the expiration date may vary because of factors other than the value of the
Underlying ETF, such as interest rate changes, changing supply and demand,
decreased liquidity of the FLEX Options, a change in the actual and perceived
volatility of the stock market and the Underlying ETF and the remaining time to
expiration. During periods of reduced market liquidity or in the absence of
readily available market quotations for the holdings of the Funds, the ability
of the Funds 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. Consequently, while such determinations may be made in good faith, it may
nevertheless be more difficult for the Fund to accurately assign a daily value.
Under those circumstances, the value of the FLEX Options will require more
reliance on the investment adviser's judgment than that required for securities
for which there is an active trading market. This creates a risk of mispricing
or improper valuation of the FLEX Options which could impact the value paid for
shares of the Funds.
TARGET OUTCOME PERIOD RISK. The Funds' investment strategies are 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.
UNDERLYING ETF RISK. The Funds invest in FLEX Options that reference an ETF,
which subjects the Funds to certain of the risks of owning shares of an ETFs as
well as the types of instruments in which the Underlying ETF invests. The value
of an ETF will fluctuate over time based on fluctuations in the values of the
securities held by the ETF, which may be affected by changes in general economic
conditions, expectations for future growth and profits, interest rates and the
supply and demand for those securities. In addition, ETFs are subject to
authorized participant concentration risk, market maker risk, premium/discount
risk, tracking error risk and trading issues risk. Brokerage, tax and other
expenses may negatively impact the performance of the Underlying ETF and, in
turn, the value of the Funds' shares. An ETF that tracks an index may not
exactly match the performance of the index due to cash drag, differences between
the portfolio of the ETF and the components of the index, expenses and other
factors.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
ADVISORY AGREEMENT
BOARD CONSIDERATIONS REGARDING APPROVAL OF INVESTMENT MANAGEMENT AGREEMENTS AND
INVESTMENT SUB-ADVISORY AGREEMENTS FOR FT CBOE VEST U.S. EQUITY BUFFER ETF - MAY
AND FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - MAY
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 - May (FMAY)
FT Cboe Vest U.S. Equity Deep Buffer ETF - May (DMAY)
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.
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
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
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.
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
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.
BOARD CONSIDERATIONS REGARDING APPROVAL OF INVESTMENT MANAGEMENT AGREEMENTS AND
INVESTMENT SUB-ADVISORY AGREEMENTS FOR FT CBOE VEST U.S. EQUITY BUFFER ETF -
JUNE, FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - JUNE, FT CBOE VEST U.S. EQUITY
BUFFER ETF - JULY, AND FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - JULY
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 - June (FJUN)
FT Cboe Vest U.S. Equity Deep Buffer ETF - June (DJUN)
FT Cboe Vest U.S. Equity Buffer ETF - July (FJUL)
FT Cboe Vest U.S. Equity Deep Buffer ETF - July (DJUL)
The Board approved the Agreements for each Fund for an initial two-year term at
a meeting held on March 9, 2020. 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
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
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, as well as the Board's prior meeting with representatives of
the Sub-Advisor in October 2019. The Board noted that the Sub-Advisor manages
six other defined-outcome ETFs with strategies similar to those of the Funds in
the First Trust Fund Complex. 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, if any.
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 six ETFs in the product
line, identical to the Funds except with respect to the target outcome periods,
had been launched since 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
Page 98
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
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.
BOARD CONSIDERATIONS REGARDING APPROVAL OF INVESTMENT MANAGEMENT AGREEMENT AND
INVESTMENT SUB-ADVISORY AGREEMENT FOR FT CBOE VEST FUND OF BUFFER ETFS
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"), on behalf of FT Cboe Vest Fund of Buffer ETFs (the "Fund"), and
the Investment Sub-Advisory Agreement (the "Sub-Advisory Agreement" and together
with the Advisory Agreement, the "Agreements") among the Trust, on behalf of the
Fund, the Advisor and Cboe Vest Financial LLC (the "Sub-Advisor"), for an
initial two-year term at a meeting held on June 8, 2020. The Board determined
that the Agreements are in the best interests of the Fund in light of the
nature, extent and quality of the services expected to be provided and such
other matters as the Board considered to be relevant in the exercise of its
reasonable business judgment.
To reach this determination, the Board considered its duties under the
Investment Company Act of 1940, as amended (the "1940 Act"), as well as under
the general principles of state law, in reviewing and approving advisory
contracts; the requirements of the 1940 Act in such matters; the fiduciary duty
of investment advisors with respect to advisory agreements and compensation; the
standards used by courts in determining whether investment company boards have
fulfilled their duties; and the factors to be considered by the Board in voting
on such agreements. To assist the Board in its evaluation of the Agreements for
the Fund, the Independent Trustees received a separate report from each of the
Advisor and the Sub-Advisor in advance of the Board meeting responding to
requests for information from counsel to the Independent Trustees, submitted on
behalf of the Independent Trustees, that, among other things, outlined: the
services to be provided by the Advisor and the Sub-Advisor to the Fund
(including the relevant personnel responsible for these services and their
experience); the proposed unitary fee rate payable by the Fund as compared to
fees charged to a peer group of funds (the "Expense Group") and a broad peer
universe of funds (the "Expense Universe"), each assembled by Broadridge
Financial Solutions, Inc. ("Broadridge"), an independent source, and as compared
to fees charged to other 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 the Fund as compared to expense ratios of the funds in the
Fund's Expense Group and Expense Universe; the nature of expenses to be incurred
in providing services to the Fund and the potential for the Advisor and the
Sub-Advisor to realize economies of scale, if any; profitability and other
financial data for the Advisor; financial data for the Sub-Advisor; any 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 the Fund's perspective.
In evaluating whether to approve the Agreements for the Fund, the Board
considered the nature, extent and quality of the services to be provided by the
Advisor and the Sub-Advisor under the Agreements. With respect to the Advisory
Agreement, the Board considered that the Advisor will be responsible for the
overall management and administration of the Fund and reviewed all of the
services to be provided by the Advisor to the Fund, including the oversight of
the Sub-Advisor, as well as the background and experience of the persons
responsible for such services. The Board considered that the Fund will be an
actively-managed ETF and will employ an advisor/sub-advisor management structure
and considered that the Advisor manages other ETFs with a similar structure in
the First Trust Fund Complex. The Board noted that the Advisor will oversee the
Sub-Advisor's day-to-day management of the Fund's investments, including
portfolio risk monitoring and performance review. In reviewing the services to
be provided, the Board noted the compliance program that had been developed by
the Advisor and considered that it includes a robust program for monitoring the
Advisor's, the Sub-Advisor's and the Fund's compliance with the 1940 Act, as
well as the Fund's compliance with its investment objective, policies and
restrictions. The Board noted that employees of the Advisor provide management
services to other ETFs and to other funds in the First Trust Fund Complex with
diligence and care. With respect to the Sub-Advisory Agreement, in addition to
Page 99
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
the materials provided by the Sub-Advisor, at the June 8, 2020 meeting, the
Board also received a presentation from representatives of the Sub-Advisor
discussing the services that the Sub-Advisor will provide to the Fund, and the
Trustees were able to ask questions about the proposed investment strategy for
the Fund. The Board noted the background and experience of the Sub-Advisor's
portfolio management team and the Sub-Advisor's investment style. The Board also
noted that the Fund would invest substantially all of its assets in four
defined-outcome ETFs in the First Trust Fund Complex sub-advised by the
Sub-Advisor. Because the Fund had yet to commence investment operations, the
Board could not consider the historical investment performance of the Fund. In
light of the information presented and the considerations made, the Board
concluded that the nature, extent and quality of the services to be provided to
the Fund by the Advisor and the Sub-Advisor under the Agreements are expected to
be satisfactory.
The Board considered the proposed unitary fee rate payable by the Fund under the
Advisory Agreement for the services to be provided. The Board noted that, under
the unitary fee arrangement, the Fund would pay the Advisor a unitary fee equal
to an annual rate of 0.20% of its average daily net assets. The Board considered
that, from the unitary fee for the Fund, the Advisor would pay the Sub-Advisor a
sub-advisory fee equal to 50% of the Fund's unitary fee less one-half of the
Fund's expenses. The Board noted that the Advisor and the Sub-Advisor would be
responsible for the Fund's expenses, including the cost of sub-advisory,
transfer agency, custody, fund administration, legal, audit and other services
and license fees, if any, but excluding the fee payment under the Advisory
Agreement and interest, taxes, acquired fund fees and expenses, if any,
brokerage commissions and other expenses connected with the execution of
portfolio transactions, distribution and service fees pursuant to a Rule 12b-1
plan, if any, and extraordinary expenses, if any. The Board noted that, because
the Fund will invest in underlying ETFs in the First Trust Fund Complex, it will
incur acquired fund fees and expenses, which are not payable out of the unitary
fee. The Board received and reviewed information showing the advisory fee rates
and expense ratios of the peer funds in the Expense Group, as well as advisory
and unitary fee rates charged by the Advisor and the Sub-Advisor to other fund
(including ETF) and non-fund clients, as applicable. Because the Fund will pay a
unitary fee, the Board determined that expense ratios were the most relevant
comparative data point. Based on the information provided, the Board noted that
the unitary fee rate for the Fund was below the median total (net) expense ratio
(excluding acquired fund fees and expenses, as applicable) of the peer funds in
the Expense Group. The Board also noted that the Fund's total (net) expense
ratio (including the estimated acquired fund fees and expenses) was below the
median total (net) expense ratio (including acquired fund fees and expenses, as
applicable) of the peer funds in the Expense Group. With respect to the Expense
Group, the Board discussed with representatives of the Advisor how the Expense
Group was assembled and how the Fund compared and differed from the peer funds.
The Board took this information into account in considering the peer data. With
respect to fees charged to other clients, the Board considered the Advisor's
statement that the Fund is most comparable to four other ETFs in the First Trust
Fund Complex that invest in underlying ETFs, including ETFs in the First Trust
Fund Complex, and pay unitary fees equal to annual rates of 0.20% or 0.30% of
their respective average daily net assets. In light of the information
considered and the nature, extent and quality of the services expected to be
provided to the Fund under the Agreements, the Board determined that the
proposed unitary fee, including the sub-advisory fee to be paid by the Advisor
to the Sub-Advisor from the unitary fee, was fair and reasonable.
The Board noted that the proposed unitary fee for the Fund was not structured to
pass on to shareholders the benefits of any economies of scale as the Fund's
assets grow. The Board noted that any reduction in fixed costs associated with
the management of the Fund would benefit the Advisor and the Sub-Advisor, but
that the unitary fee structure provides a level of certainty in expenses for the
Fund. The Board noted that the Advisor has continued to 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 the Fund under the Advisory Agreement. The Board considered the Advisor's
estimate of the asset level for the Fund at which the Advisor expects the
Advisory Agreement to be profitable to the Advisor and the Advisor's estimate of
the profitability of the Advisory Agreement if the Fund's assets reach $100
million. The Board noted the inherent limitations in the profitability analysis
and concluded that, based on the information provided, the Advisor's estimated
profitability level for the Fund was not unreasonable. The Board reviewed
financial information provided by the Sub-Advisor, but did not review any
potential profitability of the Sub-Advisory Agreement to the Sub-Advisor. The
Board considered that the Sub-Advisor would be paid by the Advisor from the
Fund's unitary fee and its understanding that the sub-advisory fee rate was the
product of an arm's length negotiation. In addition, the Board considered
fall-out benefits described by the Advisor that may be realized from its
relationship with the Fund. 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 Fund, may have had no dealings with the Advisor or FTP. The Board also noted
that the Advisor will be responsible for trade execution for the Fund and will
not utilize soft dollars in connection with the Fund. 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 statement that it does not foresee any fall-out benefits from its
relationship with the Fund. In addition, the Board considered that the Advisor
and the Sub-Advisor, as the investment advisor and the investment sub-advisor,
respectively, to the underlying ETFs in which the Fund would invest, will
recognize additional revenue from such underlying ETFs if the Fund's investment
causes their assets to grow. The Board concluded that the character and amount
of potential fall-out benefits to the Advisor and the Sub-Advisor were not
unreasonable.
Page 100
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
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 the Fund. No single factor was
determinative in the Board's analysis.
LIQUIDITY RISK MANAGEMENT PROGRAM
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as
amended (the "1940 Act"), the Funds and each other fund in the First Trust Fund
Complex, other than the closed-end funds, have adopted and implemented a
liquidity risk management program (the "Program") reasonably designed to assess
and manage the funds' liquidity risk, i.e., the risk that a fund could not meet
requests to redeem shares issued by the fund without significant dilution of
remaining investors' interests in the fund. The Board of Trustees of the First
Trust Funds has appointed First Trust Advisors, L.P. (the "Advisor") as the
person designated to administer the Program, and in this capacity the Advisor
performs its duties primarily through the activities and efforts of the First
Trust Liquidity Committee (the "Liquidity Committee").
Pursuant to the Program, the Liquidity Committee classifies the liquidity of
each fund's portfolio investments into one of the four liquidity categories
specified by Rule 22e-4: highly liquid investments, moderately liquid
investments, less liquid investments and illiquid investments. The Liquidity
Committee determines certain of the inputs for this classification process,
including reasonably anticipated trade sizes and significant investor dilution
thresholds. The Liquidity Committee also determines and periodically reviews a
highly liquid investment minimum for certain funds, monitors the funds' holdings
of assets classified as illiquid investments to seek to ensure they do not
exceed 15% of a fund's net assets and establishes policies and procedures
regarding redemptions in kind.
At the May 11, 2020 meeting of the Board of Trustees, as required by Rule 22e-4
and the Program, the Advisor provided the Board with a written report prepared
by the Advisor that addressed the operation of the Program during the period
from June 1, 2019 (the initial compliance date for certain requirements of Rule
22e-4) through the Liquidity Committee's annual meeting held on March 20, 2020
and assessed the Program's adequacy and effectiveness of implementation during
this period, including the operation of the highly liquid investment minimum for
each fund that is required under the Program to have one, and any material
changes to the Program. Note that because the Funds primarily hold assets that
are highly liquid investments, the Funds have not adopted a highly liquid
investment minimum.
As stated in the written report, during the review period, no fund breached the
15% limitation on illiquid investments, no fund with a highly liquid investment
minimum breached that minimum and no fund filed a Form N-LIQUID. The Advisor
concluded that each fund's investment strategy is appropriate for an open-end
fund; that the Program operated effectively in all material respects during the
review period; and that the Program is reasonably designed to assess and manage
the liquidity risk of each fund and to maintain compliance with Rule 22e-4.
Page 101
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BOARD OF TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
The following tables identify the Trustees and Officers of the Trust. Unless
otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite
400, Wheaton, IL 60187.
The Trust's statement of additional information includes additional information
about the Trustees and is available, without charge, upon request, by calling
(800) 988-5891.
NUMBER OF OTHER
PORTFOLIOS IN TRUSTEESHIPS OR
TERM OF OFFICE THE FIRST TRUST DIRECTORSHIPS
NAME, AND YEAR FIRST FUND COMPLEX HELD BY TRUSTEE
YEAR OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST
POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
------------------------------------------------------------------------------------------------------------------------------------
Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 185 None
(1951) Limited Partner, Gundersen Real Estate
o Since Inception Limited Partnership (June 1992 to
December 2016); Member, Sportsmed LLC
(April 2007 to November 2015)
Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 185 Director of ADM
(1957) (Futures Commission Merchant) Investor Services,
o Since Inception Inc., ADM
Investor Services
International,
Futures Industry
Association, and
National Futures
Association
Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 185 Director of Trust
(1956) and Management Consulting) Company of
o Since Inception Illinois
Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 185 None
(1954) Managing Director and Chief Operating
o Since Inception Officer (January 2015 to August 2018),
Pelita Harapan Educational Foundation
(Educational Product and Services);
President and Chief Executive Officer
(June 2012 to September 2014), Servant
Interactive LLC (Educational Products
and Services); President and Chief
Executive Officer (June 2012 to
September 2014), Dew Learning LLC
(Educational Products and Services)
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 185 None
Chairman of the Board Advisors L.P. and First Trust
(1955) o Since Inception Portfolios L.P.; Chairman of the
Board of Directors, BondWave LLC
(Software Development Company)
and Stonebridge Advisors LLC
(Investment Advisor)
-----------------------------
(1) Mr. Bowen is deemed an "interested person" of the Trust due to his
position as Chief Executive Officer of First Trust Advisors L.P.,
investment advisor of the Trust.
Page 102
--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
POSITION AND TERM OF OFFICE
NAME OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS
AND YEAR OF BIRTH WITH TRUST SERVICE DURING PAST 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS(2)
------------------------------------------------------------------------------------------------------------------------------------
James M. Dykas President and Chief Executive o Indefinite Term Managing Director and Chief Financial Officer
(1966) Officer (January 2016 to Present), Controller (January 2011
o Since Inception to January 2016), Senior Vice President (April 2007
to January 2016), First Trust Advisors L.P. and First
Trust Portfolios L.P.; Chief Financial Officer
(January 2016 to Present), BondWave LLC
(Software Development Company) and Stonebridge
Advisors LLC (Investment Advisor)
Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President (July 2016 to Present), Vice
(1972) Officer and Chief President (April 2012 to July 2016), First Trust
Accounting Officer o Since Inception Advisors L.P. and First Trust Portfolios L.P.
W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and
(1960) Legal Officer First Trust Portfolios L.P.; Secretary and General
o Since Inception Counsel, BondWave LLC; Secretary, Stonebridge
Advisors LLC
Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and
(1970) First Trust Portfolios L.P.
o Since Inception
Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P.
(1966) and Assistant Secretary and First Trust Portfolios L.P.
o Since Inception
Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
(1966) and First Trust Portfolios L.P.
o Since Inception
Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
(1970) and First Trust Portfolios L.P.
o Since Inception
-----------------------------
(2) The term "officer" means the president, vice president, secretary,
treasurer, controller or any other officer who performs a policy making
function.
Page 103
--------------------------------------------------------------------------------
PRIVACY POLICY
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
PRIVACY POLICY
First Trust values our relationship with you and considers your privacy an
important priority in maintaining that relationship. We are committed to
protecting the security and confidentiality of your personal information.
SOURCES OF INFORMATION
We collect nonpublic personal information about you from the following sources:
o Information we receive from you and your broker-dealer, investment
advisor or financial representative through interviews,
applications, agreements or other forms;
o Information about your transactions with us, our affiliates or
others;
o Information we receive from your inquiries by mail, e-mail or
telephone; and
o Information we collect on our website through the use of "cookies".
For example, we may identify the pages on our website that your
browser requests or visits.
INFORMATION COLLECTED
The type of data we collect may include your name, address, social security
number, age, financial status, assets, income, tax information, retirement and
estate plan information, transaction history, account balance, payment history,
investment objectives, marital status, family relationships and other personal
information.
DISCLOSURE OF INFORMATION
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. In addition to using
this information to verify your identity (as required under law), the permitted
uses may also include the disclosure of such information to unaffiliated
companies for the following reasons:
o In order to provide you with products and services and to effect
transactions that you request or authorize, we may disclose your
personal information as described above to unaffiliated financial
service providers and other companies that perform administrative or
other services on our behalf, such as transfer agents, custodians
and trustees, or that assist us in the distribution of investor
materials such as trustees, banks, financial representatives, proxy
services, solicitors and printers.
o We may release information we have about you if you direct us to do
so, if we are compelled by law to do so, or in other legally limited
circumstances (for example to protect your account from fraud).
In addition, in order to alert you to our other financial products and services,
we may share your personal information within First Trust.
USE OF WEBSITE ANALYTICS
We currently use third party analytics tools, Google Analytics and AddThis, to
gather information for purposes of improving First Trust's website and marketing
our products and services to you. These tools employ cookies, which are small
pieces of text stored in a file by your web browser and sent to websites that
you visit, to collect information, track website usage and viewing trends such
as the number of hits, pages visited, videos and PDFs viewed and the length of
user sessions in order to evaluate website performance and enhance navigation of
the website. We may also collect other anonymous information, which is generally
limited to technical and web navigation information such as the IP address of
your device, internet browser type and operating system for purposes of
analyzing the data to make First Trust's website better and more useful to our
users. The information collected does not include any personal identifiable
information such as your name, address, phone number or email address unless you
provide that information through the website for us to contact you in order to
answer your questions or respond to your requests. To find out how to opt-out of
these services click on: Google Analytics and AddThis.
CONFIDENTIALITY AND SECURITY
With regard to our internal security procedures, First Trust restricts access to
your nonpublic personal information to those First Trust employees who need to
know that information to provide products or services to you. We maintain
physical, electronic and procedural safeguards to protect your nonpublic
personal information.
POLICY UPDATES AND INQUIRIES
As required by federal law, we will notify you of our privacy policy annually.
We reserve the right to modify this policy at any time, however, if we do change
it, we will tell you promptly. For questions about our policy, or for additional
copies of this notice, please go to www.ftportfolios.com, or contact us at
1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust
Advisors).
March 2019
Page 104
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)
----------------------------
Annual Report
For the Period
December 3, 2019
(Commencement of Operations)
through August 31, 2020
----------------------------
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
ANNUAL REPORT
AUGUST 31, 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 Commentary......................................................... 9
Understanding Your Fund Expenses............................................. 12
Portfolio of Investments
First Trust Active Factor Large Cap ETF (AFLG)............................ 13
First Trust Active Factor Mid Cap ETF (AFMC).............................. 18
First Trust Active Factor Small Cap ETF (AFSM)............................ 23
Statements of Assets and Liabilities......................................... 29
Statements of Operations..................................................... 30
Statements of Changes in Net Assets.......................................... 31
Financial Highlights......................................................... 32
Notes to Financial Statements................................................ 34
Report of Independent Registered Public Accounting Firm...................... 40
Additional Information....................................................... 41
Board of Trustees and Officers............................................... 45
Privacy Policy............................................................... 47
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's shares may therefore be less than what you paid
for them. Accordingly, you can lose money investing in a Fund. See "Risk
Considerations" in the Additional Information section of this report for a
discussion of 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.
By reading the portfolio commentary from the portfolio management team of the
Funds, you may obtain an understanding of how the market environment affected
each Fund's performance. 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
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
AUGUST 31, 2020
Dear Shareholders:
First Trust is pleased to provide you with the 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 from the Funds' inception on
December 3, 2019 through August 31, 2020.
In case you missed the latest big news from the Federal Reserve ("Fed") in
September, it stated that it expects to hold short-term interest rates near zero
until two things happen: (1) the U.S. unemployment rate is back to normal, or
around the 4.0% level; and (2) the inflation rate is at, or above, 2.0%. As of
August 31, 2020, the U.S. unemployment rate stood at 8.4%, according to data
from the Bureau of Labor Statistics. The Fed's top benchmark for inflation (U.S.
Personal Consumption Expenditures Chain Type Price Index) stood at 1.0% on July
31, 2020. Brian Wesbury, Chief Economist at First Trust Advisors L.P., notes
that the Fed does not expect to achieve both goals until 2024.
What does this mean for investors? We believe that one of the Fed's motivations
in promoting a multi-year commitment to a near zero interest rate monetary
policy is to incentivize risk-taking. By holding interest rates artificially low
for an extended period, the Fed is essentially disincentivizing saving. The Fed
wants individuals to invest their capital in risk assets and is offering
valuable guidance on its monetary policy to instill confidence in the markets,
in my opinion.
In his testimony to the House Financial Services Committee on September 22,
2020, Fed Chairman Jerome Powell stated that the U.S. economy has a long road to
a full recovery and needs more financial support. U.S. Treasury Secretary Steven
Mnuchin also testified and said that he and the White House will continue to
push Congress to pass another fiscal relief package to help support American
workers. In pursuing additional fiscal support, the U.S. government is
ultimately looking to buy time until a coronavirus ("COVID-19") vaccine arrives.
With the U.S. Presidential election less than two months away, getting a
trillion dollar or so stimulus package through Congress will be no easy task, in
my opinion. Let us hope they surprise us.
Thanks to the monetary and fiscal support already brought to bear to fight
COVID-19, the securities markets appear to be in relatively good shape, in my
opinion. On September 22, 2020, the S&P 500(R) Index closed a little more than
two percentage points off its pre-COVID-19 high set on February 19, 2020,
according to data from Bloomberg. I find that to be an amazing feat in the
current climate. The combination of low interest rates and low inflation
continues to reward bond investors. Looking ahead, even bond investors are going
to need to assume some additional credit risk to achieve higher returns. Yields
on Treasury notes and bonds are poised at this time to stay low and fairly range
bound. The Fed's pledge to keep its benchmark rate low for up to three years
could lend some stability and reassurance to the debt markets, in my opinion.
We believe the U.S. economy is on its way back. While we have too many workers
still unemployed, I do find it encouraging that U.S. consumers have done such a
terrific job of getting their fiscal houses in order. Consumer spending
typically accounts for roughly 70% of U.S. gross domestic product output each
year. So goes the consumer, so goes the economy. The S&P/Experian Consumer
Credit Default Composite Index stood at 0.67% in August 2020, down from 0.92% in
August 2019 and well below its 1.79% average since its inception in July 2004,
according to S&P Dow Jones Indices. As we previously noted, the near-term
outlook rests on getting one or more FDA-approved vaccines or therapeutics. The
year-end target that has been touted by some, including President Donald J.
Trump, would coincide with the end to the government's moratorium on home
evictions and foreclosures, which is due to expire on December 31, 2020. Keep in
mind that the moratorium has already been extended three times. Things could get
interesting over the next few months. Stay tuned and stay the course.
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 8/31/20
FUND PERFORMANCE
NAV 6.67%
Market Price 6.62%
INDEX PERFORMANCE
S&P 500(R) Index 14.79%
---------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 8.)
----------------------------------------------------------
% OF TOTAL
LONG-TERM
SECTOR CLASSIFICATION INVESTMENTS
----------------------------------------------------------
Information Technology 29.09%
Health Care 15.69
Consumer Discretionary 11.34
Communication Services 8.56
Financials 8.50
Industrials 8.31
Consumer Staples 6.30
Real Estate 4.38
Materials 3.14
Utilities 2.68
Energy 2.01
--------
Total 100.00%
========
----------------------------------------------------------
% OF TOTAL
LONG-TERM
TOP TEN HOLDINGS INVESTMENTS
----------------------------------------------------------
Apple, Inc. 8.60%
Microsoft Corp. 4.48
Amazon.com, Inc. 3.29
Walmart, Inc. 1.42
Facebook, Inc., Class A 1.37
Alphabet, Inc., Class A 1.24
NVIDIA Corp. 1.17
Bristol-Myers Squibb Co. 1.14
Johnson & Johnson 1.11
General Mills, Inc. 1.00
--------
Total 24.82%
========
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 - AUGUST 31, 2020
First Trust Active S&P 500(R)
Factor Large Cap ETF Index
12/3/19 $10,000 $10,000
2/29/20 9,344 9,595
8/31/20 10,667 11,479
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 AUGUST 31, 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 August 31, 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 - 8/31/20 154 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 - 8/31/20 33 0 0 0
Page 3
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
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 8/31/20
FUND PERFORMANCE
NAV -6.86%
Market Price -6.86%
INDEX PERFORMANCE
S&P MidCap 400 Index -1.62%
---------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 8.)
----------------------------------------------------------
% OF TOTAL
LONG-TERM
SECTOR CLASSIFICATION INVESTMENTS
----------------------------------------------------------
Information Technology 18.63%
Health Care 15.58
Industrials 15.32
Consumer Discretionary 14.49
Financials 12.65
Real Estate 7.12
Materials 5.86
Utilities 4.06
Consumer Staples 3.97
Communication Services 1.63
Energy 0.69
--------
Total 100.00%
========
----------------------------------------------------------
% OF TOTAL
LONG-TERM
TOP TEN HOLDINGS INVESTMENTS
----------------------------------------------------------
Molina Healthcare, Inc. 1.37%
Reliance Steel & Aluminum Co. 1.29
West Pharmaceutical Services, Inc. 1.21
Bio-Rad Laboratories, Inc., Class A 1.19
Ciena Corp. 1.11
CACI International, Inc., Class A 1.10
Generac Holdings, Inc. 1.08
Regal Beloit Corp. 1.07
Pool Corp. 1.00
Commercial Metals Co. 0.93
--------
Total 11.35%
========
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 - AUGUST 31, 2020
First Trust Active S&P MidCap
Factor Mid Cap ETF 400 Index
12/3/19 $10,000 $10,000
2/29/20 9,126 9,181
8/31/20 9,314 9,838
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 AUGUST 31, 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 August 31, 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 - 8/31/20 154 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%
12/4/19 - 8/31/20 32 0 0 0
Page 5
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
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 8/31/20
FUND PERFORMANCE
NAV -7.03%
Market Price -7.08%
INDEX PERFORMANCE
Russell 2000(R) Index -1.49%
---------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 8.)
----------------------------------------------------------
% OF TOTAL
LONG-TERM
SECTOR CLASSIFICATION INVESTMENTS
----------------------------------------------------------
Health Care 22.44%
Industrials 15.47
Consumer Discretionary 14.55
Information Technology 14.36
Financials 13.81
Real Estate 6.29
Consumer Staples 4.95
Materials 3.68
Communication Services 1.74
Utilities 1.54
Energy 1.17
--------
Total 100.00%
========
----------------------------------------------------------
% OF TOTAL
LONG-TERM
TOP TEN HOLDINGS INVESTMENTS
----------------------------------------------------------
Generac Holdings, Inc. 1.32%
BMC Stock Holdings, Inc. 1.17
LHC Group, Inc. 1.13
Teladoc Health, Inc. 1.08
Amedisys, Inc. 0.92
Kinsale Capital Group, Inc. 0.90
Hibbett Sports, Inc. 0.89
Boise Cascade Co. 0.89
Plexus Corp. 0.88
B&G Foods, Inc. 0.87
--------
Total 10.05%
========
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 - AUGUST 31, 2020
First Trust Active Russell 2000(R)
Factor Small Cap ETF Index
12/3/19 $10,000 $10,000
2/29/20 8,981 9,244
8/31/20 9,297 9,851
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 AUGUST 31, 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 August 31, 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 - 8/31/20 144 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 - 8/31/20 43 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 COMMENTARY
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
ANNUAL REPORT
AUGUST 31, 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 Funds' portfolios 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
COMMENTARY
FIRST TRUST ACTIVE FACTOR LARGE CAP ETF (THE "FUND" OR "AFLG")
MARKET RECAP
In the first quarter of 2020, equity markets experienced extreme volatility due
to government enforced lockdowns around the world to slow the path of the
coronavirus ("COVID-19"). From February 19 to March 23, 2020, the S&P 500(R)
Index lost roughly one-third of its value, only to rocket to new highs by the
end of August 2020. Extraordinary accommodation on the part of the Federal
Reserve (the "Fed") and federal stimulus buttressed confidence and led to the
surge in equity markets from the depths of March. However, the recovery has been
extremely bifurcated with a few industries seeing a large tailwind due to
digital transformation and other cyclically focused sectors seeing a large
drawdown in profits. Larger technology-oriented firms with better balance
sheets, higher margins and a solid customer base outperformed more cyclical
firms.
On a factor basis, it was a tough environment given the narrowness of the market
over the period covered by this report. The five primary factors (value,
momentum, quality, low volatility and size) all underperformed the broad market
on an equal weight basis. Momentum and quality held up relatively better while
value trailed by a wide margin.
FUND PERFORMANCE
The Fund returned 6.67% on a net asset value ("NAV") basis and 6.62% on a market
price basis over the period from the Fund's inception on December 3, 2019
through August 31, 2020. The S&P 500(R) Index (the "Benchmark") returned 14.79%
over the same period. The Fund paid total distributions of $0.1768 per share
over the same period.
Most of the underperformance can be attributed to several of the five primary
factors, especially value. The Fund targets diversified exposure to the value,
momentum, quality and low volatility factors. Stocks with lower valuations
suffered as a narrow group of growth stocks outperformed, mainly in the
internet, cloud and software verticals. In addition, the low volatility factor
failed to provide downside protection during the February and March 2020
drawdown and saw less of a rebound during the recovery. The momentum factor
provided a small benefit to relative performance but could not overcome exposure
from the value and low volatility factors. Sector allocation effects added
slightly to performance, while single-stock selection was a drag on relative
performance.
MARKET AND FUND OUTLOOK
We believe market volatility will remain elevated in the near term due to
uncertainty across a number of spectrums, including the November 2020 U.S.
Presidential election, the path of COVID-19, U.S. trade policy with China, and
potential additional fiscal and monetary stimulus. We remain constructive on
equities for the long-term, especially relative to bonds.
While the last year has proved to be an especially difficult environment for
factor investing, we believe a more normalized environment could lead to better
conditions for the Active Factor suite. The spread between value and growth
stocks is especially extreme, only surpassed by the late 1990s in the last 25
years. The Fund continues to offer diversified exposure across the quality, low
volatility, value and momentum factors, while reducing sector and single-stock
risk. We continue to target key factors that historically have offered premiums
to the market return.
Page 9
--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
ANNUAL REPORT
AUGUST 31, 2020 (UNAUDITED)
FIRST TRUST ACTIVE FACTOR MID CAP ETF (THE "FUND" OR "AFMC")
MARKET RECAP
In the first quarter of 2020, equity markets experienced extreme volatility due
to government enforced lockdowns around the world to slow the path of COVID-19.
From February 19 to March 23, 2020 the S&P 500(R) Index lost roughly one-third
of its value, only to rocket to new highs by the end of August 2020.
Extraordinary accommodation on the part of the Fed and federal stimulus
buttressed confidence and led to the surge in equity markets from the depths of
March. However, the recovery has been extremely bifurcated with a few industries
seeing a large tailwind due to digital transformation and other cyclically
focused sectors seeing a large drawdown in profits. Larger technology-oriented
firms with better balance sheets, higher margins and a solid customer base
outperformed smaller cyclical firms. Smaller capitalization stocks struggled
relative to large-cap peers with the S&P MidCap 400 Index lagging the S&P 500(R)
Index by over 16%.
On a factor basis, it was a tough environment given the narrowness of the market
over the period covered by this report. The five primary factors (value,
momentum, quality, low volatility and size) all underperformed the broad market
on an equal weight basis. Momentum and quality held up relatively better while
value trailed by a wide margin.
PERFORMANCE ANALYSIS
The Fund returned -6.86% on a NAV basis and -6.86% on a market price basis over
the period from the Fund's inception on December 3, 2019 through August 31,
2020. The S&P MidCap 400 Index (the "Benchmark") returned -1.62% over the same
period. The Fund paid total distributions of $0.1406 per share over the same
period.
Most of the underperformance can be attributed to several of the five factors,
especially value. The Fund targets diversified exposure to the value, momentum,
quality and low volatility factors. Stocks with lower valuations suffered as a
narrow group of growth stocks outperformed, mainly in the internet, cloud and
software verticals. In addition, the low volatility factor failed to provide
downside protection during the February and March 2020 drawdown and saw less of
a rebound during the recovery. The momentum factor benefited performance but
could not overcome exposure from the value and low volatility factors. Sector
allocation effects added slightly to performance, while single-stock selection
was marginally negative.
MARKET AND FUND OUTLOOK
We believe market volatility will remain elevated in the near term due to
uncertainty across a number of spectrums, including the November 2020 U.S.
Presidential election, the path of COVID-19, U.S. trade policy with China, and
potential additional fiscal and monetary stimulus. We remain constructive on
equities for the long-term, especially relative to bonds.
While the last year has proved to be an especially difficult environment for
factor investing, we believe a more normalized environment could lead to better
conditions for the Active Factor suite. The spread between value and growth
stocks is especially extreme, only surpassed by the late 1990s in the last 25
years. The Fund continues to offer diversified exposure across the quality, low
volatility, value and momentum factors, while reducing sector and single-stock
risk. We continue to target key factors that historically have offered premiums
to the market return.
FIRST TRUST ACTIVE FACTOR SMALL CAP ETF (THE "FUND" OR "AFSM")
MARKET RECAP
In the first quarter of 2020, equity markets experienced extreme volatility due
to government enforced lockdowns around the world to slow the path of COVID-19.
From February 19 to March 23, 2020 the S&P 500(R) Index lost roughly one-third
of its value, only to rocket to new highs by the end of August 2020.
Extraordinary accommodation on the part of the Fed and federal stimulus
buttressed confidence and led to the surge in equity markets from the depths of
March. However, the recovery has been extremely bifurcated with a few industries
seeing a large tailwind due to digital transformation and other cyclically
focused sectors seeing a large drawdown in profits. Larger technology-oriented
firms with better balance sheets, higher margins and a solid customer base
outperformed smaller cyclical firms. Smaller capitalization stocks struggled
relative to large-cap peers with the Russell 2000(R) Index lagging the S&P
500(R) Index by over 16%.
On a factor basis, it was a tough environment given the narrowness of the market
over the period covered by this report. The five primary factors (value,
momentum, quality, low volatility and size) all underperformed the broad market
on an equal weight basis. Momentum and quality held up relatively better while
value trailed by a wide margin.
Page 10
--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
ANNUAL REPORT
AUGUST 31, 2020 (UNAUDITED)
PERFORMANCE ANALYSIS
The Fund returned -7.03% on a NAV basis and -7.08% on a market price basis over
the period from the Fund's inception on December 3, 2019 through August 31,
2020. The Russell 2000(R) Index (the "Benchmark") returned -1.49% over the same
period. The Fund paid total distributions of $0.0997 per share over the period.
Most of the underperformance can be attributed to several of the five factors,
especially value. The Fund targets diversified exposure to the value, momentum,
quality and low volatility factors. Stocks with lower valuations suffered as a
narrow group of growth stocks outperformed, mainly in the internet, cloud and
software verticals. In addition, the low volatility factor failed to provide
downside protection during the February and March 2020 drawdown and saw less of
a rebound during the recovery. The momentum factor benefited performance but
could not overcome exposure from the value and low volatility factors. Sector
allocation effects added slightly to performance, while single-stock selection
was marginally negative.
MARKET AND FUND OUTLOOK
We believe market volatility will remain elevated in the near term due to
uncertainty across a number of spectrums, including the November 2020 U.S.
Presidential election, the path of COVID-19, U.S. trade policy with China, and
potential additional fiscal and monetary stimulus. We remain constructive on
equities for the long-term, especially relative to bonds.
While the last year has proved to be an especially difficult environment for
factor investing, we believe a more normalized environment could lead to better
conditions for the Active Factor suite. The spread between value and growth
stocks is especially extreme, only surpassed by the late 1990s in the last 25
years. The Fund continues to offer diversified exposure across the quality, low
volatility, value and momentum factors, while reducing sector and single-stock
risk. We continue to target key factors that historically have offered premiums
to the market return.
Page 11
FIRST TRUST EXCHANGE-TRADED FUND VIII
UNDERSTANDING YOUR FUND EXPENSES
AUGUST 31, 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
(12b-1) fees, if any, and other Fund expenses. This Example is intended to help
you understand your ongoing costs of investing in the Funds and to compare these
costs with the ongoing costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended August 31, 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 six-month period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on 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
MARCH 1, 2020 AUGUST 31, 2020 PERIOD PERIOD (a)
------------------------------------------------------------------------------------------------------------------
FIRST TRUST ACTIVE FACTOR LARGE CAP ETF (AFLG)
Actual $1,000.00 $1,141.70 0.55% $2.96
Hypothetical (5% return before expenses) $1,000.00 $1,022.37 0.55% $2.80
FIRST TRUST ACTIVE FACTOR MID CAP ETF (AFMC)
Actual $1,000.00 $1,020.60 0.65% $3.30
Hypothetical (5% return before expenses) $1,000.00 $1,021.87 0.65% $3.30
FIRST TRUST ACTIVE FACTOR SMALL CAP ETF (AFSM)
Actual $1,000.00 $1,035.20 0.75% $3.84
Hypothetical (5% return before expenses) $1,000.00 $1,021.37 0.75% $3.81
(a) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (March 1,
2020 through August 31, 2020), multiplied by 184/366 (to reflect the
six-month period).
Page 12
FIRST TRUST ACTIVE FACTOR LARGE CAP ETF (AFLG)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS -- 99.8%
AEROSPACE & DEFENSE -- 0.6%
220 Howmet Aerospace, Inc. $ 3,855
12 Lockheed Martin Corp. 4,683
12 Teledyne Technologies, Inc. (a) 3,763
31 Textron, Inc. 1,222
-------------
13,523
-------------
AIR FREIGHT & LOGISTICS -- 0.9%
82 C.H. Robinson Worldwide, Inc. 8,061
28 Expeditors International of
Washington, Inc. 2,475
50 United Parcel Service, Inc.,
Class B 8,181
-------------
18,717
-------------
AIRLINES -- 0.2%
128 Southwest Airlines Co. 4,810
-------------
AUTO COMPONENTS -- 0.7%
358 BorgWarner, Inc. 14,531
-------------
AUTOMOBILES -- 0.0%
28 Harley-Davidson, Inc. 776
-------------
BANKS -- 1.4%
109 Citigroup, Inc. 5,572
136 Citizens Financial Group, Inc. 3,518
74 Comerica, Inc. 2,925
8 M&T Bank Corp. 826
271 Regions Financial Corp. 3,133
228 Wells Fargo & Co. 5,506
230 Zions Bancorp N.A. 7,397
-------------
28,877
-------------
BEVERAGES -- 0.6%
152 Monster Beverage Corp. (a) 12,747
-------------
BIOTECHNOLOGY -- 2.9%
99 AbbVie, Inc. 9,481
42 Alexion Pharmaceuticals, Inc. (a) 4,797
38 Amgen, Inc. 9,626
27 Biogen, Inc. (a) 7,766
166 Gilead Sciences, Inc. 11,081
8 Neurocrine Biosciences, Inc. (a) 931
18 Regeneron Pharmaceuticals,
Inc. (a) 11,159
20 Vertex Pharmaceuticals, Inc. (a) 5,583
-------------
60,424
-------------
BUILDING PRODUCTS -- 1.1%
114 A.O. Smith Corp. 5,582
36 Fortune Brands Home &
Security, Inc. 3,027
68 Johnson Controls International
PLC 2,770
6 Lennox International, Inc. 1,682
146 Masco Corp. 8,512
20 Trane Technologies PLC 2,368
-------------
23,941
-------------
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
CAPITAL MARKETS -- 2.6%
8 Ameriprise Financial, Inc. $ 1,255
14 BlackRock, Inc. 8,319
74 Blackstone Group (The), Inc.,
Class A 3,918
10 Cboe Global Markets, Inc. 918
381 Franklin Resources, Inc. 8,024
2 MarketAxess Holdings, Inc. 972
4 Moody's Corp. 1,179
16 MSCI, Inc. 5,972
20 Nasdaq, Inc. 2,688
36 S&P Global, Inc. 13,191
44 T. Rowe Price Group, Inc. 6,125
46 Tradeweb Markets, Inc., Class A 2,635
-------------
55,196
-------------
CHEMICALS -- 1.8%
61 DuPont de Nemours, Inc. 3,401
13 Eastman Chemical Co. 950
82 FMC Corp. 8,763
26 Linde PLC 6,493
11 LyondellBasell Industries N.V.,
Class A 720
52 PPG Industries, Inc. 6,261
16 Sherwin-Williams (The) Co. 10,737
-------------
37,325
-------------
COMMERCIAL SERVICES & SUPPLIES
-- 0.4%
10 Cintas Corp. 3,333
108 Rollins, Inc. 5,955
-------------
9,288
-------------
COMMUNICATIONS EQUIPMENT
-- 1.6%
344 Cisco Systems, Inc. 14,524
66 F5 Networks, Inc. (a) 8,734
372 Juniper Networks, Inc. 9,300
6 Ubiquiti, Inc. 1,090
-------------
33,648
-------------
CONSTRUCTION & ENGINEERING
-- 0.4%
14 Jacobs Engineering Group, Inc. 1,264
118 Quanta Services, Inc. 6,047
-------------
7,311
-------------
CONSUMER FINANCE -- 0.4%
153 Ally Financial, Inc. 3,500
186 Synchrony Financial 4,615
-------------
8,115
-------------
CONTAINERS & PACKAGING -- 0.5%
141 International Paper Co. 5,114
42 Packaging Corp. of America 4,252
-------------
9,366
-------------
DISTRIBUTORS -- 0.3%
82 LKQ Corp. (a) 2,603
See Notes to Financial Statements Page 13
FIRST TRUST ACTIVE FACTOR LARGE CAP ETF (AFLG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
DISTRIBUTORS (CONTINUED)
10 Pool Corp. $ 3,278
-------------
5,881
-------------
DIVERSIFIED FINANCIAL SERVICES
-- 0.7%
48 Berkshire Hathaway, Inc.,
Class B (a) 10,466
203 Equitable Holdings, Inc. 4,301
-------------
14,767
-------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 1.5%
500 AT&T, Inc. 14,905
290 Verizon Communications, Inc. 17,188
-------------
32,093
-------------
ELECTRIC UTILITIES -- 1.9%
147 Evergy, Inc. 7,823
14 Eversource Energy 1,200
236 Exelon Corp. 8,711
50 NextEra Energy, Inc. 13,959
128 NRG Energy, Inc. 4,404
59 Pinnacle West Capital Corp. 4,328
-------------
40,425
-------------
ELECTRICAL EQUIPMENT -- 0.9%
93 Eaton Corp. PLC 9,495
60 Emerson Electric Co. 4,168
16 Generac Holdings, Inc. (a) 3,040
12 Rockwell Automation, Inc. 2,767
-------------
19,470
-------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 0.9%
18 CDW Corp. 2,046
41 FLIR Systems, Inc. 1,513
32 Keysight Technologies, Inc. (a) 3,153
117 TE Connectivity Ltd. 11,302
4 Zebra Technologies Corp.,
Class A (a) 1,146
-------------
19,160
-------------
ENTERTAINMENT -- 1.6%
170 Activision Blizzard, Inc. 14,198
90 Electronic Arts, Inc. (a) 12,552
34 Take-Two Interactive Software,
Inc. (a) 5,821
-------------
32,571
-------------
EQUITY REAL ESTATE INVESTMENT
TRUSTS -- 4.2%
52 American Tower Corp. 12,956
38 Crown Castle International Corp. 6,204
10 Equinix, Inc. 7,898
108 Equity LifeStyle Properties, Inc. 7,159
64 Equity Residential 3,613
16 Essex Property Trust, Inc. 3,464
582 Host Hotels & Resorts, Inc. 6,536
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
EQUITY REAL ESTATE INVESTMENT
TRUSTS (CONTINUED)
44 Mid-America Apartment
Communities, Inc. $ 5,153
68 Prologis, Inc. 6,927
46 Public Storage 9,770
96 Regency Centers Corp. 3,812
22 SBA Communications Corp. 6,734
39 Simon Property Group, Inc. 2,646
33 SL Green Realty Corp. 1,543
81 Vornado Realty Trust 2,902
-------------
87,317
-------------
FOOD & STAPLES RETAILING -- 2.2%
22 Costco Wholesale Corp. 7,649
34 Kroger (The) Co. 1,213
73 Sysco Corp. 4,390
96 Walgreens Boots Alliance, Inc. 3,650
214 Walmart, Inc. 29,714
-------------
46,616
-------------
FOOD PRODUCTS -- 2.3%
110 Archer-Daniels-Midland Co. 4,923
108 Campbell Soup Co. 5,682
327 General Mills, Inc. 20,912
102 Hormel Foods Corp. 5,200
48 J.M. Smucker (The) Co. 5,769
174 Kraft Heinz (The) Co. 6,097
-------------
48,583
-------------
HEALTH CARE EQUIPMENT
& SUPPLIES -- 3.1%
18 ABIOMED, Inc. (a) 5,537
40 Danaher Corp. 8,259
96 DENTSPLY SIRONA, Inc. 4,308
54 Edwards Lifesciences Corp. (a) 4,635
16 IDEXX Laboratories, Inc. (a) 6,257
18 Masimo Corp. (a) 4,032
22 Medtronic PLC 2,364
14 Quidel Corp. (a) 2,463
50 ResMed, Inc. 9,039
62 West Pharmaceutical Services,
Inc. 17,606
-------------
64,500
-------------
HEALTH CARE PROVIDERS & SERVICES
-- 3.2%
22 AmerisourceBergen Corp. 2,135
11 Anthem, Inc. 3,097
90 CVS Health Corp. 5,591
56 DaVita, Inc. (a) 4,858
91 Henry Schein, Inc. (a) 6,046
41 Humana, Inc. 17,022
6 Laboratory Corp. of America
Holdings (a) 1,054
13 McKesson Corp. 1,995
12 Molina Healthcare, Inc. (a) 2,220
37 Quest Diagnostics, Inc. 4,116
Page 14 See Notes to Financial Statements
FIRST TRUST ACTIVE FACTOR LARGE CAP ETF (AFLG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
HEALTH CARE PROVIDERS & SERVICES
(CONTINUED)
55 UnitedHealth Group, Inc. $ 17,190
8 Universal Health Services, Inc.,
Class B 883
-------------
66,207
-------------
HEALTH CARE TECHNOLOGY -- 0.7%
60 Cerner Corp. 4,402
22 Teladoc Health, Inc. (a) 4,745
20 Veeva Systems, Inc., Class A (a) 5,646
-------------
14,793
-------------
HOTELS, RESTAURANTS & LEISURE
-- 0.7%
8 Chipotle Mexican Grill, Inc. (a) 10,482
8 Domino's Pizza, Inc. 3,272
95 Norwegian Cruise Line Holdings
Ltd. (a) 1,625
-------------
15,379
-------------
HOUSEHOLD DURABLES -- 1.3%
110 D.R. Horton, Inc. 7,851
16 Garmin Ltd. 1,658
63 Lennar Corp., Class A 4,713
190 PulteGroup, Inc. 8,472
28 Whirlpool Corp. 4,976
-------------
27,670
-------------
HOUSEHOLD PRODUCTS -- 0.6%
12 Church & Dwight Co., Inc. 1,150
52 Clorox (The) Co. 11,622
-------------
12,772
-------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS -- 0.4%
407 Vistra Corp. 7,827
-------------
INDUSTRIAL CONGLOMERATES -- 0.3%
36 Honeywell International, Inc. 5,960
-------------
INSURANCE -- 3.4%
94 Allstate (The) Corp. 8,742
32 Aon PLC, Class A 6,400
52 Arthur J. Gallagher & Co. 5,476
40 Assurant, Inc. 4,862
130 Brown & Brown, Inc. 6,032
106 CNA Financial Corp. 3,410
102 Loews Corp. 3,658
96 Marsh & McLennan Cos., Inc. 11,031
115 MetLife, Inc. 4,423
86 Progressive (The) Corp. 8,173
60 Prudential Financial, Inc. 4,066
16 Travelers (The) Cos., Inc. 1,857
166 Unum Group 3,068
-------------
71,198
-------------
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
INTERACTIVE MEDIA & SERVICES
-- 3.1%
16 Alphabet, Inc., Class A (a) $ 26,072
98 Facebook, Inc., Class A (a) 28,734
6 IAC/InterActiveCorp (a) 798
45 Match Group, Inc. (a) 5,026
44 Zillow Group, Inc., Class C (a) 3,773
-------------
64,403
-------------
INTERNET & DIRECT MARKETING RETAIL
-- 4.5%
20 Amazon.com, Inc. (a) 69,019
2 Booking Holdings, Inc. (a) 3,821
361 eBay, Inc. 19,776
4 Wayfair, Inc., Class A (a) 1,186
-------------
93,802
-------------
IT SERVICES -- 4.8%
67 Accenture PLC, Class A 16,075
8 Automatic Data Processing, Inc. 1,113
62 Black Knight, Inc. (a) 5,214
75 Booz Allen Hamilton Holding
Corp. 6,604
9 Broadridge Financial Solutions,
Inc. 1,237
164 Cognizant Technology Solutions
Corp., Class A 10,965
94 International Business Machines
Corp. 11,591
58 Jack Henry & Associates, Inc. 9,594
58 Leidos Holdings, Inc. 5,248
12 Paychex, Inc. 918
54 PayPal Holdings, Inc. (a) 11,024
24 Square, Inc., Class A (a) 3,829
40 Visa, Inc., Class A 8,480
367 Western Union (The) Co. 8,658
-------------
100,550
-------------
LIFE SCIENCES TOOLS & SERVICES
-- 1.2%
12 Agilent Technologies, Inc. 1,205
20 Bio-Rad Laboratories, Inc.,
Class A (a) 10,172
16 Bio-Techne Corp. 4,087
2 Mettler-Toledo International,
Inc. (a) 1,941
20 Thermo Fisher Scientific, Inc. 8,580
-------------
25,985
-------------
MACHINERY -- 1.9%
76 Cummins, Inc. 15,751
24 Dover Corp. 2,636
24 Illinois Tool Works, Inc. 4,741
12 Nordson Corp. 2,238
72 PACCAR, Inc. 6,180
62 Snap-on, Inc. 9,193
-------------
40,739
-------------
See Notes to Financial Statements Page 15
FIRST TRUST ACTIVE FACTOR LARGE CAP ETF (AFLG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MEDIA -- 2.1%
22 Charter Communications, Inc.,
Class A (a) $ 13,543
364 Comcast Corp., Class A 16,311
76 Discovery, Inc., Class A (a) 1,677
140 Fox Corp., Class A 3,900
103 Liberty Media Corp.-Liberty
SiriusXM, Series C (a) 3,708
77 Omnicom Group, Inc. 4,165
26 ViacomCBS, Inc., Class B 724
-------------
44,028
-------------
METALS & MINING -- 0.9%
132 Arconic Corp. (a) 2,937
84 Newmont Corp. 5,652
203 Nucor Corp. 9,228
26 Southern Copper Corp. 1,251
-------------
19,068
-------------
MULTILINE RETAIL -- 1.0%
36 Dollar General Corp. 7,267
63 Kohl's Corp. 1,346
86 Target Corp. 13,004
-------------
21,617
-------------
MULTI-UTILITIES -- 0.4%
48 Consolidated Edison, Inc. 3,424
86 Public Service Enterprise Group,
Inc. 4,493
-------------
7,917
-------------
OIL, GAS & CONSUMABLE FUELS
-- 2.0%
133 Cabot Oil & Gas Corp. 2,523
147 Chevron Corp. 12,338
219 ConocoPhillips 8,298
104 Devon Energy Corp. 1,130
154 Exxon Mobil Corp. 6,151
121 HollyFrontier Corp. 2,888
32 Marathon Petroleum Corp. 1,135
63 Phillips 66 3,684
77 Valero Energy Corp. 4,049
-------------
42,196
-------------
PHARMACEUTICALS -- 4.6%
383 Bristol-Myers Squibb Co. 23,823
100 Eli Lilly and Co. 14,839
152 Johnson & Johnson 23,318
194 Merck & Co., Inc. 16,542
428 Pfizer, Inc. 16,174
14 Zoetis, Inc. 2,242
-------------
96,938
-------------
PROFESSIONAL SERVICES -- 0.4%
169 Robert Half International, Inc. 8,991
-------------
REAL ESTATE MANAGEMENT
& DEVELOPMENT -- 0.2%
96 CBRE Group, Inc., Class A (a) 4,515
-------------
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
ROAD & RAIL -- 0.5%
10 J.B. Hunt Transport Services, Inc. $ 1,405
48 Old Dominion Freight Line, Inc. 9,705
-------------
11,110
-------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 3.5%
118 Advanced Micro Devices, Inc. (a) 10,717
18 Applied Materials, Inc. 1,109
169 Intel Corp. 8,610
22 KLA Corp. 4,513
16 Lam Research Corp. 5,381
70 Maxim Integrated Products, Inc. 4,791
16 Monolithic Power Systems, Inc. 4,274
46 NVIDIA Corp. 24,609
65 Texas Instruments, Inc. 9,240
-------------
73,244
-------------
SOFTWARE -- 8.9%
18 Adobe, Inc. (a) 9,241
32 ANSYS, Inc. (a) 10,848
6 Autodesk, Inc. (a) 1,474
104 Cadence Design Systems, Inc. (a) 11,535
126 Citrix Systems, Inc. 18,295
10 Fair Isaac Corp. (a) 4,208
416 Microsoft Corp. 93,820
528 NortonLifeLock, Inc. 12,419
166 Oracle Corp. 9,499
40 Synopsys, Inc. (a) 8,852
16 Tyler Technologies, Inc. (a) 5,525
-------------
185,716
-------------
SPECIALTY RETAIL -- 2.1%
68 Best Buy Co., Inc. 7,542
66 Home Depot (The), Inc. 18,812
62 Lowe's Cos., Inc. 10,211
48 Tractor Supply Co. 7,144
-------------
43,709
-------------
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 9.4%
1,396 Apple, Inc. 180,140
200 Hewlett Packard Enterprise Co. 1,934
285 HP, Inc. 5,572
90 NetApp, Inc. 4,265
33 Seagate Technology PLC 1,584
196 Xerox Holdings Corp. 3,696
-------------
197,191
-------------
TEXTILES, APPAREL & LUXURY GOODS
-- 0.7%
100 NIKE, Inc., Class B 11,189
46 Ralph Lauren Corp. 3,166
-------------
14,355
-------------
TOBACCO -- 0.5%
124 Altria Group, Inc. 5,424
74 Philip Morris International, Inc. 5,904
-------------
11,328
-------------
Page 16 See Notes to Financial Statements
FIRST TRUST ACTIVE FACTOR LARGE CAP ETF (AFLG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
TRADING COMPANIES & DISTRIBUTORS
-- 0.5%
152 Fastenal Co. $ 7,427
8 W.W. Grainger, Inc. 2,923
-------------
10,350
-------------
WIRELESS TELECOMMUNICATION SERVICES
-- 0.3%
52 T-Mobile US, Inc. (a) 6,067
-------------
TOTAL COMMON STOCKS -- 99.8% 2,095,603
(Cost $1,906,275) -------------
MONEY MARKET FUNDS -- 0.1%
1,103 Morgan Stanley Institutional Liquidity
Funds - Treasury Portfolio -
Institutional Class - 0.01% (b) 1,103
(Cost $1,103) -------------
TOTAL INVESTMENTS -- 99.9% 2,096,706
(Cost $1,907,378) (c)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 2,725
-------------
NET ASSETS -- 100.0% $ 2,099,431
=============
(a) Non-income producing security.
(b) Rate shown reflects yield as of August 31, 2020.
(c) Aggregate cost for federal income tax purposes is $1,924,028. As of August
31, 2020, the aggregate gross unrealized appreciation for all investments
in which there was an excess of value over tax cost was $292,017 and the
aggregate gross unrealized depreciation for all investments in which there
was an excess of tax cost over value was $119,339. The net unrealized
appreciation was $172,678.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of August 31,
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* $ 2,095,603 $ -- $ --
Money Market
Funds 1,103 -- --
-------------------------------------------
Total Investments $ 2,096,706 $ -- $ --
===========================================
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 17
FIRST TRUST ACTIVE FACTOR MID CAP ETF (AFMC)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS -- 99.7%
AUTO COMPONENTS -- 1.2%
114 BorgWarner, Inc. $ 4,627
246 Gentex Corp. 6,655
96 Lear Corp. 10,937
-------------
22,219
-------------
AUTOMOBILES -- 0.4%
28 Harley-Davidson, Inc. 776
66 Thor Industries, Inc. 6,232
-------------
7,008
-------------
BANKS -- 3.5%
327 Associated Banc-Corp. 4,395
141 BankUnited, Inc. 3,297
108 CIT Group, Inc. 2,124
104 Commerce Bancshares, Inc. 6,195
242 CVB Financial Corp. 4,407
10 First Citizens BancShares, Inc.,
Class A 3,931
397 First Hawaiian, Inc. 6,562
336 Fulton Financial Corp. 3,286
186 Hancock Whitney Corp. 3,722
386 PacWest Bancorp 7,365
110 Popular, Inc. 4,074
613 Sterling Bancorp 7,154
216 Zions Bancorp N.A. 6,947
-------------
63,459
-------------
BEVERAGES -- 1.0%
8 Boston Beer (The) Co., Inc.,
Class A (a) 7,056
140 National Beverage Corp. (a) 11,385
-------------
18,441
-------------
BIOTECHNOLOGY -- 1.9%
40 ACADIA Pharmaceuticals,
Inc. (a) 1,583
10 Acceleron Pharma, Inc. (a) 975
18 Allogene Therapeutics, Inc. (a) 642
92 Emergent BioSolutions, Inc. (a) 10,493
398 Exelixis, Inc. (a) 8,843
74 Halozyme Therapeutics, Inc. (a) 2,146
75 Ligand Pharmaceuticals, Inc. (a) 7,650
20 Natera, Inc. (a) 1,274
14 United Therapeutics Corp. (a) 1,497
-------------
35,103
-------------
BUILDING PRODUCTS -- 1.4%
84 A.O. Smith Corp. 4,113
144 Fortune Brands Home &
Security, Inc. 12,108
94 Simpson Manufacturing Co., Inc. 9,244
16 UFP Industries, Inc. 950
-------------
26,415
-------------
CAPITAL MARKETS -- 2.4%
68 Cohen & Steers, Inc. 4,114
34 FactSet Research Systems, Inc. 11,914
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
CAPITAL MARKETS (CONTINUED)
116 Houlihan Lokey, Inc. $ 6,798
702 Janus Henderson Group PLC 14,545
120 SEI Investments Co. 6,283
-------------
43,654
-------------
CHEMICALS -- 1.9%
128 Cabot Corp. 4,737
160 Huntsman Corp. 3,459
8 NewMarket Corp. 2,980
280 Olin Corp. 3,150
136 RPM International, Inc. 11,529
50 Scotts Miracle-Gro (The) Co. 8,427
-------------
34,282
-------------
COMMERCIAL SERVICES & SUPPLIES
-- 1.1%
28 Deluxe Corp. 795
272 HNI Corp. 8,663
261 KAR Auction Services, Inc. 4,526
48 MSA Safety, Inc. 6,046
-------------
20,030
-------------
COMMUNICATIONS EQUIPMENT
-- 2.8%
358 Ciena Corp. (a) 20,324
117 EchoStar Corp., Class A (a) 3,437
17 F5 Networks, Inc. (a) 2,249
344 Juniper Networks, Inc. 8,600
126 Lumentum Holdings, Inc. (a) 10,836
179 NetScout Systems, Inc. (a) 4,142
187 Viavi Solutions, Inc. (a) 2,494
-------------
52,082
-------------
CONSTRUCTION & ENGINEERING
-- 0.6%
71 EMCOR Group, Inc. 5,326
94 Quanta Services, Inc. 4,817
-------------
10,143
-------------
CONSUMER FINANCE -- 0.4%
401 Navient Corp. 3,645
210 Santander Consumer USA
Holdings, Inc. 3,614
-------------
7,259
-------------
CONTAINERS & PACKAGING -- 0.3%
152 Silgan Holdings, Inc. 5,785
-------------
DISTRIBUTORS -- 1.0%
56 Pool Corp. 18,359
-------------
DIVERSIFIED CONSUMER SERVICES
-- 0.7%
300 Adtalem Global Education,
Inc. (a) 9,960
8 Graham Holdings Co., Class B 3,424
-------------
13,384
-------------
Page 18 See Notes to Financial Statements
FIRST TRUST ACTIVE FACTOR MID CAP ETF (AFMC)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
DIVERSIFIED FINANCIAL SERVICES
-- 1.0%
602 Jefferies Financial Group, Inc. $ 10,559
164 Voya Financial, Inc. 8,513
-------------
19,072
-------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 0.0%
12 Cogent Communications
Holdings, Inc. 807
-------------
ELECTRIC UTILITIES -- 2.0%
288 Hawaiian Electric Industries, Inc. 9,968
108 IDACORP, Inc. 9,709
160 OGE Energy Corp. 5,098
336 Portland General Electric Co. 12,818
-------------
37,593
-------------
ELECTRICAL EQUIPMENT -- 3.2%
48 Acuity Brands, Inc. 5,246
104 Generac Holdings, Inc. (a) 19,758
311 GrafTech International Ltd. 2,071
50 Hubbell, Inc. 7,246
198 Regal Beloit Corp. 19,574
58 Vicor Corp. (a) 5,048
-------------
58,943
-------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 4.3%
106 Arrow Electronics, Inc. (a) 8,327
123 Avnet, Inc. 3,384
50 Cognex Corp. 3,460
73 Dolby Laboratories, Inc., Class A 5,099
109 FLIR Systems, Inc. 4,022
110 Jabil, Inc. 3,757
35 Littelfuse, Inc. 6,329
120 National Instruments Corp. 4,307
128 SYNNEX Corp. 16,275
70 Trimble, Inc. (a) 3,669
553 Vishay Intertechnology, Inc. 8,842
42 Zebra Technologies Corp.,
Class A (a) 12,034
-------------
79,505
-------------
ENERGY EQUIPMENT & SERVICES
-- 0.2%
94 Helmerich & Payne, Inc. 1,549
399 Patterson-UTI Energy, Inc. 1,536
-------------
3,085
-------------
ENTERTAINMENT -- 0.0%
31 Cinemark Holdings, Inc. 454
-------------
EQUITY REAL ESTATE INVESTMENT
TRUSTS -- 6.9%
246 Alexander & Baldwin, Inc. 2,979
36 American Homes 4 Rent, Class A 1,031
639 Apple Hospitality REIT, Inc. 6,498
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
EQUITY REAL ESTATE INVESTMENT
TRUSTS (CONTINUED)
106 Brixmor Property Group, Inc. $ 1,251
30 Camden Property Trust 2,728
726 CoreCivic, Inc. 6,759
62 CoreSite Realty Corp. 7,592
32 CubeSmart 1,012
122 CyrusOne, Inc. 10,191
282 Equity Commonwealth 8,852
268 First Industrial Realty Trust, Inc. 11,430
302 Gaming and Leisure Properties,
Inc. 10,978
442 GEO Group (The), Inc. 4,933
30 Highwoods Properties, Inc. 1,118
400 Host Hotels & Resorts, Inc. 4,492
471 Lexington Realty Trust 5,355
54 Life Storage, Inc. 5,693
201 Macerich (The) Co. 1,594
138 Omega Healthcare Investors, Inc. 4,274
120 PotlatchDeltic Corp. 5,525
38 PS Business Parks, Inc. 4,795
116 QTS Realty Trust, Inc., Class A 7,867
90 Regency Centers Corp. 3,574
265 Service Properties Trust 2,176
264 Weingarten Realty Investors 4,612
-------------
127,309
-------------
FOOD & STAPLES RETAILING -- 1.0%
292 BJ's Wholesale Club Holdings,
Inc. (a) 12,968
236 Sprouts Farmers Market, Inc. (a) 5,510
-------------
18,478
-------------
FOOD PRODUCTS -- 1.3%
288 Flowers Foods, Inc. 7,044
210 Hain Celestial Group (The),
Inc. (a) 6,886
133 Ingredion, Inc. 10,699
-------------
24,629
-------------
GAS UTILITIES -- 0.7%
108 National Fuel Gas Co. 4,929
70 ONE Gas, Inc. 5,188
54 UGI Corp. 1,865
-------------
11,982
-------------
HEALTH CARE EQUIPMENT
& SUPPLIES -- 3.7%
10 ABIOMED, Inc. (a) 3,076
20 Globus Medical, Inc., Class A (a) 1,130
14 Haemonetics Corp. (a) 1,255
41 Hill-Rom Holdings, Inc. 3,845
6 ICU Medical, Inc. (a) 1,202
20 Integra LifeSciences Holdings
Corp. (a) 956
26 iRhythm Technologies, Inc. (a) 5,725
44 Masimo Corp. (a) 9,856
36 Nevro Corp. (a) 4,951
See Notes to Financial Statements Page 19
FIRST TRUST ACTIVE FACTOR MID CAP ETF (AFMC)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
HEALTH CARE EQUIPMENT
& SUPPLIES (CONTINUED)
31 NuVasive, Inc. (a) $ 1,616
10 Penumbra, Inc. (a) 2,092
22 Quidel Corp. (a) 3,871
32 STERIS PLC 5,109
10 Tandem Diabetes Care, Inc. (a) 1,127
78 West Pharmaceutical Services,
Inc. 22,149
-------------
67,960
-------------
HEALTH CARE PROVIDERS & SERVICES
-- 5.4%
66 Amedisys, Inc. (a) 15,966
12 AMN Healthcare Services,
Inc. (a) 646
29 Chemed Corp. 14,996
175 DaVita, Inc. (a) 15,183
96 Encompass Health Corp. 6,263
68 Henry Schein, Inc. (a) 4,518
34 LHC Group, Inc. (a) 7,087
38 MEDNAX, Inc. (a) 706
136 Molina Healthcare, Inc. (a) 25,156
318 Patterson Cos., Inc. 9,225
-------------
99,746
-------------
HEALTH CARE TECHNOLOGY -- 0.6%
144 Inovalon Holdings, Inc.,
Class A (a) 3,563
10 Omnicell, Inc. (a) 667
32 Teladoc Health, Inc. (a) 6,902
-------------
11,132
-------------
HOTELS, RESTAURANTS & LEISURE
-- 1.5%
32 Domino's Pizza, Inc. 13,087
96 Papa John's International, Inc. 9,436
36 Wingstop, Inc. 5,882
-------------
28,405
-------------
HOUSEHOLD DURABLES -- 2.6%
34 Helen of Troy Ltd. (a) 7,032
34 Meritage Homes Corp. (a) 3,265
148 PulteGroup, Inc. 6,599
161 Toll Brothers, Inc. 6,797
78 TopBuild Corp. (a) 11,996
361 TRI Pointe Group, Inc. (a) 6,094
34 Whirlpool Corp. 6,043
-------------
47,826
-------------
INSURANCE -- 4.3%
128 Brighthouse Financial, Inc. (a) 3,886
326 Brown & Brown, Inc. 15,126
320 CNO Financial Group, Inc. 5,216
244 First American Financial Corp. 12,827
44 Hanover Insurance Group (The),
Inc. 4,510
74 Kemper Corp. 5,747
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
INSURANCE (CONTINUED)
22 Kinsale Capital Group, Inc. $ 4,559
447 Old Republic International Corp. 7,201
46 Primerica, Inc. 5,743
38 RenaissanceRe Holdings Ltd. 6,982
343 Unum Group 6,339
-------------
78,136
-------------
INTERACTIVE MEDIA & SERVICES
-- 0.3%
334 ANGI Homeservices, Inc.,
Class A (a) 4,634
-------------
INTERNET & DIRECT MARKETING RETAIL
-- 0.9%
86 Etsy, Inc. (a) 10,294
18 Overstock.com, Inc. (a) 1,575
16 Stamps.com, Inc. (a) 3,990
-------------
15,859
-------------
IT SERVICES -- 2.8%
10 Alliance Data Systems Corp. 451
86 CACI International, Inc.,
Class A (a) 20,140
38 Euronet Worldwide, Inc. (a) 3,929
205 KBR, Inc. 5,123
106 LiveRamp Holdings, Inc. (a) 5,919
121 MAXIMUS, Inc. 9,384
220 Perspecta, Inc. 4,569
14 Science Applications International
Corp. 1,168
-------------
50,683
-------------
LEISURE PRODUCTS -- 1.0%
216 Brunswick Corp. 13,368
92 YETI Holdings, Inc. (a) 4,727
-------------
18,095
-------------
LIFE SCIENCES TOOLS & SERVICES
-- 3.5%
43 Bio-Rad Laboratories, Inc.,
Class A (a) 21,869
10 Bio-Techne Corp. 2,555
40 Bruker Corp. 1,681
47 Charles River Laboratories
International, Inc. (a) 10,291
98 Medpace Holdings, Inc. (a) 12,719
94 NeoGenomics, Inc. (a) 3,661
34 PRA Health Sciences, Inc. (a) 3,635
14 Repligen Corp. (a) 2,169
91 Syneos Health, Inc. (a) 5,742
-------------
64,322
-------------
MACHINERY -- 3.8%
82 AGCO Corp. 5,830
123 Allison Transmission Holdings,
Inc. 4,412
78 Crane Co. 4,410
116 Graco, Inc. 6,730
94 Lincoln Electric Holdings, Inc. 9,091
Page 20 See Notes to Financial Statements
FIRST TRUST ACTIVE FACTOR MID CAP ETF (AFMC)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MACHINERY (CONTINUED)
70 Nordson Corp. $ 13,054
139 Oshkosh Corp. 10,705
61 Snap-on, Inc. 9,045
112 Timken (The) Co. 6,069
-------------
69,346
-------------
MEDIA -- 1.3%
215 AMC Networks, Inc., Class A (a) 5,222
210 Interpublic Group of Cos. (The),
Inc. 3,730
96 John Wiley & Sons, Inc., Class A 3,038
178 Meredith Corp. 2,492
218 New York Times (The) Co.,
Class A 9,446
-------------
23,928
-------------
METALS & MINING -- 2.9%
815 Commercial Metals Co. 17,009
226 Reliance Steel & Aluminum Co. 23,700
409 Steel Dynamics, Inc. 12,074
22 Worthington Industries, Inc. 914
-------------
53,697
-------------
MULTILINE RETAIL -- 0.5%
99 Dillard's, Inc., Class A 2,991
84 Kohl's Corp. 1,794
373 Macy's, Inc. 2,600
103 Nordstrom, Inc. 1,648
-------------
9,033
-------------
MULTI-UTILITIES -- 1.4%
650 MDU Resources Group, Inc. 15,353
185 NorthWestern Corp. 9,553
-------------
24,906
-------------
OIL, GAS & CONSUMABLE FUELS
-- 0.5%
110 Cabot Oil & Gas Corp. 2,087
158 CVR Energy, Inc. 2,637
404 Devon Energy Corp. 4,391
19 HollyFrontier Corp. 454
-------------
9,569
-------------
PAPER & FOREST PRODUCTS -- 0.7%
308 Domtar Corp. 8,784
146 Louisiana-Pacific Corp. 4,809
-------------
13,593
-------------
PERSONAL PRODUCTS -- 0.6%
239 Nu Skin Enterprises, Inc.,
Class A 11,298
-------------
PHARMACEUTICALS -- 0.4%
10 MyoKardia, Inc. (a) 1,094
172 Prestige Consumer Healthcare,
Inc. (a) 6,266
-------------
7,360
-------------
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
PROFESSIONAL SERVICES -- 1.3%
42 FTI Consulting, Inc. (a) $ 4,820
137 ManpowerGroup, Inc. 10,044
172 Robert Half International, Inc. 9,150
-------------
24,014
-------------
REAL ESTATE MANAGEMENT
& DEVELOPMENT -- 0.2%
68 Redfin Corp. (a) 3,235
-------------
ROAD & RAIL -- 2.3%
72 Landstar System, Inc. 9,583
60 Old Dominion Freight Line, Inc. 12,131
372 Schneider National, Inc., Class B 10,066
232 Werner Enterprises, Inc. 10,674
-------------
42,454
-------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 3.9%
208 Cirrus Logic, Inc. (a) 12,603
24 Enphase Energy, Inc. (a) 1,853
68 Entegris, Inc. 4,548
176 Lattice Semiconductor Corp. (a) 5,034
28 Monolithic Power Systems, Inc. 7,480
64 SolarEdge Technologies, Inc. (a) 14,154
114 Synaptics, Inc. (a) 9,728
181 Teradyne, Inc. 15,379
-------------
70,779
-------------
SOFTWARE -- 4.3%
32 Appfolio, Inc., Class A (a) 5,377
8 Aspen Technology, Inc. (a) 1,016
14 Blackline, Inc. (a) 1,223
66 CDK Global, Inc. 3,077
34 Fair Isaac Corp. (a) 14,307
22 Five9, Inc. (a) 2,804
121 J2 Global, Inc. (a) 8,469
38 Manhattan Associates, Inc. (a) 3,695
373 Nuance Communications, Inc. (a) 11,175
50 Pegasystems, Inc. 6,423
30 PTC, Inc. (a) 2,742
38 Qualys, Inc. (a) 4,033
124 Sailpoint Technologies Holdings,
Inc. (a) 4,865
22 Tyler Technologies, Inc. (a) 7,597
18 Varonis Systems, Inc. (a) 2,224
-------------
79,027
-------------
SPECIALTY RETAIL -- 3.0%
314 American Eagle Outfitters, Inc. 3,960
112 AutoNation, Inc. (a) 6,368
88 Dick's Sporting Goods, Inc. 4,763
301 Foot Locker, Inc. 9,129
18 Lithia Motors, Inc., Class A 4,481
58 Murphy USA, Inc. (a) 7,822
96 Penske Automotive Group, Inc. 4,528
14 RH (a) 4,628
114 Williams-Sonoma, Inc. 10,005
-------------
55,684
-------------
See Notes to Financial Statements Page 21
FIRST TRUST ACTIVE FACTOR MID CAP ETF (AFMC)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 0.5%
36 NCR Corp. (a) $ 736
457 Xerox Holdings Corp. 8,619
-------------
9,355
-------------
TEXTILES, APPAREL & LUXURY GOODS
-- 1.6%
86 Carter's, Inc. 6,847
46 Deckers Outdoor Corp. (a) 9,378
174 Hanesbrands, Inc. 2,661
40 PVH Corp. 2,231
46 Ralph Lauren Corp. 3,166
146 Steven Madden Ltd. 3,089
164 Tapestry, Inc. 2,416
-------------
29,788
-------------
THRIFTS & MORTGAGE FINANCE
-- 1.1%
803 MGIC Investment Corp. 7,363
543 New York Community Bancorp,
Inc. 4,914
96 PennyMac Financial Services, Inc. 5,061
190 Radian Group, Inc. 2,934
-------------
20,272
-------------
TRADING COMPANIES & DISTRIBUTORS
-- 1.6%
50 HD Supply Holdings, Inc. (a) 1,983
222 MSC Industrial Direct Co., Inc.,
Class A 14,630
28 SiteOne Landscape Supply,
Inc. (a) 3,501
38 Watsco, Inc. 9,310
-------------
29,424
-------------
TOTAL COMMON STOCKS -- 99.7% 1,833,040
(Cost $1,845,389) -------------
MONEY MARKET FUNDS -- 0.2%
2,941 Morgan Stanley Institutional Liquidity
Funds - Treasury Portfolio -
Institutional Class - 0.01% (b) 2,941
(Cost $2,941) -------------
TOTAL INVESTMENTS -- 99.9% 1,835,981
(Cost $1,848,330) (c)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 1,394
-------------
NET ASSETS -- 100.0% $ 1,837,375
=============
(a) Non-income producing security.
(b) Rate shown reflects yield as of August 31, 2020.
(c) Aggregate cost for federal income tax purposes is $1,864,106. As of August
31, 2020, the aggregate gross unrealized appreciation for all investments
in which there was an excess of value over tax cost was $160,262 and the
aggregate gross unrealized depreciation for all investments in which there
was an excess of tax cost over value was $188,387. The net unrealized
depreciation was $28,125.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of August 31,
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* $ 1,833,040 $ -- $ --
Money Market
Funds 2,941 -- --
-------------------------------------------
Total Investments $ 1,835,981 $ -- $ --
===========================================
* See Portfolio of Investments for industry breakout.
Page 22 See Notes to Financial Statements
FIRST TRUST ACTIVE FACTOR SMALL CAP ETF (AFSM)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS -- 99.7%
AEROSPACE & DEFENSE -- 0.2%
174 Maxar Technologies, Inc. $ 4,028
-------------
AIR FREIGHT & LOGISTICS -- 0.3%
40 Echo Global Logistics, Inc. (a) 1,093
72 Hub Group, Inc., Class A (a) 3,876
-------------
4,969
-------------
AUTO COMPONENTS -- 0.5%
333 Dana, Inc. 4,645
42 LCI Industries 4,773
-------------
9,418
-------------
AUTOMOBILES -- 0.3%
106 Winnebago Industries, Inc. 5,722
-------------
BANKS -- 6.0%
46 Associated Banc-Corp. 618
169 Bank OZK 3,894
60 BankUnited, Inc. 1,403
44 Berkshire Hills Bancorp, Inc. 404
452 Boston Private Financial
Holdings, Inc. 2,685
77 Cathay General Bancorp 1,901
206 Central Pacific Financial Corp. 3,191
152 Columbia Banking System, Inc. 4,242
72 Community Bank System, Inc. 4,332
376 CVB Financial Corp. 6,847
291 Eagle Bancorp, Inc. 8,375
228 First Financial Bancorp 3,128
169 First Hawaiian, Inc. 2,794
331 Fulton Financial Corp. 3,237
158 Great Western Bancorp, Inc. 2,201
158 Hancock Whitney Corp. 3,162
227 Hilltop Holdings, Inc. 4,676
446 Hope Bancorp, Inc. 3,773
142 International Bancshares Corp. 4,484
467 Investors Bancorp, Inc. 3,619
152 PacWest Bancorp 2,900
291 Renasant Corp. 7,383
293 ServisFirst Bancshares, Inc. 10,738
212 Sterling Bancorp 2,474
393 Synovus Financial Corp. 8,595
130 Triumph Bancorp, Inc. (a) 3,713
104 Trustmark Corp. 2,442
68 Westamerica Bancorporation 4,139
-------------
111,350
-------------
BEVERAGES -- 0.3%
174 Celsius Holdings, Inc. (a) 3,379
16 National Beverage Corp. (a) 1,301
-------------
4,680
-------------
BIOTECHNOLOGY -- 4.9%
58 ACADIA Pharmaceuticals,
Inc. (a) 2,296
102 Acceleron Pharma, Inc. (a) 9,942
255 Akebia Therapeutics, Inc. (a) 2,655
106 Altimmune, Inc. (a) 1,788
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
BIOTECHNOLOGY (CONTINUED)
214 Anika Therapeutics, Inc. (a) $ 8,203
132 Arena Pharmaceuticals, Inc. (a) 9,216
48 Cue Biopharma, Inc. (a) 858
91 Eagle Pharmaceuticals, Inc. (a) 3,611
108 Emergent BioSolutions, Inc. (a) 12,317
148 Enanta Pharmaceuticals, Inc. (a) 7,724
261 Halozyme Therapeutics, Inc. (a) 7,568
36 Krystal Biotech, Inc. (a) 1,721
94 Ligand Pharmaceuticals, Inc. (a) 9,588
40 Myriad Genetics, Inc. (a) 535
64 Natera, Inc. (a) 4,077
32 Novavax, Inc. (a) 3,531
541 Vanda Pharmaceuticals, Inc. (a) 5,567
-------------
91,197
-------------
BUILDING PRODUCTS -- 2.9%
22 Advanced Drainage Systems, Inc. 1,221
386 Builders FirstSource, Inc. (a) 11,819
96 Gibraltar Industries, Inc. (a) 5,995
78 Masonite International Corp. (a) 7,121
121 Patrick Industries, Inc. 6,801
70 Simpson Manufacturing Co., Inc. 6,884
48 Trex Co., Inc. (a) 7,175
108 UFP Industries, Inc. 6,410
-------------
53,426
-------------
CAPITAL MARKETS -- 2.4%
288 Artisan Partners Asset
Management, Inc., Class A 11,149
80 Brightsphere Investment Group,
Inc. 1,109
78 Cohen & Steers, Inc. 4,719
68 Hamilton Lane, Inc., Class A 4,971
120 Houlihan Lokey, Inc. 7,032
88 PJT Partners, Inc., Class A 5,208
595 Waddell & Reed Financial, Inc.,
Class A 9,371
-------------
43,559
-------------
CHEMICALS -- 0.3%
28 Innospec, Inc. 2,091
294 Olin Corp. 3,308
-------------
5,399
-------------
COMMERCIAL SERVICES & SUPPLIES
-- 2.2%
112 ABM Industries, Inc. 4,272
74 Brady Corp., Class A 3,470
24 Deluxe Corp. 682
138 Herman Miller, Inc. 3,288
126 HNI Corp. 4,013
224 KAR Auction Services, Inc. 3,884
61 Knoll, Inc. 785
52 MSA Safety, Inc. 6,549
284 Steelcase, Inc., Class A 2,968
66 Tetra Tech, Inc. 6,092
22 UniFirst Corp. 4,238
-------------
40,241
-------------
See Notes to Financial Statements Page 23
FIRST TRUST ACTIVE FACTOR SMALL CAP ETF (AFSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
COMMUNICATIONS EQUIPMENT
-- 1.5%
116 Calix, Inc. (a) $ 2,256
141 Comtech Telecommunications
Corp. 2,341
72 InterDigital, Inc. 4,403
122 Lumentum Holdings, Inc. (a) 10,492
144 NETGEAR, Inc. (a) 4,802
138 NetScout Systems, Inc. (a) 3,193
-------------
27,487
-------------
CONSTRUCTION & ENGINEERING
-- 0.2%
91 MasTec, Inc. (a) 4,205
-------------
CONSUMER FINANCE -- 0.2%
343 Navient Corp. 3,118
-------------
DISTRIBUTORS -- 0.5%
271 Core-Mark Holding Co., Inc. 9,057
-------------
DIVERSIFIED CONSUMER SERVICES
-- 0.9%
271 Adtalem Global Education,
Inc. (a) 8,997
8 Graham Holdings Co., Class B 3,424
307 Perdoceo Education Corp. (a) 4,411
-------------
16,832
-------------
DIVERSIFIED FINANCIAL SERVICES
-- 0.2%
112 Cannae Holdings, Inc. (a) 4,226
-------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 0.2%
64 Cogent Communications
Holdings, Inc. 4,305
-------------
ELECTRIC UTILITIES -- 0.4%
214 Portland General Electric Co. 8,164
-------------
ELECTRICAL EQUIPMENT -- 2.0%
19 AZZ, Inc. 660
128 Generac Holdings, Inc. (a) 24,318
142 Vicor Corp. (a) 12,358
-------------
37,336
-------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 3.1%
44 Badger Meter, Inc. 2,714
320 Benchmark Electronics, Inc. 6,275
16 FARO Technologies, Inc. (a) 904
84 Insight Enterprises, Inc. (a) 5,023
73 Methode Electronics, Inc. 2,067
10 OSI Systems, Inc. (a) 787
78 PC Connection, Inc. 3,455
212 Plexus Corp. (a) 16,127
219 Sanmina Corp. (a) 6,198
408 TTM Technologies, Inc. (a) 4,676
512 Vishay Intertechnology, Inc. 8,187
-------------
56,413
-------------
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES
-- 0.1%
126 Helmerich & Payne, Inc. $ 2,076
-------------
EQUITY REAL ESTATE INVESTMENT
TRUSTS -- 4.7%
48 Alexander & Baldwin, Inc. 581
153 Chatham Lodging Trust 1,059
437 CoreCivic, Inc. 4,069
100 CorEnergy Infrastructure Trust,
Inc. 894
432 Easterly Government Properties,
Inc. 10,450
36 EastGroup Properties, Inc. 4,794
239 First Industrial Realty Trust, Inc. 10,193
382 GEO Group (The), Inc. 4,263
160 Healthcare Realty Trust, Inc. 4,616
52 Investors Real Estate Trust 3,697
24 Office Properties Income Trust 572
58 Pebblebrook Hotel Trust 732
66 QTS Realty Trust, Inc., Class A 4,476
660 RLJ Lodging Trust 6,231
90 RPT Realty 528
447 Summit Hotel Properties, Inc. 2,633
789 Sunstone Hotel Investors, Inc. 6,572
438 Tanger Factory Outlet Centers,
Inc. 2,492
177 Terreno Realty Corp. 10,556
36 Universal Health Realty Income
Trust 2,402
532 Xenia Hotels & Resorts, Inc. 4,777
-------------
86,587
-------------
FOOD & STAPLES RETAILING -- 0.6%
158 BJ's Wholesale Club Holdings,
Inc. (a) 7,017
51 Sprouts Farmers Market, Inc. (a) 1,191
74 Weis Markets, Inc. 3,643
-------------
11,851
-------------
FOOD PRODUCTS -- 2.1%
515 B&G Foods, Inc. 16,037
209 Darling Ingredients, Inc. (a) 6,682
78 Freshpet, Inc. (a) 8,861
80 John B Sanfilippo & Son, Inc. 6,371
-------------
37,951
-------------
HEALTH CARE EQUIPMENT
& SUPPLIES -- 6.3%
621 AngioDynamics, Inc. (a) 5,816
162 AtriCure, Inc. (a) 7,246
2 Atrion Corp. 1,263
9 CONMED Corp. 777
42 CryoLife, Inc. (a) 849
162 CryoPort, Inc. (a) 8,988
293 GenMark Diagnostics, Inc. (a) 3,800
104 Globus Medical, Inc., Class A (a) 5,878
12 Haemonetics Corp. (a) 1,076
24 Heska Corp. (a) 2,486
Page 24 See Notes to Financial Statements
FIRST TRUST ACTIVE FACTOR SMALL CAP ETF (AFSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
HEALTH CARE EQUIPMENT
& SUPPLIES (CONTINUED)
12 Inogen, Inc. (a) $ 363
73 Integer Holdings Corp. (a) 5,056
64 iRhythm Technologies, Inc. (a) 14,092
48 Lantheus Holdings, Inc. (a) 644
120 Meridian Bioscience, Inc. (a) 1,697
157 Merit Medical Systems, Inc. (a) 7,709
168 Natus Medical, Inc. (a) 3,051
26 Neogen Corp. (a) 1,981
60 Nevro Corp. (a) 8,252
48 Novocure Ltd. (a) 3,972
27 NuVasive, Inc. (a) 1,407
288 OraSure Technologies, Inc. (a) 3,375
135 Orthofix Medical, Inc. (a) 4,096
80 Quidel Corp. (a) 14,077
44 STAAR Surgical Co. (a) 2,110
18 Tactile Systems Technology,
Inc. (a) 692
28 Tandem Diabetes Care, Inc. (a) 3,156
176 Varex Imaging Corp. (a) 1,952
-------------
115,861
-------------
HEALTH CARE PROVIDERS & SERVICES
-- 4.8%
32 Acadia Healthcare Co., Inc. (a) 989
82 Addus HomeCare Corp. (a) 7,680
70 Amedisys, Inc. (a) 16,933
29 AMN Healthcare Services,
Inc. (a) 1,561
39 BioTelemetry, Inc. (a) 1,544
25 CorVel Corp. (a) 2,076
24 Ensign Group (The), Inc. 1,405
70 Fulgent Genetics, Inc. (a) 2,069
100 LHC Group, Inc. (a) 20,844
81 Magellan Health, Inc. (a) 6,112
38 MEDNAX, Inc. (a) 706
54 Ontrak, Inc. (a) 3,939
193 Owens & Minor, Inc. 3,200
98 Patterson Cos., Inc. 2,843
68 Providence Service (The)
Corp. (a) 6,296
256 Select Medical Holdings Corp. (a) 5,138
38 Tenet Healthcare Corp. (a) 1,071
191 Tivity Health, Inc. (a) 3,125
19 US Physical Therapy, Inc. 1,689
-------------
89,220
-------------
HEALTH CARE TECHNOLOGY -- 2.6%
59 HMS Holdings Corp. (a) 1,646
446 Inovalon Holdings, Inc.,
Class A (a) 11,036
22 Inspire Medical Systems, Inc. (a) 2,628
69 Omnicell, Inc. (a) 4,601
144 Simulations Plus, Inc. 8,580
92 Teladoc Health, Inc. (a) 19,843
-------------
48,334
-------------
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE
-- 0.8%
74 Papa John's International, Inc. $ 7,273
40 Wingstop, Inc. 6,536
-------------
13,809
-------------
HOUSEHOLD DURABLES -- 2.9%
32 Helen of Troy Ltd. (a) 6,618
80 Installed Building Products,
Inc. (a) 6,946
124 KB Home 4,434
28 LGI Homes, Inc. (a) 3,132
20 Meritage Homes Corp. (a) 1,921
269 Taylor Morrison Home Corp. (a) 6,330
86 TopBuild Corp. (a) 13,227
696 TRI Pointe Group, Inc. (a) 11,748
-------------
54,356
-------------
HOUSEHOLD PRODUCTS -- 0.6%
314 Central Garden & Pet Co.,
Class A (a) 11,668
-------------
INSURANCE -- 3.3%
38 American National Group, Inc. 2,850
78 AMERISAFE, Inc. 5,205
316 CNO Financial Group, Inc. 5,151
30 eHealth, Inc. (a) 1,894
212 Employers Holdings, Inc. 6,907
56 Goosehead Insurance, Inc.,
Class A 5,755
80 Kinsale Capital Group, Inc. 16,578
74 Mercury General Corp. 3,310
120 Palomar Holdings, Inc. (a) 13,482
-------------
61,132
-------------
INTERACTIVE MEDIA & SERVICES
-- 0.2%
120 EverQuote, Inc., Class A (a) 4,260
-------------
INTERNET & DIRECT MARKETING RETAIL
-- 1.4%
36 1-800-Flowers.com, Inc.,
Class A (a) 1,077
291 CarParts.com, Inc. (a) 4,089
66 Overstock.com, Inc. (a) 5,775
166 PetMed Express, Inc. 5,770
34 Stamps.com, Inc. (a) 8,478
-------------
25,189
-------------
IT SERVICES -- 1.9%
106 CSG Systems International, Inc. 4,513
62 ExlService Holdings, Inc. (a) 3,949
63 KBR, Inc. 1,574
82 MAXIMUS, Inc. 6,359
179 NIC, Inc. 3,827
220 Perspecta, Inc. 4,569
325 Sykes Enterprises, Inc. (a) 10,759
-------------
35,550
-------------
See Notes to Financial Statements Page 25
FIRST TRUST ACTIVE FACTOR SMALL CAP ETF (AFSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
LEISURE PRODUCTS -- 1.0%
30 Acushnet Holdings Corp. $ 1,059
61 American Outdoor Brands,
Inc. (a) 929
245 Smith & Wesson Brands, Inc. (a) 4,474
116 Sturm Ruger & Co., Inc. 8,220
211 Vista Outdoor, Inc. (a) 4,095
-------------
18,777
-------------
LIFE SCIENCES TOOLS & SERVICES
-- 1.8%
191 Luminex Corp. 5,098
72 Medpace Holdings, Inc. (a) 9,345
162 NeoGenomics, Inc. (a) 6,310
42 Repligen Corp. (a) 6,506
108 Syneos Health, Inc. (a) 6,815
-------------
34,074
-------------
MACHINERY -- 2.6%
217 Astec Industries, Inc. 11,440
216 Evoqua Water Technologies
Corp. (a) 4,419
70 Franklin Electric Co., Inc. 4,155
218 Meritor, Inc. (a) 4,962
279 Shyft Group (The), Inc. 5,572
86 SPX Corp. (a) 3,597
36 Terex Corp. 705
724 Wabash National Corp. 8,840
40 Watts Water Technologies, Inc.,
Class A 3,830
-------------
47,520
-------------
MEDIA -- 1.0%
147 AMC Networks, Inc., Class A (a) 3,571
62 Cardlytics, Inc. (a) 4,703
77 Meredith Corp. 1,078
114 MSG Networks, Inc., Class A (a) 1,110
118 Scholastic Corp. 2,655
138 TechTarget, Inc. (a) 5,476
-------------
18,593
-------------
METALS & MINING -- 1.8%
506 Commercial Metals Co. 10,560
134 Kaiser Aluminum Corp. 8,614
241 Schnitzer Steel Industries, Inc.,
Class A 4,757
539 Warrior Met Coal, Inc. 8,338
-------------
32,269
-------------
MORTGAGE REAL ESTATE INVESTMENT
TRUSTS -- 0.4%
156 Hannon Armstrong Sustainable
Infrastructure Capital, Inc. 6,624
-------------
MULTILINE RETAIL -- 0.8%
213 Big Lots, Inc. 10,043
126 Dillard's, Inc., Class A 3,806
-------------
13,849
-------------
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
MULTI-UTILITIES -- 1.0%
209 Avista Corp. $ 7,703
159 NorthWestern Corp. 8,211
60 Unitil Corp. 2,532
-------------
18,446
-------------
OIL, GAS & CONSUMABLE FUELS
-- 1.1%
137 Arch Resources, Inc. 5,161
178 CVR Energy, Inc. 2,971
184 PDC Energy, Inc. (a) 2,786
168 Renewable Energy Group, Inc. (a) 5,616
239 Teekay Tankers Ltd., Class A (a) 2,997
-------------
19,531
-------------
PAPER & FOREST PRODUCTS -- 1.6%
357 Boise Cascade Co. 16,350
265 Domtar Corp. 7,558
187 Louisiana-Pacific Corp. 6,160
-------------
30,068
-------------
PERSONAL PRODUCTS -- 0.9%
44 Medifast, Inc. 7,160
115 Nu Skin Enterprises, Inc., Class A 5,436
50 USANA Health Sciences, Inc. (a) 3,920
-------------
16,516
-------------
PHARMACEUTICALS -- 1.8%
214 Amphastar Pharmaceuticals,
Inc. (a) 4,361
87 ANI Pharmaceuticals, Inc. (a) 2,728
503 Corcept Therapeutics, Inc. (a) 6,388
341 Innoviva, Inc. (a) 3,993
20 Pacira BioSciences, Inc. (a) 1,251
43 Phibro Animal Health Corp.,
Class A 923
161 Prestige Consumer Healthcare,
Inc. (a) 5,865
389 Supernus Pharmaceuticals,
Inc. (a) 8,554
-------------
34,063
-------------
PROFESSIONAL SERVICES -- 1.6%
96 ASGN, Inc. (a) 6,890
14 Exponent, Inc. 1,126
42 FTI Consulting, Inc. (a) 4,820
146 Kforce, Inc. 5,014
146 Korn Ferry 4,453
463 TrueBlue, Inc. (a) 7,834
-------------
30,137
-------------
REAL ESTATE MANAGEMENT
& DEVELOPMENT -- 1.6%
136 eXp World Holdings, Inc. (a) 6,049
307 Realogy Holdings Corp. (a) 3,402
290 Redfin Corp. (a) 13,795
210 RMR Group (The), Inc., Class A 5,926
-------------
29,172
-------------
Page 26 See Notes to Financial Statements
FIRST TRUST ACTIVE FACTOR SMALL CAP ETF (AFSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ROAD & RAIL -- 0.6%
181 ArcBest Corp. $ 6,121
102 Werner Enterprises, Inc. 4,693
-------------
10,814
-------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 2.6%
20 ACM Research, Inc., Class A (a) 1,776
48 Ambarella, Inc. (a) 2,530
64 Cirrus Logic, Inc. (a) 3,878
119 Diodes, Inc. (a) 5,814
168 Enphase Energy, Inc. (a) 12,975
156 Lattice Semiconductor Corp. (a) 4,461
108 SMART Global Holdings, Inc. (a) 2,722
110 Synaptics, Inc. (a) 9,386
146 Ultra Clean Holdings, Inc. (a) 3,580
-------------
47,122
-------------
SOFTWARE -- 4.8%
74 Appfolio, Inc., Class A (a) 12,434
80 Blackline, Inc. (a) 6,990
170 Digital Turbine, Inc. (a) 4,112
157 Ebix, Inc. 3,622
34 Everbridge, Inc. (a) 5,053
94 Five9, Inc. (a) 11,980
10 J2 Global, Inc. (a) 700
102 LivePerson, Inc. (a) 6,085
276 Model N, Inc. (a) 10,852
82 Progress Software Corp. 3,107
92 Qualys, Inc. (a) 9,765
114 Sailpoint Technologies Holdings,
Inc. (a) 4,472
76 SPS Commerce, Inc. (a) 6,071
219 Xperi Holding Corp. 2,744
-------------
87,987
-------------
SPECIALTY RETAIL -- 4.7%
140 Aaron's, Inc. 7,825
222 Abercrombie & Fitch Co.,
Class A 2,888
378 American Eagle Outfitters, Inc. 4,767
56 Buckle (The), Inc. 1,049
6 Camping World Holdings, Inc.,
Class A 174
139 Genesco, Inc. (a) 2,711
199 GrowGeneration Corp. (a) 3,175
493 Hibbett Sports, Inc. (a) 16,451
10 Lithia Motors, Inc., Class A 2,490
162 Lumber Liquidators Holdings,
Inc. (a) 3,886
32 MarineMax, Inc. (a) 941
8 Murphy USA, Inc. (a) 1,079
411 Rent-A-Center, Inc. 12,618
38 RH (a) 12,561
111 Signet Jewelers Ltd. 1,917
28 Sleep Number Corp. (a) 1,344
82 Sonic Automotive, Inc., Class A 3,465
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
SPECIALTY RETAIL (CONTINUED)
315 Sportsman's Warehouse Holdings,
Inc. (a) $ 4,944
111 Urban Outfitters, Inc. (a) 2,613
-------------
86,898
-------------
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 0.5%
343 Super Micro Computer, Inc. (a) 9,395
-------------
TEXTILES, APPAREL & LUXURY GOODS
-- 0.7%
62 Crocs, Inc. (a) 2,475
32 Deckers Outdoor Corp. (a) 6,524
440 Movado Group, Inc. 4,800
-------------
13,799
-------------
THRIFTS & MORTGAGE FINANCE
-- 1.3%
192 HomeStreet, Inc. 5,255
122 PennyMac Financial Services, Inc. 6,432
240 Provident Financial Services, Inc. 3,163
594 Radian Group, Inc. 9,171
-------------
24,021
-------------
TOBACCO -- 0.5%
176 Universal Corp. 7,640
78 Vector Group Ltd. 786
-------------
8,426
-------------
TRADING COMPANIES & DISTRIBUTORS
-- 2.8%
540 BMC Stock Holdings, Inc. (a) 21,557
2 Foundation Building Materials,
Inc. (a) 33
137 GMS, Inc. (a) 3,629
990 NOW, Inc. (a) 7,197
23 Rush Enterprises, Inc., Class A 1,111
66 SiteOne Landscape Supply,
Inc. (a) 8,253
127 Triton International Ltd. 4,580
118 WESCO International, Inc. (a) 5,528
-------------
51,888
-------------
WATER UTILITIES -- 0.1%
22 American States Water Co. 1,674
-------------
WIRELESS TELECOMMUNICATION
SERVICES -- 0.3%
210 Telephone and Data Systems, Inc. 4,857
-------------
TOTAL COMMON STOCKS -- 99.7% 1,839,496
(Cost $1,793,826) -------------
MONEY MARKET FUNDS -- 0.3%
5,378 Morgan Stanley Institutional Liquidity
Funds - Treasury Portfolio -
Institutional Class - 0.01% (b) 5,378
(Cost $5,378) -------------
See Notes to Financial Statements Page 27
FIRST TRUST ACTIVE FACTOR SMALL CAP ETF (AFSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
DESCRIPTION VALUE
---------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% $ 1,844,874
(Cost $1,799,204) (c)
NET OTHER ASSETS AND
LIABILITIES -- (0.0)% (69)
-------------
NET ASSETS -- 100.0% $ 1,844,805
=============
(a) Non-income producing security.
(b) Rate shown reflects yield as of August 31, 2020.
(c) Aggregate cost for federal income tax purposes is $1,828,246. As of August
31, 2020, the aggregate gross unrealized appreciation for all investments
in which there was an excess of value over tax cost was $221,172 and the
aggregate gross unrealized depreciation for all investments in which there
was an excess of tax cost over value was $204,544. The net unrealized
appreciation was $16,628.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of August 31,
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* $ 1,839,496 $ -- $ --
Money Market
Funds 5,378 -- --
-------------------------------------------
Total Investments $ 1,844,874 $ -- $ --
===========================================
* See Portfolio of Investments for industry breakout.
Page 28 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF ASSETS AND LIABILITIES
AUGUST 31, 2020
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............................................ $ 2,096,706 $ 1,835,981 $ 1,844,874
Dividends receivable............................................. 3,677 2,404 1,099
-------------- -------------- --------------
Total Assets.................................................. 2,100,383 1,838,385 1,845,973
-------------- -------------- --------------
LIABILITIES:
Investment advisory fees payable................................. 952 1,010 1,168
-------------- -------------- --------------
Total Liabilities............................................. 952 1,010 1,168
-------------- -------------- --------------
NET ASSETS....................................................... $ 2,099,431 $ 1,837,375 $ 1,844,805
============== ============== ==============
NET ASSETS CONSIST OF:
Paid-in capital.................................................. $ 2,087,481 $ 2,088,610 $ 2,110,989
Par value........................................................ 1,000 1,000 1,000
Accumulated distributable earnings (loss)........................ 10,950 (252,235) (267,184)
-------------- -------------- --------------
NET ASSETS....................................................... $ 2,099,431 $ 1,837,375 $ 1,844,805
============== ============== ==============
NET ASSET VALUE, per share....................................... $ 20.99 $ 18.37 $ 18.45
============== ============== ==============
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share)........................ 100,002 100,002 100,002
============== ============== ==============
Investments, at cost............................................. $ 1,907,378 $ 1,848,330 $ 1,799,204
============== ============== ==============
See Notes to Financial Statements Page 25
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF OPERATIONS
FOR THE PERIOD DECEMBER 3, 2019 (a) THROUGH AUGUST 31, 2020
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........................................................ $ 30,865 $ 26,356 $ 21,791
-------------- -------------- --------------
Total investment income....................................... 30,865 26,356 21,791
-------------- -------------- --------------
EXPENSES:
Investment advisory fees......................................... 7,828 8,623 9,817
-------------- -------------- --------------
Total expenses................................................ 7,828 8,623 9,817
-------------- -------------- --------------
NET INVESTMENT INCOME (LOSS)..................................... 23,037 17,733 11,974
-------------- -------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments................................................... (183,735) (243,558) (314,858)
In-kind redemptions........................................... 92,008 91,482 104,675
-------------- -------------- --------------
Net realized gain (loss)......................................... (91,727) (152,076) (210,183)
-------------- -------------- --------------
Net change in unrealized appreciation (depreciation) on
investments................................................... 189,328 (12,349) 45,670
-------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS).......................... 97,601 (164,425) (164,513)
-------------- -------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS............................................... $ 120,638 $ (146,692) $ (152,539)
============== ============== ==============
(a) Inception date is consistent with the commencement of investment
operations and is the date the initial creation units were established.
Page 30 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 AUGUST 31, 2020
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)..................................... $ 23,037 $ 17,733 $ 11,974
Net realized gain (loss)......................................... (91,727) (152,076) (210,183)
Net change in unrealized appreciation (depreciation)............. 189,328 (12,349) 45,670
-------------- -------------- --------------
Net increase (decrease) in net assets resulting from operations.. 120,638 (146,692) (152,539)
-------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations............................................ (17,680) (14,061) (9,970)
-------------- -------------- --------------
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.......................... 2,099,431 1,837,375 1,844,805
NET ASSETS:
Beginning of period.............................................. -- -- --
-------------- -------------- --------------
End of period.................................................... $ 2,099,431 $ 1,837,375 $ 1,844,805
============== ============== ==============
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 31
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
8/31/2020 (a)
--------------
Net asset value, beginning of period........................... $ 19.87
----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... 0.23
Net realized and unrealized gain (loss)........................ 1.07
----------
Total from investment operations............................... 1.30
----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.......................................... (0.18)
----------
Net asset value, end of period................................. $ 20.99
==========
TOTAL RETURN (b)............................................... 6.67%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 2,099
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.... 1.62% (c)
Portfolio turnover rate (d).................................... 55%
FIRST TRUST ACTIVE FACTOR MID CAP ETF (AFMC)
PERIOD
ENDED
8/31/2020 (a)
--------------
Net asset value, beginning of period........................... $ 19.88
----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... 0.18
Net realized and unrealized gain (loss)........................ (1.55)
----------
Total from investment operations............................... (1.37)
----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.......................................... (0.14)
----------
Net asset value, end of period................................. $ 18.37
==========
TOTAL RETURN (b)............................................... (6.86)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 1,837
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.... 1.34% (c)
Portfolio turnover rate (d).................................... 66%
(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 32 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
8/31/2020 (a)
--------------
Net asset value, beginning of period........................... $ 19.95
----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... 0.12
Net realized and unrealized gain (loss)........................ (1.52)
----------
Total from investment operations............................... (1.40)
----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.......................................... (0.10)
----------
Net asset value, end of period................................. $ 18.45
==========
TOTAL RETURN (b)............................................... (7.03)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 1,845
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.... 0.91% (c)
Portfolio turnover rate (d).................................... 65%
(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 33
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
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 twenty-five 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 34
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
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 August 31, 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 35
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
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.
The tax character of distributions paid by each Fund during the fiscal period
ended August 31, 2020, was as follows:
Distributions Distributions Distributions
paid from paid from paid from
Ordinary Capital Return of
Income Gains Capital
------------- ------------- -------------
First Trust Active Factor Large Cap ETF $ 17,680 $ -- $ --
First Trust Active Factor Mid Cap ETF 14,061 -- --
First Trust Active Factor Small Cap ETF 9,970 -- --
As of August 31, 2020, 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 Active Factor Large Cap ETF $ 5,357 $ (167,085) $ 172,678
First Trust Active Factor Mid Cap ETF 3,672 (227,782) (28,125)
First Trust Active Factor Small Cap ETF 2,004 (285,816) 16,628
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. The taxable year ending 2020
remains open to federal and state audit. As of August 31, 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, 2020, for
federal income tax purposes, the Funds 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 the Funds' shareholders.
Page 36
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
Non-Expiring
Capital Loss
Carryforwards
---------------
First Trust Active Factor Large Cap ETF $ 167,085
First Trust Active Factor Mid Cap ETF 227,782
First Trust Active Factor Small Cap ETF 285,816
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, 2020, the Funds had
no net late year ordinary or capital losses.
In order to present paid-in capital and accumulated distributable earnings
(loss) (which consists of accumulated net investment income (loss), accumulated
net realized gain (loss) on investments and net unrealized appreciation
(depreciation) on investments) on the Statements of Assets and Liabilities that
more closely represent their tax character, certain adjustments have been made
to paid-in capital, accumulated net investment income (loss) and accumulated net
realized gain (loss) on investments. These adjustments are primarily due to the
difference between book and tax treatments of income and gains on various
investment securities held by the Funds and in-kind transactions. The results of
operations and net assets were not affected by these adjustments. For the fiscal
period ended August 31, 2020, the adjustments for each Fund were as follows:
Accumulated
Accumulated Net Realized
Net Investment Gain (Loss) Paid-in
Income (Loss) on Investments Capital
-------------- -------------- -------------
First Trust Active Factor Large Cap ETF $ -- $ (92,008) $ 92,008
First Trust Active Factor Mid Cap ETF -- (91,482) 91,482
First Trust Active Factor Small Cap ETF -- (104,675) 104,675
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%
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.
Page 37
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
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 fiscal period ended August 31, 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 $ 1,046,010 $ 1,041,291
First Trust Active Factor Mid Cap ETF 1,180,451 1,175,111
First Trust Active Factor Small Cap ETF 1,145,664 1,143,018
For the fiscal period ended August 31, 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.
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 38
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020
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 were the following subsequent events:
On September 21, 2020, FT Cboe Vest U.S. Equity Buffer ETF - September and FT
Cboe Vest U.S. Equity Deep Buffer ETF - September, additional series of the
Trust, began trading under the symbols "FSEP" and "DSEP", respectively, on Cboe
BZX Exchange, Inc.
On October 19, 2020, FT Cboe Vest U.S. Equity Buffer ETF - October and FT Cboe
Vest U.S. Equity Deep Buffer ETF - October, additional series of the Trust,
began trading under the symbols "FOCT" and "DOCT", respectively, on Cboe BZX
Exchange, Inc.
Page 39
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED FUND
VIII:
OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS
We have audited the accompanying statements of assets and liabilities of First
Trust Active Factor Large Cap ETF, First Trust Active Factor Mid Cap ETF, and
First Trust Active Factor Small Cap ETF (the "Funds"), each a series of the
First Trust Exchange-Traded Fund VIII, including the portfolios of investments,
as of August 31, 2020, the related statements of operations, the statements of
changes in net assets, and the financial highlights for the period from December
3, 2019 (commencement of operations) through August 31, 2020, and the related
notes. In our opinion, the financial statements and financial highlights present
fairly, in all material respects, the financial position of the Funds as of
August 31, 2020, and the results of their operations, the changes in their net
assets, and the financial highlights for the period from December 3, 2019
(commencement of operations) through August 31, 2020, in conformity with
accounting principles generally accepted in the United States of America.
BASIS FOR OPINION
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on the Funds'
financial statements and financial highlights based on our audits. We are a
public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to
the Funds in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement, whether due to error or fraud. The Funds are not
required to have, nor were we engaged to perform, an audit of their internal
control over financial reporting. As part of our audits we are required to
obtain an understanding of internal control over financial reporting but not for
the purpose of expressing an opinion on the effectiveness of the Funds' internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material
misstatement of the financial statements and financial highlights, whether due
to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements and financial highlights. Our audits
also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of August 31, 2020, by correspondence with
the custodian and brokers. We believe that our audits provide a reasonable basis
for our opinion.
/s/ Deloitte & Touche LLP
Chicago, Illinois
October 23, 2020
We have served as the auditor of one or more First Trust investment companies
since 2001.
Page 40
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 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.
FEDERAL TAX INFORMATION
For the taxable period ended August 31, 2020, the following percentages of
income dividend paid by the Funds qualify for the dividends received deduction
available to corporations:
Dividends Received Deduction
----------------------------
First Trust Active Factor Large Cap ETF 100.00%
First Trust Active Factor Mid Cap ETF 100.00%
First Trust Active Factor Small Cap ETF 100.00%
For the taxable period ended August 31, 2020, the following percentages of
income dividend paid by the Funds are hereby designated as qualified dividend
income:
Qualified Dividend Income
----------------------------
First Trust Active Factor Large Cap ETF 100.00%
First Trust Active Factor Mid Cap ETF 100.00%
First Trust Active Factor Small Cap ETF 100.00%
A portion of each of the Funds' 2020 ordinary dividends (including short-term
capital gains) paid to its shareholders during the fiscal period ended August
31, 2020, may be eligible for the Qualified Business Income Deduction (QBI)
under Code Section 199A for the aggregate dividends each Fund received from the
underlying Real Estate Investment Trusts (REITs) these Funds invest in.
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE
APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS
RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW
APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT
IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY
FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE,
RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT
WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO
REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
CONCENTRATION RISK. To the extent that a fund is able to invest a 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.
Page 41
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
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.
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.
Page 42
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
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 COVID-19 pandemic may last
for an extended period of time and will continue to impact the economy for the
foreseeable future.
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
LIQUIDITY RISK MANAGEMENT PROGRAM
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as
amended (the "1940 Act"), the Funds and each other fund in the First Trust Fund
Complex, other than the closed-end funds, have adopted and implemented a
liquidity risk management program (the "Program") reasonably designed to assess
and manage the funds' liquidity risk, i.e., the risk that a fund could not meet
requests to redeem shares issued by the fund without significant dilution of
remaining investors' interests in the fund. The Board of Trustees of the First
Trust Funds has appointed First Trust Advisors, L.P. (the "Advisor") as the
person designated to administer the Program, and in this capacity the Advisor
performs its duties primarily through the activities and efforts of the First
Trust Liquidity Committee (the "Liquidity Committee").
Pursuant to the Program, the Liquidity Committee classifies the liquidity of
each fund's portfolio investments into one of the four liquidity categories
specified by Rule 22e-4: highly liquid investments, moderately liquid
investments, less liquid investments and illiquid investments. The Liquidity
Committee determines certain of the inputs for this classification process,
including reasonably anticipated trade sizes and significant investor dilution
thresholds. The Liquidity Committee also determines and periodically reviews a
highly liquid investment minimum for certain funds, monitors the funds' holdings
of assets classified as illiquid investments to seek to ensure they do not
exceed 15% of a fund's net assets and establishes policies and procedures
regarding redemptions in kind.
At the May 11, 2020 meeting of the Board of Trustees, as required by Rule 22e-4
and the Program, the Advisor provided the Board with a written report prepared
by the Advisor that addressed the operation of the Program during the period
from June 1, 2019 (the initial compliance date for certain requirements of Rule
22e-4) through the Liquidity Committee's annual meeting held on March 20, 2020
Page 43
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
and assessed the Program's adequacy and effectiveness of implementation during
this period, including the operation of the highly liquid investment minimum for
each fund, that is required under the Program to have one, and any material
changes to the Program. Note that because the Funds primarily hold assets that
are highly liquid investments, the Funds have not adopted any highly liquid
investment minimums.
As stated in the written report, during the review period, no fund breached the
15% limitation on illiquid investments, no fund with a highly liquid investment
minimum breached that minimum and no fund filed a Form N-LIQUID. The Advisor
concluded that each fund's investment strategy is appropriate for an open-end
fund; that the Program operated effectively in all material respects during the
review period; and that the Program is reasonably designed to assess and manage
the liquidity risk of each fund and to maintain compliance with Rule 22e-4.
Page 44
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BOARD OF TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
The following tables identify the Trustees and Officers of the Trust. Unless
otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite
400, Wheaton, IL 60187.
The Trust's statement of additional information includes additional information
about the Trustees and is available, without charge, upon request, by calling
(800) 988-5891.
NUMBER OF OTHER
PORTFOLIOS IN TRUSTEESHIPS OR
TERM OF OFFICE THE FIRST TRUST DIRECTORSHIPS
NAME, AND YEAR FIRST FUND COMPLEX HELD BY TRUSTEE
YEAR OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST
POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
------------------------------------------------------------------------------------------------------------------------------------
Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 185 None
(1951) Limited Partner, Gundersen Real Estate
o Since Inception Limited Partnership (June 1992 to
December 2016); Member, Sportsmed LLC
(April 2007 to November 2015)
Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 185 Director of ADM
(1957) (Futures Commission Merchant) Investor Services,
o Since Inception Inc., ADM
Investor Services
International,
Futures Industry
Association, and
National Futures
Association
Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 185 Director of Trust
(1956) and Management Consulting) Company of
o Since Inception Illinois
Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 185 None
(1954) Managing Director and Chief Operating
o Since Inception Officer (January 2015 to August 2018),
Pelita Harapan Educational Foundation
(Educational Product and Services);
President and Chief Executive Officer
(June 2012 to September 2014), Servant
Interactive LLC (Educational Products
and Services); President and Chief
Executive Officer (June 2012 to
September 2014), Dew Learning LLC
(Educational Products and Services)
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 185 None
Chairman of the Board Advisors L.P. and First Trust
(1955) o Since Inception Portfolios L.P.; Chairman of the
Board of Directors, BondWave LLC
(Software Development Company)
and Stonebridge Advisors LLC
(Investment Advisor)
-----------------------------
(1) Mr. Bowen is deemed an "interested person" of the Trust due to his
position as Chief Executive Officer of First Trust Advisors L.P.,
investment advisor of the Trust.
Page 45
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BOARD OF TRUSTEES AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
POSITION AND TERM OF OFFICE
NAME OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS
AND YEAR OF BIRTH WITH TRUST SERVICE DURING PAST 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS(2)
------------------------------------------------------------------------------------------------------------------------------------
James M. Dykas President and Chief Executive o Indefinite Term Managing Director and Chief Financial Officer
(1966) Officer (January 2016 to Present), Controller (January 2011
o Since Inception to January 2016), Senior Vice President (April 2007
to January 2016), First Trust Advisors L.P. and First
Trust Portfolios L.P.; Chief Financial Officer
(January 2016 to Present), BondWave LLC
(Software Development Company) and Stonebridge
Advisors LLC (Investment Advisor)
Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President (July 2016 to Present), Vice
(1972) Officer and Chief President (April 2012 to July 2016), First Trust
Accounting Officer o Since Inception Advisors L.P. and First Trust Portfolios L.P.
W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and
(1960) Legal Officer First Trust Portfolios L.P.; Secretary and General
o Since Inception Counsel, BondWave LLC; Secretary, Stonebridge
Advisors LLC
Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and
(1970) First Trust Portfolios L.P.
o Since Inception
Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P.
(1966) and Assistant Secretary and First Trust Portfolios L.P.
o Since Inception
Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
(1966) and First Trust Portfolios L.P.
o Since Inception
Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
(1970) and First Trust Portfolios L.P.
o Since Inception
-----------------------------
(2) The term "officer" means the president, vice president, secretary,
treasurer, controller or any other officer who performs a policy making
function.
Page 46
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PRIVACY POLICY
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
AUGUST 31, 2020 (UNAUDITED)
PRIVACY POLICY
First Trust values our relationship with you and considers your privacy an
important priority in maintaining that relationship. We are committed to
protecting the security and confidentiality of your personal information.
SOURCES OF INFORMATION
We collect nonpublic personal information about you from the following sources:
o Information we receive from you and your broker-dealer, investment
advisor or financial representative through interviews,
applications, agreements or other forms;
o Information about your transactions with us, our affiliates or
others;
o Information we receive from your inquiries by mail, e-mail or
telephone; and
o Information we collect on our website through the use of "cookies".
For example, we may identify the pages on our website that your
browser requests or visits.
INFORMATION COLLECTED
The type of data we collect may include your name, address, social security
number, age, financial status, assets, income, tax information, retirement and
estate plan information, transaction history, account balance, payment history,
investment objectives, marital status, family relationships and other personal
information.
DISCLOSURE OF INFORMATION
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. In addition to using
this information to verify your identity (as required under law), the permitted
uses may also include the disclosure of such information to unaffiliated
companies for the following reasons:
o In order to provide you with products and services and to effect
transactions that you request or authorize, we may disclose your
personal information as described above to unaffiliated financial
service providers and other companies that perform administrative or
other services on our behalf, such as transfer agents, custodians
and trustees, or that assist us in the distribution of investor
materials such as trustees, banks, financial representatives, proxy
services, solicitors and printers.
o We may release information we have about you if you direct us to do
so, if we are compelled by law to do so, or in other legally limited
circumstances (for example to protect your account from fraud).
In addition, in order to alert you to our other financial products and services,
we may share your personal information within First Trust.
USE OF WEBSITE ANALYTICS
We currently use third party analytics tools, Google Analytics and AddThis, to
gather information for purposes of improving First Trust's website and marketing
our products and services to you. These tools employ cookies, which are small
pieces of text stored in a file by your web browser and sent to websites that
you visit, to collect information, track website usage and viewing trends such
as the number of hits, pages visited, videos and PDFs viewed and the length of
user sessions in order to evaluate website performance and enhance navigation of
the website. We may also collect other anonymous information, which is generally
limited to technical and web navigation information such as the IP address of
your device, internet browser type and operating system for purposes of
analyzing the data to make First Trust's website better and more useful to our
users. The information collected does not include any personal identifiable
information such as your name, address, phone number or email address unless you
provide that information through the website for us to contact you in order to
answer your questions or respond to your requests. To find out how to opt-out of
these services click on: Google Analytics and AddThis.
CONFIDENTIALITY AND SECURITY
With regard to our internal security procedures, First Trust restricts access to
your nonpublic personal information to those First Trust employees who need to
know that information to provide products or services to you. We maintain
physical, electronic and procedural safeguards to protect your nonpublic
personal information.
POLICY UPDATES AND INQUIRIES
As required by federal law, we will notify you of our privacy policy annually.
We reserve the right to modify this policy at any time, however, if we do change
it, we will tell you promptly. For questions about our policy, or for additional
copies of this notice, please go to www.ftportfolios.com, or contact us at
1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust
Advisors).
March 2019
Page 47
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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 Multi-Manager Large Growth ETF (MMLG)
----------------------------
Annual Report
For the Period
July 21, 2020
(Commencement of Operations)
through August 31, 2020
----------------------------
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST MULTI-MANAGER LARGE GROWTH ETF (MMLG)
ANNUAL REPORT
AUGUST 31, 2020
Shareholder Letter........................................................... 1
Fund Performance Overview.................................................... 2
Portfolio Commentary......................................................... 4
Understanding Your Fund Expenses............................................. 6
Portfolio of Investments..................................................... 7
Statement of Assets and Liabilities.......................................... 10
Statement of Operations...................................................... 11
Statement of Changes in Net Assets........................................... 12
Financial Highlights......................................................... 13
Notes to Financial Statements................................................ 14
Report of Independent Registered Public Accounting Firm...................... 19
Additional Information....................................................... 20
Board of Trustees and Officers............................................... 25
Privacy Policy............................................................... 27
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 Wellington Management Company LLP ("Wellington")
and/or Sands Capital Management, LLC ("Sands Capital") (each, a "Sub-Advisor"
and together, "Sub-Advisors") and their respective representatives, taking into
account the information currently available to them. Forward-looking statements
include all statements that do not relate solely to current or historical fact.
For example, forward-looking statements include the use of words such as
"anticipate," "estimate," "intend," "expect," "believe," "plan," "may,"
"should," "would" or other words that convey uncertainty of future events or
outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the series of First Trust Exchange-Traded Fund VIII (the "Trust") described in
this report (First Trust Multi-Manager Large Growth 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/or Sub-Advisors and their respective representatives
only as of the date hereof. We undertake no obligation to publicly revise or
update these forward-looking statements to reflect events and circumstances that
arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that the Fund will achieve its investment objective. The
Fund is subject to market risk, which is the possibility that the market values
of securities owned by the Fund will decline and that the value of the Fund's
shares may therefore be less than what you paid for them. Accordingly, you can
lose money investing in the Fund. See "Risk Considerations" in the Additional
Information section of this report for a discussion of other risks of investing
in the Fund.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.ftportfolios.com or speak with your financial advisor. Investment returns,
net asset value and share price will fluctuate and Fund shares, when sold, may
be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on the Fund's webpage at www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment in
the Fund. It includes details about the Fund and presents data and analysis that
provide insight into the Fund's performance and investment approach.
By reading the portfolio commentary from the portfolio management team of the
Fund, you may obtain an understanding of how the market environment affected the
Fund's performance. The statistical information that follows may help you
understand the Fund's performance compared to that of relevant market
benchmarks.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor and/or Sub-Advisors 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 MULTI-MANAGER LARGE GROWTH ETF (MMLG)
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
AUGUST 31, 2020
Dear Shareholders:
First Trust is pleased to provide you with the annual report for First Trust
Multi-Manager Large Growth ETF (the "Fund"), which contains detailed information
about the Fund since its inception on July 21, 2020 through August 31, 2020.
Please note that information contained in this letter and the annual report
prior to the Fund's inception date does not apply to this Fund.
In case you missed the latest big news from the Federal Reserve ("Fed") in
September, it stated that it expects to hold short-term interest rates near zero
until two things happen: (1) the U.S. unemployment rate is back to normal, or
around the 4.0% level; and (2) the inflation rate is at, or above, 2.0%. As of
August 31, 2020, the U.S. unemployment rate stood at 8.4%, according to data
from the Bureau of Labor Statistics. The Fed's top benchmark for inflation (U.S.
Personal Consumption Expenditures Chain Type Price Index) stood at 1.0% on July
31, 2020. Brian Wesbury, Chief Economist at First Trust Advisors L.P., notes
that the Fed does not expect to achieve both goals until 2024.
What does this mean for investors? We believe that one of the Fed's motivations
in promoting a multi-year commitment to a near zero interest rate monetary
policy is to incentivize risk-taking. By holding interest rates artificially low
for an extended period, the Fed is essentially disincentivizing saving. The Fed
wants individuals to invest their capital in risk assets and is offering
valuable guidance on its monetary policy to instill confidence in the markets,
in my opinion.
In his testimony to the House Financial Services Committee on September 22,
2020, Fed Chairman Jerome Powell stated that the U.S. economy has a long road to
a full recovery and needs more financial support. U.S. Treasury Secretary Steven
Mnuchin also testified and said that he and the White House will continue to
push Congress to pass another fiscal relief package to help support American
workers. In pursuing additional fiscal support, the U.S. government is
ultimately looking to buy time until a coronavirus ("COVID-19") vaccine arrives.
With the U.S. Presidential election less than two months away, getting a
trillion dollar or so stimulus package through Congress will be no easy task, in
my opinion. Let us hope they surprise us.
Thanks to the monetary and fiscal support already brought to bear to fight
COVID-19, the securities markets appear to be in relatively good shape, in my
opinion. On September 22, 2020, the S&P 500(R) Index closed a little more than
two percentage points off its pre-COVID-19 high set on February 19, 2020,
according to data from Bloomberg. I find that to be an amazing feat in the
current climate. The combination of low interest rates and low inflation
continues to reward bond investors. Looking ahead, even bond investors are going
to need to assume some additional credit risk to achieve higher returns. Yields
on Treasury notes and bonds are poised at this time to stay low and fairly range
bound. The Fed's pledge to keep its benchmark rate low for up to three years
could lend some stability and reassurance to the debt markets, in my opinion.
We believe the U.S. economy is on its way back. While we have too many workers
still unemployed, I do find it encouraging that U.S. consumers have done such a
terrific job of getting their fiscal houses in order. Consumer spending
typically accounts for roughly 70% of U.S. gross domestic product output each
year. So goes the consumer, so goes the economy. The S&P/Experian Consumer
Credit Default Composite Index stood at 0.67% in August 2020, down from 0.92% in
August 2019 and well below its 1.79% average since its inception in July 2004,
according to S&P Dow Jones Indices. As we previously noted, the near-term
outlook rests on getting one or more FDA-approved vaccines or therapeutics. The
year-end target that has been touted by some, including President Donald J.
Trump, would coincide with the end to the government's moratorium on home
evictions and foreclosures, which is due to expire on December 31, 2020. Keep in
mind that the moratorium has already been extended three times. Things could get
interesting over the next few months. Stay tuned and stay the course.
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 MULTI-MANAGER LARGE GROWTH ETF (MMLG)
The First Trust Multi-Manager Large Growth ETF (the "Fund") seeks to provide
long-term capital appreciation. Under normal market conditions, the Fund will
invest at least 80% of its net assets (including investment borrowings) in
equity securities issued by large capitalization companies. The Fund considers
large capitalization companies to be those companies with market capitalizations
within the market capitalization range of the companies comprising the Russell
1000(R) Growth Index (as of the index's most recent reconstitution). The Fund's
portfolio will be principally composed of common stocks issued by companies
domiciled in the United States, common stocks issued by non-U.S. companies that
are principally traded in the United States and American Depositary Receipts.
The Fund utilizes a multi-manager approach to provide exposure to the large
capitalization growth segment of the equity market through the blending of
multiple portfolio management teams. The Fund lists and principally trades its
shares on NYSE Arca, Inc. under the ticker symbol "MMLG."
---------------------------------------------------------------------------------------------------------------------
PERFORMANCE
---------------------------------------------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURNS
Inception (7/21/20)
to 8/31/20
FUND PERFORMANCE
NAV 10.18%
Market Price 10.13%
INDEX PERFORMANCE
Russell 1000(R) Index 7.85%
Russell 1000(R) Growth Index 11.98%
---------------------------------------------------------------------------------------------------------------------
Total returns for the period since inception are calculated from the inception
date of the Fund. "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 its inception, for the period from inception to the
first day of secondary market trading in shares of the Fund, the NAV of the Fund
is used as a proxy for the secondary market trading price to calculate market
returns. NAV and market returns assume that all distributions have been
reinvested in the Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike the Fund, the 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 index. The returns presented do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund shares. The investment return and principal value of shares of the
Fund will vary with changes in market conditions. Shares of the Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. The Fund's past performance is no guarantee of future performance.
Page 2
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST MULTI-MANAGER LARGE GROWTH ETF (MMLG) (CONTINUED)
----------------------------------------------------------
% OF TOTAL
LONG-TERM
SECTOR CLASSIFICATION INVESTMENTS
----------------------------------------------------------
Information Technology 40.00%
Communication Services 22.01
Health Care 13.30
Consumer Discretionary 11.88
Consumer Staples 4.94
Industrials 4.85
Financials 1.15
Materials 0.87
Real Estate 0.52
Utilities 0.48
--------
Total 100.00%
========
----------------------------------------------------------
% OF TOTAL
LONG-TERM
TOP TEN HOLDINGS INVESTMENTS
----------------------------------------------------------
Amazon.com, Inc. 7.50%
Microsoft Corp. 5.72
Facebook, Inc., Class A 4.07
ServiceNow, Inc. 3.97
Netflix, Inc. 3.96
Adobe, Inc. 3.96
Sea Ltd., ADR 3.80
Apple, Inc. 3.24
Visa, Inc., Class A 2.90
Alphabet, Inc., Class A 2.86
--------
Total 41.98%
========
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JULY 21, 2020 - AUGUST 31, 2020
First Trust Multi-Manager Russell 1000(R) Russell 1000(R)
Large Growth ETF Index Growth Index
1/3/19 $10,000 $10,000 $10,000
8/31/20 11,018 10,785 11,198
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 AUGUST 31, 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 July 22, 2020 (commencement
of trading) through August 31, 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%
7/22/20 - 8/31/20 22 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%
7/22/20 - 8/31/20 7 0 0 0
Page 3
--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY
--------------------------------------------------------------------------------
FIRST TRUST MULTI-MANAGER LARGE GROWTH ETF (MMLG)
ANNUAL REPORT
AUGUST 31, 2020 (UNAUDITED)
ADVISOR
First Trust Advisors L.P. ("First Trust" or the "Advisor") is the investment
advisor to the First Trust Multi-Manager Large Growth ETF ("MMLG" or the
"Fund"). The following serve as investment sub-advisors (each, a "Sub-Advisor")
to the Fund: Wellington Management Company LLP ("Wellington") and Sands Capital
Management, LLC ("Sands Capital"). First Trust is responsible for the ongoing
monitoring of the Fund's investment portfolio, selecting and overseeing the
investment sub-advisors, managing the Fund's business affairs and providing
certain administrative services necessary for the management of the Fund.
PORTFOLIO MANAGEMENT TEAM
THE ADVISOR'S INVESTMENT COMMITTEE, WHICH MANAGES THE FUND'S INVESTMENTS,
CONSISTS OF:
o Daniel J. Lindquist, Managing Director of First Trust
o Jon C. Erickson, Senior Vice President of First Trust
o David G. McGarel, Chief Investment Officer, Chief Operating Officer and
Managing Director of First Trust
o Roger F. Testin, Senior Vice President of First Trust
o Stan Ueland, Senior Vice President of First Trust
o Chris A. Peterson, CFA, Senior Vice President of First Trust
SUB-ADVISOR PORTFOLIO MANAGERS
WELLINGTON
o Douglas W. McLane, CFA, Senior Managing Director, Partner and Equity Portfolio
Manager
SANDS CAPITAL
o Frank M. Sands, CFA, Chief Investment Officer and Chief Executive Officer
o Michael A. Sramek, CFA, Senior Portfolio Manager, Research Analyst and
Managing Director
o Wesley A. Johnston, CFA, Portfolio Manager and Senior Research Analyst
o Thomas H. Trentman, CFA, Portfolio Manager and Senior Research Analyst
COMMENTARY
MARKET RECAP
U.S. equities rose for the fifth consecutive month in August 2020 bringing the
Russell 1000(R) Growth Index's (the "Index") calendar year-to-date gains to
30.48%. Monetary support from the Federal Reserve (the "Fed"), improving
coronavirus ("COVID-19") trends, better-than-expected corporate earnings, and
optimism about potential COVID-19 vaccines contributed to the rise. Net-long
positioning was the highest since early March 2020, and the Chicago Board of
Options Exchange Volatility Index neared its lowest level since late February
2020, signaling diminishing concerns of a near-term decline in equities.
Nevertheless, we believe the path to a sustainable economic recovery is clouded
by the uncertain trajectory of COVID-19 and an undetermined vaccine timeline,
risks of further stimulus delays or the premature withdrawal of fiscal support,
high unemployment, elevated debt burdens, increasing geopolitical tensions and
de-globalization, civil unrest and the November 2020 U.S. Presidential election.
The gains were broad based, with all sectors contributing positively to the
Index's return. The largest portion of the Index's rise was attributable to the
Information Technology, Consumer Discretionary, and Communication Services
sectors, which investors perceived as either relatively insulated from the
COVID-19 pandemic's economic fallout or as potential beneficiaries from a
socially distant/work-from-home environment.
PERFORMANCE ANALYSIS
For the period from the Fund's inception on July 21, 2020 through August 31,
2020, the Fund generated a net asset value ("NAV") return of 10.18%. During the
same period, the Russell 1000(R) Index returned 7.85% and the Index returned
11.98%.
Security selection was the primary driver of underperformance relative to the
Index. Selection in the Communications Services and Industrials sectors added to
relative performance while selection in Information Technology and Consumer
Discretionary sectors detracted. On a stock level, the Fund's overweight in the
Information Technology company Teradyne, Inc. was a top detractor along with its
overweight in the Consumer Discretionary company Floor & Decor Holdings, Inc. On
the positive side, the Fund's off-Index holding in Sea Ltd. (a Communication
Services company) was a top contributor as was its overweight in the Industrial
company CoStar Group, Inc.
Page 4
--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST MULTI-MANAGER LARGE GROWTH ETF (MMLG)
ANNUAL REPORT
AUGUST 31, 2020 (UNAUDITED)
MARKET AND FUND OUTLOOK
The duration of the COVID-19 crisis remains an area of uncertainty. We are
focused on how COVID-19 is changing the business spaces we invest in and
consumer behavior. Once we have a better sense of the duration, we should have a
clearer idea on the magnitude of losses and the amount of stimulus. While
economic output and jobs have recovered roughly half of what was lost in the
pandemic, there is still significant uncertainty on how we can return to normal
with the absence of a vaccine or treatment options. Amidst the uncertainty and
through the COVID-19 pandemic, companies have adapted to working from home and
consumers have become more adept at shopping for goods and services online which
has massively benefited a narrow group of companies. The pandemic has rapidly
accelerated secular changes we had been observing, so the question now is
whether COVID-19 created a one-time spike, or a step-change higher in the growth
trajectory.
Globally, there are still parts of the world where the incidence of COVID-19
cases has not stabilized, and in some areas, it appears that the peak may still
be weeks or even months away. So unfortunately, a lot of uncertainty remains. In
the meantime, we are spending more time understanding the possible permanent or
semi-permanent changes to behavior, both from a consumer and corporate
perspective, and what that might mean for some of the Fund's holdings. However,
it seems too early to draw conclusions.
We remain focused on the long term as eventually we will put this health crisis
behind us. We believe COVID-19 will likely have a lasting impact on economies,
business spaces, behaviors, and geopolitics. It's accelerating existing trends,
ending others, and we expect will widen the gap between winners and losers.
However, we believe it's unlikely to change the fact that investors need
appropriate absolute returns to achieve their goals, and our belief that
earnings drive equity returns over the long run, and only a select few
businesses are capable of sustaining above-average growth. Leadership,
innovation, and competitive advantage will distinguish the winning businesses
even more in the years ahead, in our view.
Page 5
FIRST TRUST MULTI-MANAGER LARGE GROWTH ETF (MMLG)
UNDERSTANDING YOUR FUND EXPENSES
AUGUST 31, 2020 (UNAUDITED)
As a shareholder of First Trust Multi-Manager Large Growth ETF (the "Fund"), you
incur two types of costs: (1) transaction costs; and (2) ongoing costs,
including management fees, distribution and/or service (12b-1) fees, if any, and
other Fund expenses. This Example is intended to help you understand your
ongoing costs of investing in the Fund and to compare these costs with the
ongoing costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period (or since inception) and held through the six-month (or shorter) period
ended August 31, 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 six-month (or
shorter) 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 PERIOD
ACCOUNT VALUE ACCOUNT VALUE NUMBER OF DAYS JULY 21, 2020 (a) TO
JULY 21, 2020 (a) AUGUST 31, 2020 IN THE PERIOD AUGUST 31, 2020 (b)
----------------------------------------------------------------------------------------------------------------------------
FIRST TRUST MULTI-MANAGER LARGE GROWTH ETF (MMLG)
Actual $1,000.00 $1,101.80 0.85% $1.03
Hypothetical (5% return before expenses) $1,000.00 $1,020.86 0.85% $4.32
(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 (July
21, 2020 through August 31, 2020), multiplied by 42/366. Hypothetical
expenses are assumed for the most recent half-year period.
Page 6
FIRST TRUST MULTI-MANAGER LARGE GROWTH ETF (MMLG)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS -- 99.0%
AEROSPACE & DEFENSE -- 0.7%
113 BWX Technologies, Inc. $ 6,284
152 Raytheon Technologies Corp. 9,272
-------------
15,556
-------------
AIR FREIGHT & LOGISTICS -- 0.5%
49 FedEx Corp. 10,772
-------------
BEVERAGES -- 2.0%
63 Constellation Brands, Inc., Class A 11,622
387 Monster Beverage Corp. (a) 32,454
-------------
44,076
-------------
BIOTECHNOLOGY -- 2.0%
92 Mirati Therapeutics, Inc. (a) 13,742
86 Sarepta Therapeutics, Inc. (a) 12,592
61 Seattle Genetics, Inc. (a) 9,659
28 Vertex Pharmaceuticals, Inc. (a) 7,815
-------------
43,808
-------------
BUILDING PRODUCTS -- 0.7%
192 Fortune Brands Home &
Security, Inc. 16,143
-------------
CAPITAL MARKETS -- 0.4%
14 BlackRock, Inc. 8,319
-------------
CHEMICALS -- 0.6%
18 Sherwin-Williams (The) Co. 12,079
-------------
COMMERCIAL SERVICES & SUPPLIES
-- 0.3%
80 Republic Services, Inc. 7,418
-------------
COMMUNICATIONS EQUIPMENT
-- 0.6%
80 Motorola Solutions, Inc. 12,380
-------------
CONSTRUCTION MATERIALS -- 0.3%
56 Vulcan Materials Co. 6,720
-------------
CONSUMER FINANCE -- 0.4%
92 American Express Co. 9,346
-------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 0.4%
152 Verizon Communications, Inc. 9,009
-------------
ELECTRIC UTILITIES -- 0.5%
37 NextEra Energy, Inc. 10,329
-------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 0.9%
82 CDW Corp. 9,319
295 Corning, Inc. 9,576
-------------
18,895
-------------
ENTERTAINMENT -- 9.5%
148 Activision Blizzard, Inc. 12,361
162 Netflix, Inc. (a) 85,789
538 Sea Ltd., ADR (a) 82,212
77 Walt Disney (The) Co. 10,154
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
ENTERTAINMENT (CONTINUED)
570 Warner Music Group Corp.,
Class A $ 16,906
-------------
207,422
-------------
EQUITY REAL ESTATE INVESTMENT
TRUSTS -- 0.5%
171 Equity LifeStyle Properties, Inc. 11,335
-------------
FOOD & STAPLES RETAILING -- 1.7%
42 Costco Wholesale Corp. 14,602
380 Grocery Outlet Holding Corp. (a) 15,629
50 Walmart, Inc. 6,943
-------------
37,174
-------------
HEALTH CARE EQUIPMENT
& SUPPLIES -- 5.6%
76 Align Technology, Inc. (a) 22,570
166 Baxter International, Inc. 14,454
37 Becton, Dickinson and Co. 8,982
48 Danaher Corp. 9,911
36 DexCom, Inc. (a) 15,315
234 Edwards Lifesciences Corp. (a) 20,087
156 Hologic, Inc. (a) 9,316
22 Teleflex, Inc. 8,645
43 West Pharmaceutical Services, Inc. 12,210
-------------
121,490
-------------
HEALTH CARE PROVIDERS & SERVICES
-- 1.5%
43 Laboratory Corp. of America
Holdings (a) 7,557
83 UnitedHealth Group, Inc. 25,942
-------------
33,499
-------------
HOTELS, RESTAURANTS & LEISURE
-- 0.7%
67 McDonald's Corp. 14,306
-------------
HOUSEHOLD PRODUCTS -- 1.2%
116 Colgate-Palmolive Co. 9,194
119 Procter & Gamble (The) Co. 16,461
-------------
25,655
-------------
INSURANCE -- 0.3%
58 Chubb Ltd. 7,250
-------------
INTERACTIVE MEDIA & SERVICES
-- 10.8%
38 Alphabet, Inc., Class A (a) 61,922
9 Alphabet, Inc., Class C (a) 14,708
300 Facebook, Inc., Class A (a) 87,960
510 Match Group, Inc. (a) 56,957
174 Zillow Group, Inc., Class C (a) 14,922
-------------
236,469
-------------
INTERNET & DIRECT MARKETING RETAIL
-- 7.4%
47 Amazon.com, Inc. (a) 162,195
-------------
See Notes to Financial Statements Page 7
FIRST TRUST MULTI-MANAGER LARGE GROWTH ETF (MMLG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
IT SERVICES -- 13.3%
30 EPAM Systems, Inc. (a) $ 9,813
69 Fidelity National Information
Services, Inc. 10,409
40 FleetCor Technologies, Inc. (a) 10,058
77 Global Payments, Inc. 13,600
134 GoDaddy, Inc., Class A (a) 11,213
130 Leidos Holdings, Inc. 11,764
86 Mastercard, Inc., Class A 30,804
117 PayPal Holdings, Inc. (a) 23,884
125 Science Applications International
Corp. 10,432
385 Square, Inc., Class A (a) 61,431
124 Twilio, Inc., Class A (a) 33,450
296 Visa, Inc., Class A 62,749
-------------
289,607
-------------
LIFE SCIENCES TOOLS & SERVICES
-- 1.7%
68 Illumina, Inc. (a) 24,291
32 Thermo Fisher Scientific, Inc. 13,727
-------------
38,018
-------------
MEDIA -- 1.1%
38 Charter Communications, Inc.,
Class A (a) 23,393
-------------
PHARMACEUTICALS -- 2.3%
106 Eli Lilly and Co. 15,729
220 Zoetis, Inc. 35,222
-------------
50,951
-------------
PROFESSIONAL SERVICES -- 1.9%
38 CoStar Group, Inc. (a) 32,247
55 Equifax, Inc. 9,255
-------------
41,502
-------------
ROAD & RAIL -- 0.6%
402 Uber Technologies, Inc. (a) 13,519
-------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 1.4%
42 KLA Corp. 8,616
105 Teradyne, Inc. 8,922
88 Texas Instruments, Inc. 12,509
-------------
30,047
-------------
SOFTWARE -- 20.3%
167 Adobe, Inc. (a) 85,736
96 Atlassian Corp. PLC, Class A (a) 18,409
46 Coupa Software, Inc. (a) 15,076
36 DocuSign, Inc. (a) 8,028
73 Guidewire Software, Inc. (a) 8,199
126 Intuit, Inc. 43,519
549 Microsoft Corp. 123,816
115 salesforce.com, Inc. (a) 31,355
178 ServiceNow, Inc. (a) 85,800
102 SS&C Technologies Holdings, Inc. 6,499
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
SOFTWARE (CONTINUED)
75 Workday, Inc., Class A (a) $ 17,978
-------------
444,415
-------------
SPECIALTY RETAIL -- 2.4%
74 Burlington Stores, Inc. (a) 14,573
296 Floor & Decor Holdings, Inc.,
Class A (a) 21,679
301 TJX (The) Cos., Inc. 16,492
-------------
52,744
-------------
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 3.2%
544 Apple, Inc. 70,198
-------------
TEXTILES, APPAREL & LUXURY GOODS
-- 1.3%
137 NIKE, Inc., Class B 15,329
189 VF Corp. 12,427
-------------
27,756
-------------
TOTAL COMMON STOCKS -- 99.0% 2,163,795
(Cost $1,962,407) -------------
MONEY MARKET FUNDS -- 1.0%
22,147 Morgan Stanley Institutional Liquidity
Funds - Treasury Portfolio -
Institutional Class - 0.01% (b) 22,147
(Cost $22,147) -------------
TOTAL INVESTMENTS -- 100.0% 2,185,942
(Cost $1,984,554) (c)
NET OTHER ASSETS AND
LIABILITIES -- (0.0)% (385)
-------------
NET ASSETS -- 100.0% $ 2,185,557
=============
(a) Non-income producing security.
(b) Rate shown reflects yield as of August 31, 2020.
(c) Aggregate cost for federal income tax purposes is $1,984,668. As of August
31, 2020, the aggregate gross unrealized appreciation for all investments
in which there was an excess of value over tax cost was $215,735 and the
aggregate gross unrealized depreciation for all investments in which there
was an excess of tax cost over value was $14,461. The net unrealized
appreciation was $201,274.
ADR - American Depositary Receipt
Page 8 See Notes to Financial Statements
FIRST TRUST MULTI-MANAGER LARGE GROWTH ETF (MMLG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2020
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of August 31,
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* $ 2,163,795 $ -- $ --
Money Market Funds 22,147 -- --
---------------------------------------------
Total Investments $ 2,185,942 $ -- $ --
=============================================
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 9
FIRST TRUST MULTI-MANAGER LARGE GROWTH ETF (MMLG)
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 2020
ASSETS:
Investments, at value.................................................. $ 2,185,942
Dividends receivable................................................... 1,112
---------------
Total Assets........................................................ 2,187,054
---------------
LIABILITIES:
Investment advisory fees payable....................................... 1,497
---------------
Total Liabilities................................................... 1,497
---------------
NET ASSETS............................................................. $ 2,185,557
===============
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $ 1,983,028
Par value.............................................................. 1,000
Accumulated distributable earnings (loss).............................. 201,529
---------------
NET ASSETS............................................................. $ 2,185,557
===============
NET ASSET VALUE, per share............................................. $ 21.86
===============
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share).............................. 100,002
===============
Investments, at cost................................................... $ 1,984,554
===============
Page 10 See Notes to Financial Statements
FIRST TRUST MULTI-MANAGER LARGE GROWTH ETF (MMLG)
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED AUGUST 31, 2020 (a)
INVESTMENT INCOME:
Dividends.............................................................. $ 1,463
---------------
Total investment income............................................. 1,463
---------------
EXPENSES:
Investment advisory fees............................................... 1,954
---------------
Total expenses...................................................... 1,954
---------------
NET INVESTMENT INCOME (LOSS)........................................... (491)
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investments................................ 632
Net change in unrealized appreciation (depreciation) on investments.... 201,388
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ 202,020
---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ 201,529
===============
(a) Inception date is July 21, 2020, 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 11
FIRST TRUST MULTI-MANAGER LARGE GROWTH ETF (MMLG)
STATEMENT OF CHANGES IN NET ASSETS
PERIOD
ENDED
8/31/2020 (a)
---------------
OPERATIONS:
Net investment income (loss)......................................................... $ (491)
Net realized gain (loss)............................................................. 632
Net change in unrealized appreciation (depreciation)................................. 201,388
---------------
Net increase (decrease) in net assets resulting from operations...................... 201,529
---------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold............................................................ 1,984,028
Cost of shares redeemed.............................................................. --
---------------
Net increase (decrease) in net assets resulting from shareholder transactions........ 1,984,028
---------------
Total increase (decrease) in net assets.............................................. 2,185,557
NET ASSETS:
Beginning of period.................................................................. --
---------------
End of period........................................................................ $ 2,185,557
===============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period.............................................. --
Shares sold.......................................................................... 100,002
Shares redeemed...................................................................... --
---------------
Shares outstanding, end of period.................................................... 100,002
===============
(a) Inception date is July 21, 2020, which is consistent with the commencement
of investment operations and is the date the initial creation units were
established.
Page 12 See Notes to Financial Statements
FIRST TRUST MULTI-MANAGER LARGE GROWTH ETF (MMLG)
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
PERIOD
ENDED
8/31/2020 (a)
--------------
Net asset value, beginning of period........................... $ 19.84
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... (0.00) (b)
Net realized and unrealized gain (loss)........................ 2.02
--------
Total from investment operations............................... 2.02
--------
Net asset value, end of period................................. $ 21.86
========
TOTAL RETURN (c)............................................... 10.18%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 2,186
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.... (0.21)% (d)
Portfolio turnover rate (e).................................... 2%
(a) Inception date is July 21, 2020, 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 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 and in-kind
transactions.
See Notes to Financial Statements Page 13
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST MULTI-MANAGER LARGE GROWTH ETF (MMLG)
AUGUST 31, 2020
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 twenty-five funds that are offering shares. This
report covers the First Trust Multi-Manager Large Growth ETF (the "Fund"), which
trades under the ticker "MMLG" on NYSE Arca, Inc. 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 seeks to provide
long-term capital appreciation. Under normal market conditions, the Fund will
invest at least 80% of its net assets (including investment borrowings) in
equity securities issued by large capitalization companies. The Fund considers
large capitalization companies to be those companies with market capitalizations
within the market capitalization range of the companies comprising the Russell
1000(R) Growth Index (as of the index's most recent reconstitution). The Fund's
portfolio will be principally composed of common stocks issued by companies
domiciled in the United States, common stocks issued by non-U.S. companies that
are principally traded in the United States and American Depositary Receipts.
The Fund utilizes a multi-manager approach to provide exposure to the large
capitalization growth segment of the equity market through the blending of
multiple portfolio management teams. There can be no assurance that the Fund
will achieve its investment objective. The Fund may not be appropriate for all
investors.
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. The Fund's investments are valued as follows:
Common stocks and other equity securities listed on any national or
foreign exchange (excluding The Nasdaq Stock Market LLC ("Nasdaq") and the
London Stock Exchange Alternative Investment Market ("AIM")) are valued at
the last sale price on the exchange on which they are principally traded
or, for Nasdaq and AIM securities, the official closing price. Securities
traded on more than one securities exchange are valued at the last sale
price or official closing price, as applicable, at the close of the
securities exchange representing the principal market for such securities.
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.
Page 14
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST MULTI-MANAGER LARGE GROWTH ETF (MMLG)
AUGUST 31, 2020
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 August 31, 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. Interest income, if any, is
recorded on the accrual basis.
C. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income, if any, are declared and paid quarterly by
the Fund, or as the Board of Trustees may determine from time to time.
Distributions of net realized gains earned by the Fund, if any, are distributed
at least annually.
Distributions from net investment income and realized capital gains are
determined in accordance with federal income tax regulations, which may differ
from U.S. GAAP. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These permanent differences are primarily due to the varying
treatment of income and gain/loss on 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 Fund did not pay a distribution during its fiscal period
ended August 31, 2020.
Page 15
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST MULTI-MANAGER LARGE GROWTH ETF (MMLG)
AUGUST 31, 2020
As of August 31, 2020, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income................. $ 255
Accumulated capital and other gain (loss)..... --
Net unrealized appreciation (depreciation).... 201,274
D. 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 ended 2020
remains open to federal and state audit. As of August 31, 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.
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, 2020, the
Fund had no capital loss carryforwards for federal income tax purposes.
Certain losses realized during the current fiscal period 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, 2020, the Fund had
no net late year ordinary or capital losses.
In order to present paid-in capital and accumulated distributable earnings
(loss) (which consists of accumulated net investment income (loss), accumulated
net realized gain (loss) on investments and net unrealized appreciation
(depreciation) on investments) on the Statement of Assets and Liabilities that
more closely represent their tax character, certain adjustments have been made
to paid-in capital, accumulated net investment income (loss) and accumulated net
realized gain (loss) on investments. These adjustments are primarily due to the
difference between book and tax treatments of income and gains on various
investment securities held by the Fund and in-kind transactions. The results of
operations and net assets were not affected by these adjustments. For the fiscal
period ended August 31, 2020, the adjustments for the Fund were as follows:
Accumulated
Accumulated Net Realized
Net Investment Gain (Loss)
Income (Loss) on Investments Paid-in Capital
-------------- -------------- ---------------
$491 $(491) $--
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 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 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 Fund's portfolio based on recommendations
provided by the Sub-Advisors (defined below) and is responsible for the expenses
of the Fund including the cost of transfer agency, sub-advisory, custody, fund
administration, legal, audit and other services and license fees (if any), but
excluding fee payments under the Investment Management Agreement, interest,
taxes, acquired fund fees and expenses, if any, brokerage commissions and other
expenses connected with the execution of portfolio transactions, distribution
and service fees payable pursuant to a Rule 12b-1 plan, if any, and
extraordinary expenses, which are paid by the Fund. The Fund has agreed to pay
First Trust an annual management fee equal to 0.85% of its average daily net
assets.
Page 16
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST MULTI-MANAGER LARGE GROWTH ETF (MMLG)
AUGUST 31, 2020
The Fund utilizes a multi-manager structure. The Trust, on behalf of the Fund,
and First Trust have retained Wellington Management Company LLP ("Wellington")
and Sands Capital Management, LLC ("Sands Capital") (each, a "Sub-Advisor" and
together, "Sub-Advisors"), to serve as non-discretionary investment sub-advisors
to the Fund pursuant to sub-advisory agreements (the "Sub-Advisory Agreements").
In this capacity, Wellington and Sands Capital are each responsible for
providing recommendations to First Trust regarding the selection and allocation
of the securities in the portion of the Fund's portfolio they have been
allocated by First Trust. Pursuant to the Sub-Advisory Agreements, First Trust
has agreed to pay for the services and facilities provided by the Sub-Advisors
through sub-advisory fees equal in the aggregate to an annual rate of 0.30% of
the average daily net assets of the Fund (i.e., for each sub-advisor, 0.30% of
the average daily net assets of the portion of the Fund's assets allocated to
that sub-advisor). Each Sub-Advisor's fees are paid by First Trust out of First
Trust's management fee.
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
the Fund. As custodian, BNYM is responsible for custody of the Fund's assets. As
fund accountant and administrator, BNYM is responsible for maintaining the books
and records of the Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for the Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
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 fiscal period ended August 31, 2020, the cost of purchases and proceeds
from sales of investments, excluding short-term investments and in-kind
transactions, were $48,395 and $40,927, respectively.
For the fiscal period ended August 31, 2020, the cost of in-kind purchases and
proceeds from in-kind sales were $1,954,307 and $0, respectively.
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 Creation Transaction Fee may increase
or decrease with changes in the 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 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
Page 17
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST MULTI-MANAGER LARGE GROWTH ETF (MMLG)
AUGUST 31, 2020
transactions are settled. The Redemption Transaction Fee may increase or
decrease with changes in the Fund's portfolio. 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 May 15, 2022.
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
were the following subsequent events:
On September 21, 2020, FT Cboe Vest U.S. Equity Buffer ETF - September and FT
Cboe Vest U.S. Equity Deep Buffer ETF - September, additional series of the
Trust, began trading under the symbols "FSEP" and "DSEP", respectively, on Cboe
BZX Exchange, Inc.
On October 19, 2020, FT Cboe Vest U.S. Equity Buffer ETF - October and FT Cboe
Vest U.S. Equity Deep Buffer ETF - October, additional series of the Trust,
began trading under the symbols "FOCT" and "DOCT", respectively, on Cboe BZX
Exchange, Inc.
Page 18
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED
FUND VIII:
OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS
We have audited the accompanying statement of assets and liabilities of First
Trust Multi-Manager Large Growth ETF (the "Fund"), a series of the First Trust
Exchange-Traded Fund VIII, including the portfolio of investments, as of August
31, 2020, the related statement of operations, statement of changes in net
assets, and financial highlights for the period from July 21, 2020 (commencement
of operations) through August 31, 2020, and the related notes. In our opinion,
the financial statements and financial highlights present fairly, in all
material respects, the financial position of the Fund as of August 31, 2020, and
the results of its operations, changes in its net assets, and financial
highlights for the period from July 21, 2020 (commencement of operations)
through August 31, 2020, in conformity with accounting principles generally
accepted in the United States of America.
BASIS FOR OPINION
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on the Fund's
financial statements and financial highlights based on our audit. We are a
public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to
the Fund in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement, whether due to error or fraud. The Fund is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. As part of our audit we are required to obtain
an understanding of internal control over financial reporting but not for the
purpose of expressing an opinion on the effectiveness of the Fund's internal
control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material
misstatement of the financial statements and financial highlights, whether due
to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements and financial highlights. Our audit
also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of August 31, 2020, by correspondence with
the custodian and brokers. We believe that our audit provides a reasonable basis
for our opinion.
/s/ Deloitte & Touche LLP
Chicago, Illinois
October 26, 2020
We have served as the auditor of one or more First Trust investment companies
since 2001.
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ADDITIONAL INFORMATION
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FIRST TRUST MULTI-MANAGER LARGE GROWTH ETF (MMLG)
AUGUST 31, 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.
FEDERAL TAX INFORMATION
There were no distributions made by MMLG during the Fund's fiscal year ended
August 31, 2020; therefore, no analysis for the corporate dividends received
deduction and qualified dividend income were completed.
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 20
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST MULTI-MANAGER LARGE GROWTH ETF (MMLG)
AUGUST 31, 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 COVID-19 pandemic may last
for an extended period of time and will continue to impact the economy for the
foreseeable future.
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
Page 21
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST MULTI-MANAGER LARGE GROWTH ETF (MMLG)
AUGUST 31, 2020 (UNAUDITED)
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 AND SUB-ADVISORY AGREEMENTS
BOARD CONSIDERATIONS REGARDING APPROVAL OF INVESTMENT MANAGEMENT AND
SUB-ADVISORY AGREEMENTS
The Board of Trustees of First Trust Exchange-Traded Fund VIII (the "Trust"),
including the Independent Trustees, unanimously approved the Investment
Management Agreement (the "Advisory Agreement") with First Trust Advisors L.P.
(the "Advisor"), on behalf of First Trust Multi-Manager Large Growth ETF (the
"Fund"), the Investment Sub-Advisory Agreement (the "Sands Sub-Advisory
Agreement") among the Trust, on behalf of the Fund, the Advisor and Sands
Capital Management, LLC ("Sands"), and the Investment Sub-Advisory Agreement
(the "Wellington Sub-Advisory Agreement" and together with the Sands
Sub-Advisory Agreement, the "Sub-Advisory Agreements") among the Trust, on
behalf of the Fund, the Advisor and Wellington Management Company LLP
("Wellington" and together with Sands, the "Sub-Advisors" and each a
"Sub-Advisor), for an initial two-year term at a meeting held on May 11, 2020.
The Sub-Advisory Agreements together with the Advisory Agreement are referred to
as the "Agreements." The Board determined that the Agreements are in the best
interests of the Fund in light of the nature, extent and quality of the services
expected to be provided and such other matters as the Board considered to be
relevant in the exercise of its reasonable business judgment.
To reach this determination, the Board considered its duties under the
Investment Company Act of 1940, as amended (the "1940 Act"), as well as under
the general principles of state law, in reviewing and approving advisory
contracts; the requirements of the 1940 Act in such matters; the fiduciary duty
of investment advisors with respect to advisory agreements and compensation; the
standards used by courts in determining whether investment company boards have
fulfilled their duties; and the factors to be considered by the Board in voting
on such agreements. To assist the Board in its evaluation of the Agreements for
the Fund, the Independent Trustees received a separate report from each of the
Advisor and each 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 each Sub-Advisor to the Fund
(including the relevant personnel responsible for these services and their
experience); the proposed unitary fee rate payable by the Fund as compared to
fees charged to a peer group of funds (the "Expense Group") and a broad peer
universe of funds (the "Expense Universe"), each assembled by Broadridge
Financial Solutions, Inc. ("Broadridge"), an independent source, and as compared
to fees charged to other clients of the Advisor, including other exchange-traded
funds ("ETFs") managed by the Advisor; the proposed sub-advisory fee rates for
the Fund as compared to fees charged to other clients of the Sub-Advisors; the
estimated expense ratio of the Fund as compared to expense ratios of the funds
in the Fund's Expense Group and Expense Universe; the nature of expenses to be
incurred in providing services to the Fund and the potential for the Advisor and
the Sub-Advisors to realize economies of scale, if any; profitability and other
financial data for the Advisor; financial data for the Sub-Advisors; any
fall-out benefits to the Advisor and its affiliate, First Trust Portfolios L.P.
("FTP"), and the Sub-Advisors; and information on the Advisor's and each
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-Advisors. The Board applied its business judgment to determine whether the
arrangements between the Trust and the Advisor and among the Trust, the Advisor
and each Sub-Advisor are reasonable business arrangements from the Fund's
perspective.
In evaluating whether to approve the Agreements for the Fund, the Board
considered the nature, extent and quality of the services to be provided by the
Advisor and the Sub-Advisors under the Agreements. With respect to the Advisory
Agreement, the Board considered that the Advisor will be responsible for the
overall management and administration of the Fund and reviewed all of the
services to be provided by the Advisor to the Fund, including the oversight of
the Sub-Advisors, as well as the background and experience of the persons
responsible for such services. The Board considered that the Fund will be an
actively-managed ETF and will utilize a multi-manager approach in which the
Advisor selects multiple sub-advisors for the Fund, with each sub-advisor
responsible for investing a portion of the Fund's assets, and considered that
the Fund's multi-manager approach will be unique to the First Trust Fund
Complex. The Board noted that, under this approach, each Sub-Advisor will act as
a non-discretionary manager providing model portfolio recommendations to the
Advisor, and the Advisor will execute the Fund's portfolio trades. The Board
also considered that the Fund's multi-manager approach is intended to alleviate
the potential capacity constraints of any single manager's investment strategy
and provide daily portfolio transparency while protecting against frontrunning
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST MULTI-MANAGER LARGE GROWTH ETF (MMLG)
AUGUST 31, 2020 (UNAUDITED)
of any single manager's strategy by blending multiple investment strategies. The
Board considered that the Advisor will oversee management of the Fund's
investments, including portfolio risk monitoring and performance review. The
Board noted that the Advisor will be responsible for the selection and ongoing
monitoring of the sub-advisors for the Fund and may recommend to the Board
additional sub-advisors, replacement sub-advisors or changes in the allocation
of the Fund's assets among the sub-advisors.
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-Advisors' and the Fund's
compliance with the 1940 Act, as well as the Fund's compliance with its
investment objective, policies and restrictions. The Board noted that employees
of the Advisor provide management services to other ETFs and to other funds in
the First Trust Fund Complex with diligence and care. With respect to the
Sub-Advisory Agreements, the Board reviewed the materials provided by each
Sub-Advisor and noted the background and experience of each Sub-Advisor's
portfolio management team and each Sub-Advisor's investment style. At the
meeting, the Trustees received presentations from representatives of the Advisor
and each Sub-Advisor, and were able to ask questions about the multi-manager
approach, each Sub-Advisor and the investment strategies of each Sub-Advisor to
be implemented within the Fund. Because the Fund had yet to commence investment
operations, the Board could not consider the historical investment performance
of the Fund. In light of the information presented and the considerations made,
the Board concluded that the nature, extent and quality of the services to be
provided to the Fund by the Advisor and each Sub-Advisor under the Agreements
are expected to be satisfactory.
The Board considered the proposed unitary fee rate payable by the Fund under the
Advisory Agreement for the services to be provided. The Board noted that, under
the unitary fee arrangement, the Fund would pay the Advisor a unitary fee equal
to an annual rate of 0.85% of its average daily net assets. The Board considered
that, from the unitary fee for the Fund, the Advisor would pay each Sub-Advisor
a sub-advisory fee equal to an annual rate of 0.30% of the average daily net
assets of the portion of the Fund's assets allocated to that Sub-Advisor. The
Board noted that the Advisor would be responsible for the Fund's expenses,
including the cost of sub-advisory, transfer agency, custody, fund
administration, legal, audit and other services and license fees, if any, but
excluding the fee payment under the Advisory Agreement and interest, taxes,
brokerage commissions and other expenses connected with the execution of
portfolio transactions, distribution and service fees pursuant to a Rule 12b-1
plan, if any, and extraordinary expenses, if any. The Board received and
reviewed information showing the advisory fee rates and expense ratios of the
peer funds in the Expense Group, as well as advisory and unitary fee rates
charged by the Advisor and each Sub-Advisor to other fund (including ETF) and
non-fund clients, as applicable. Because the Fund will pay a unitary fee, the
Board determined that expense ratios were the most relevant comparative data
point. Based on the information provided, the Board noted that the unitary fee
for the Fund was above the median total (net) expense ratio of the peer funds in
its Expense Group. With respect to the Expense Group, the Board discussed with
representatives of the Advisor how the Expense Group was assembled and how the
Fund compared and differed from the peer funds. The Board took this information
into account in considering the peer data. With respect to fees charged to other
clients, the Board considered differences between the Fund and other clients
that limited their comparability. The Board noted the Advisor's statement that
the Fund will be unique to both the ETF market and the First Trust Fund Complex
given its intent to combine multiple managers. In light of the information
considered and the nature, extent and quality of the services expected to be
provided to the Fund under the Agreements, the Board determined that the
proposed unitary fee, including the sub-advisory fee to be paid by the Advisor
to each Sub-Advisor from the unitary fee, was fair and reasonable.
The Board noted that the proposed unitary fee for the Fund was not structured to
pass on to shareholders the benefits of any economies of scale as the Fund's
assets grow. The Board noted that any reduction in fixed costs associated with
the management of the Fund would benefit the Advisor and the Sub-Advisors, but
that the unitary fee structure provides a level of certainty in expenses for the
Fund. The Board noted that the Advisor has continued to 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 the Fund under the Advisory Agreement. The Board considered the Advisor's
estimate of the asset level for the Fund at which the Advisor expects the
Advisory Agreement to be profitable to the Advisor and the Advisor's estimate of
the profitability of the Advisory Agreement if the Fund's assets reach $100
million. The Board noted the inherent limitations in the profitability analysis
and concluded that, based on the information provided, the Advisor's estimated
profitability level for the Fund was not unreasonable. The Board reviewed
financial information provided by each Sub-Advisor, but did not review any
potential profitability of the Sub-Advisory Agreements for the Fund to the
Sub-Advisors. The Board considered that each Sub-Advisor would be paid by the
Advisor from the Fund's unitary fee and its understanding that the sub-advisory
fee rates were the product of arm's length negotiations. In addition, the Board
considered fall-out benefits described by the Advisor that may be realized from
its relationship with the Fund. 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 Fund, may have had no
dealings with the Advisor or FTP. The Board also noted that the Advisor will be
responsible for trade execution for the Fund and will not utilize soft dollars
in connection with the Fund. The Board also considered fall-out benefits to each
Sub-Advisor that may be realized from its relationship with the Fund, noting
Sands' statement that there are no additional benefits expected to be derived as
part of Sands' relationship with the Fund given the Advisor will be responsible
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST MULTI-MANAGER LARGE GROWTH ETF (MMLG)
AUGUST 31, 2020 (UNAUDITED)
for trade execution, and Wellington's statement that, as a sub-advisor,
Wellington would derive no ancillary economic benefits of the type that may
accrue to an adviser which also provides distribution and other services but
that Wellington recognizes and appreciates the reputational benefit from its
relationship with the Advisor. The Board concluded that the character and amount
of potential fall-out benefits to the Advisor and each 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 the Fund. No single factor was
determinative in the Board's analysis.
LIQUIDITY RISK MANAGEMENT PROGRAM
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as
amended (the "1940 Act"), the Fund and each other fund in the First Trust Fund
Complex, other than the closed-end funds, have adopted and implemented a
liquidity risk management program (the "Program") reasonably designed to assess
and manage the funds' liquidity risk, i.e., the risk that a fund could not meet
requests to redeem shares issued by the fund without significant dilution of
remaining investors' interests in the fund. The Board of Trustees of the First
Trust Funds has appointed First Trust Advisors, L.P. (the "Advisor") as the
person designated to administer the Program, and in this capacity the Advisor
performs its duties primarily through the activities and efforts of the First
Trust Liquidity Committee.
Pursuant to the Program, the Liquidity Committee classifies the liquidity of
each fund's portfolio investments into one of the four liquidity categories
specified by Rule 22e-4: highly liquid investments, moderately liquid
investments, less liquid investments and illiquid investments. The Liquidity
Committee determines certain of the inputs for this classification process,
including reasonably anticipated trade sizes and significant investor dilution
thresholds. The Liquidity Committee also determines and periodically reviews a
highly liquid investment minimum for certain funds, monitors the funds' holdings
of assets classified as illiquid investments to seek to ensure they do not
exceed 15% of a fund's net assets and establishes policies and procedures
regarding redemptions in kind.
At the May 11, 2020 meeting of the Board of Trustees, as required by Rule 22e-4
and the Program, the Advisor provided the Board with a written report prepared
by the Advisor that addressed the operation of the Program during the period
from June 1, 2019 (the initial compliance date for certain requirements of Rule
22e-4) through the Liquidity Committee's annual meeting held on March 20, 2020
and assessed the Program's adequacy and effectiveness of implementation during
this period, including the operation of the highly liquid investment minimum for
each fund that is required under the Program to have one, and any material
changes to the Program. Note that because the Fund primarily holds assets that
are highly liquid investments, the Fund has not adopted any highly liquid
investment minimums.
As stated in the written report, during the review period, no fund breached the
15% limitation on illiquid investments, no fund with a highly liquid investment
minimum breached that minimum and no fund filed a Form N-LIQUID. The Advisor
concluded that each fund's investment strategy is appropriate for an open-end
fund; that the Program operated effectively in all material respects during the
review period; and that the Program is reasonably designed to assess and manage
the liquidity risk of each fund and to maintain compliance with Rule 22e-4.
Page 24
--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
FIRST TRUST MULTI-MANAGER LARGE GROWTH ETF (MMLG)
AUGUST 31, 2020 (UNAUDITED)
The following tables identify the Trustees and Officers of the Trust. Unless
otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite
400, Wheaton, IL 60187.
The Trust's statement of additional information includes additional information
about the Trustees and is available, without charge, upon request, by calling
(800) 988-5891.
NUMBER OF OTHER
PORTFOLIOS IN TRUSTEESHIPS OR
TERM OF OFFICE THE FIRST TRUST DIRECTORSHIPS
NAME, AND YEAR FIRST FUND COMPLEX HELD BY TRUSTEE
YEAR OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST
POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
------------------------------------------------------------------------------------------------------------------------------------
Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 185 None
(1951) Limited Partner, Gundersen Real Estate
o Since Inception Limited Partnership (June 1992 to
December 2016); Member, Sportsmed LLC
(April 2007 to November 2015)
Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 185 Director of ADM
(1957) (Futures Commission Merchant) Investor Services,
o Since Inception Inc., ADM
Investor Services
International,
Futures Industry
Association, and
National Futures
Association
Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 185 Director of Trust
(1956) and Management Consulting) Company of
o Since Inception Illinois
Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 185 None
(1954) Managing Director and Chief Operating
o Since Inception Officer (January 2015 to August 2018),
Pelita Harapan Educational Foundation
(Educational Product and Services);
President and Chief Executive Officer
(June 2012 to September 2014), Servant
Interactive LLC (Educational Products
and Services); President and Chief
Executive Officer (June 2012 to
September 2014), Dew Learning LLC
(Educational Products and Services)
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 185 None
Chairman of the Board Advisors L.P. and First Trust
(1955) o Since Inception Portfolios L.P.; Chairman of the
Board of Directors, BondWave LLC
(Software Development Company)
and Stonebridge Advisors LLC
(Investment Advisor)
-----------------------------
(1) Mr. Bowen is deemed an "interested person" of the Trust due to his
position as Chief Executive Officer of First Trust Advisors L.P.,
investment advisor of the Trust.
Page 25
--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST MULTI-MANAGER LARGE GROWTH ETF (MMLG)
AUGUST 31, 2020 (UNAUDITED)
POSITION AND TERM OF OFFICE
NAME OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS
AND YEAR OF BIRTH WITH TRUST SERVICE DURING PAST 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS(2)
------------------------------------------------------------------------------------------------------------------------------------
James M. Dykas President and Chief Executive o Indefinite Term Managing Director and Chief Financial Officer
(1966) Officer (January 2016 to Present), Controller (January 2011
o Since Inception to January 2016), Senior Vice President (April 2007
to January 2016), First Trust Advisors L.P. and First
Trust Portfolios L.P.; Chief Financial Officer
(January 2016 to Present), BondWave LLC
(Software Development Company) and Stonebridge
Advisors LLC (Investment Advisor)
Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President (July 2016 to Present), Vice
(1972) Officer and Chief President (April 2012 to July 2016), First Trust
Accounting Officer o Since Inception Advisors L.P. and First Trust Portfolios L.P.
W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and
(1960) Legal Officer First Trust Portfolios L.P.; Secretary and General
o Since Inception Counsel, BondWave LLC; Secretary, Stonebridge
Advisors LLC
Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and
(1970) First Trust Portfolios L.P.
o Since Inception
Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P.
(1966) and Assistant Secretary and First Trust Portfolios L.P.
o Since Inception
Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
(1966) and First Trust Portfolios L.P.
o Since Inception
Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
(1970) and First Trust Portfolios L.P.
o Since Inception
-----------------------------
(2) The term "officer" means the president, vice president, secretary,
treasurer, controller or any other officer who performs a policy making
function.
Page 26
--------------------------------------------------------------------------------
PRIVACY POLICY
--------------------------------------------------------------------------------
FIRST TRUST MULTI-MANAGER LARGE GROWTH ETF (MMLG)
AUGUST 31, 2020 (UNAUDITED)
PRIVACY POLICY
First Trust values our relationship with you and considers your privacy an
important priority in maintaining that relationship. We are committed to
protecting the security and confidentiality of your personal information.
SOURCES OF INFORMATION
We collect nonpublic personal information about you from the following sources:
o Information we receive from you and your broker-dealer, investment
advisor or financial representative through interviews,
applications, agreements or other forms;
o Information about your transactions with us, our affiliates or
others;
o Information we receive from your inquiries by mail, e-mail or
telephone; and
o Information we collect on our website through the use of "cookies".
For example, we may identify the pages on our website that your
browser requests or visits.
INFORMATION COLLECTED
The type of data we collect may include your name, address, social security
number, age, financial status, assets, income, tax information, retirement and
estate plan information, transaction history, account balance, payment history,
investment objectives, marital status, family relationships and other personal
information.
DISCLOSURE OF INFORMATION
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. In addition to using
this information to verify your identity (as required under law), the permitted
uses may also include the disclosure of such information to unaffiliated
companies for the following reasons:
o In order to provide you with products and services and to effect
transactions that you request or authorize, we may disclose your
personal information as described above to unaffiliated financial
service providers and other companies that perform administrative or
other services on our behalf, such as transfer agents, custodians
and trustees, or that assist us in the distribution of investor
materials such as trustees, banks, financial representatives, proxy
services, solicitors and printers.
o We may release information we have about you if you direct us to do
so, if we are compelled by law to do so, or in other legally limited
circumstances (for example to protect your account from fraud).
In addition, in order to alert you to our other financial products and services,
we may share your personal information within First Trust.
USE OF WEBSITE ANALYTICS
We currently use third party analytics tools, Google Analytics and AddThis, to
gather information for purposes of improving First Trust's website and marketing
our products and services to you. These tools employ cookies, which are small
pieces of text stored in a file by your web browser and sent to websites that
you visit, to collect information, track website usage and viewing trends such
as the number of hits, pages visited, videos and PDFs viewed and the length of
user sessions in order to evaluate website performance and enhance navigation of
the website. We may also collect other anonymous information, which is generally
limited to technical and web navigation information such as the IP address of
your device, internet browser type and operating system for purposes of
analyzing the data to make First Trust's website better and more useful to our
users. The information collected does not include any personal identifiable
information such as your name, address, phone number or email address unless you
provide that information through the website for us to contact you in order to
answer your questions or respond to your requests. To find out how to opt-out of
these services click on: Google Analytics and AddThis.
CONFIDENTIALITY AND SECURITY
With regard to our internal security procedures, First Trust restricts access to
your nonpublic personal information to those First Trust employees who need to
know that information to provide products or services to you. We maintain
physical, electronic and procedural safeguards to protect your nonpublic
personal information.
POLICY UPDATES AND INQUIRES
As required by federal law, we will notify you of our privacy policy annually.
We reserve the right to modify this policy at any time, however, if we do change
it, we will tell you promptly. For questions about our policy, or for additional
copies of this notice, please go to www.ftportfolios.com, or contact us at
1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust
Advisors).
March 2019
Page 27
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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-ADVISORS
Wellington Management Company LLP
280 Congress Street
Boston, MA 02210
Sands Capital Management, LLC
1000 Wilson Boulevard, Suite 3000
Arlington, Virginia 22209
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]
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report, has
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or
a third party.
(b) Not applicable.
(c) There have been no amendments, during the period covered by this report,
to a provision of the code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the
registrant or a third party, and that relates to any element of the code
of ethics description.
(d) The registrant has not granted any waivers, including an implicit waiver,
from a provision of the code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the
registrant or a third party, that relates to one or more of the items set
forth in paragraph (b) of this item's instructions.
(e) Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
As of the end of the period covered by the report, the Registrant's board of
trustees has determined that Thomas R. Kadlec and Robert F. Keith are qualified
to serve as audit committee financial experts serving on its audit committee and
that each of them is "independent," as defined by Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees (Registrant) -- The aggregate fees billed for each of the
last two fiscal years for professional services rendered by the principal
accountant for the audit of the registrant's annual financial statements or
services that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements for those fiscal years were
$194,500 for the fiscal year ended August 31, 2019 and $462,750 for the fiscal
year ended August 31, 2020.
(b) Audit-Related Fees (Registrant) -- The aggregate fees billed in each
of the last two fiscal years for assurance and related services by the principal
accountant that are reasonably related to the performance of the audit of the
registrant's financial statements and are not reported under paragraph (a) of
this Item were $0 for the fiscal year ended August 31, 2019 and $0 for the
fiscal year ended August 31, 2020.
Audit-Related Fees (Investment Adviser) -- The aggregate fees billed in
each of the last two fiscal years for assurance and related services by the
principal accountant that are reasonably related to the performance of the audit
of the registrant's financial statements and are not reported under paragraph
(a) of this Item were $0 for the fiscal year ended August 31, 2019 and $0 for
the fiscal year ended August 31, 2020.
(c) Tax Fees (Registrant) -- The aggregate fees billed in each of the last
two fiscal years for professional services rendered by the principal accountant
for tax compliance, tax advice, and tax planning to the registrant were $45,110
for the fiscal year ended August 31, 2019 and $57,862 for the fiscal year ended
August 31, 2020. These fees were for tax consultation and/or tax return
preparation and professional services rendered for Passive Foreign Investment
Company Identification.
Tax Fees (Investment Adviser) -- The aggregate fees billed in each of the
last two fiscal years for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning to the registrant's
adviser were $0 for the fiscal year ended August 31, 2019 and $0 for the fiscal
year ended August 31, 2020.
(d) All Other Fees (Registrant) -- The aggregate fees billed in each of
the last two fiscal years for products and services provided by the principal
accountant to the registrant, other than the services reported in paragraphs (a)
through (c) of this Item were $0 for the fiscal year ended August 31, 2019 and
$0 for the fiscal year ended August 31, 2020.
All Other Fees (Investment Adviser) -- The aggregate fees billed in each
of the last two fiscal years for products and services provided by the principal
accountant to the registrant's investment adviser, other than the services
reported in paragraphs (a) through (c) of this Item were $0 for the fiscal year
ended August 31, 2019 and $0 for the fiscal year ended August 31, 2020.
(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c) (7) of Rule 2-01 of Regulation S-X.
Pursuant to its charter and its Audit and Non-Audit Services Pre-Approval
Policy, the Audit Committee (the "Committee") is responsible for the
pre-approval of all audit services and permitted non-audit services (including
the fees and terms thereof) to be performed for the registrant by its
independent auditors. The Chairman of the Committee is authorized to give such
pre-approvals on behalf of the Committee up to $25,000 and report any such
pre-approval to the full Committee.
The Committee is also responsible for the pre-approval of the independent
auditor's engagements for non-audit services with the registrant's adviser (not
including a sub-adviser whose role is primarily portfolio management and is
sub-contracted or overseen by another investment adviser) and any entity
controlling, controlled by or under common control with the investment adviser
that provides ongoing services to the registrant, if the engagement relates
directly to the operations and financial reporting of the registrant, subject to
the de minimis exceptions for non-audit services described in Rule 2-01 of
Regulation S-X. If the independent auditor has provided non-audit services to
the registrant's adviser (other than any sub-adviser whose role is primarily
portfolio management and is sub-contracted with or overseen by another
investment adviser) and any entity controlling, controlled by or under common
control with the investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to its policies, the Committee
will consider whether the provision of such non-audit services is compatible
with the auditor's independence.
(e)(2) The percentage of services described in each of paragraphs (b)
through (d) for the registrant and the registrant's investment adviser of this
Item that were approved by the audit committee pursuant to the pre-approval
exceptions included in paragraph (c)(7)(i)(c) or paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X are as follows:
(b) 0%
(c) 0%
(d) 0%
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most recent
fiscal year that were attributed to work performed by persons other than the
principal accountant's full-time, permanent employees was less than fifty
percent.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's investment
adviser (not including any sub-adviser whose role is primarily portfolio
management and is subcontracted with or overseen by another investment adviser),
and any entity controlling, controlled by, or under common control with the
adviser that provides ongoing services to the registrant for the fiscal year
ended August 31, 2019, were $45,110 for the registrant, $28,500 for the
registrant's investment adviser and $34,400 for the registrant's distributor;
and for the fiscal year ended August 31, 2020 were $57,862 for the registrant,
$47,170 for the registrant's investment adviser and $70,330 for the registrant's
distributor.
(h) The registrant's audit committee of its Board of Trustees has
determined that the provision of non-audit services that were rendered to the
registrant's investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under common
control with the investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal accountant's
independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
(a) The Registrant has a separately designated audit committee consisting of
all the independent trustees of the Registrant. The members of the audit
committee are: Thomas R. Kadlec, Niel B. Nielson, Richard E. Erickson and
Robert F. Keith.
(b) Not applicable.
ITEM 6. INVESTMENTS.
(a) Schedules of Investments in securities of unaffiliated issuers as of the
close of the reporting period are included as part of the report to
shareholders filed under Item 1 of this form.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)),or
this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3
(c))) are effective, as of a date within 90 days of the filing date of the
report that includes the disclosure required by this paragraph, based on their
evaluation of these controls and procedures required by Rule 30a-3(b) under the
1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the
Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15
(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR
270.30a-3(d)) that occurred during the period covered by this report that have
materially affected, or are reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT
INVESTMENT COMPANIES.
(a) Not applicable.
(b) Not applicable.
ITEM 13. EXHIBITS.
(a)(1) Code of ethics, or any amendment thereto, that is the subject of
disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section
302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(a)(4) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section
906 of the Sarbanes- Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) First Trust Exchange-Traded Fund VIII
-----------------------------------------------
By (Signature and Title)* /s/ James M. Dykas
----------------------------------------
James M. Dykas, President and
Chief Executive Officer
(principal executive officer)
Date: November 9, 2020
------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ James M. Dykas
----------------------------------------
James M. Dykas, President and
Chief Executive Officer
(principal executive officer)
Date: November 9, 2020
------------------
By (Signature and Title)* /s/ Donald P. Swade
----------------------------------------
Donald P. Swade, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
(principal financial officer)
Date: November 9, 2020
------------------
* Print the name and title of each signing officer under his or her signature.